News Release
Continental Airlines Reports Twelfth Consecutive Record Quarter
HOUSTON, April 16, 1998 -- Continental Airlines (NYSE: CAI.B, CAI.A) today reported record first quarter pre-tax income of $137 million. This record represents an 11 percent improvement over first quarter 1997 pre-tax income of $124 million. Continental's first quarter pre-tax margin was a record 7.4 percent and the first quarter load factor also set a new record at 68.9 percent. These records were accomplished while Continental's available seat miles grew 11 percent through the continued development of its undersized hubs.
This is the twelfth consecutive period Continental has reported record quarterly earnings. After taxes, the company reported net income of $81 million ($1.38 basic and $1.06 diluted earnings per share), compared to $74 million ($1.28 basic and $.96 diluted earnings per share) in the same period 1997. These results exceed First Call analysts diluted estimate of $.99 per share.
"We achieved another record quarter by delivering a quality product on a consistent basis. Our employees show day in and day out they add value to the marketplace," said Continental Chairman and Chief Executive Officer Gordon M. Bethune.
First Quarter Operating Results
First quarter passenger revenue rose 10 percent to $1.7 billion on 11 percent more capacity, while operating income increased three percent to $150 million, despite the presence of the federal excise tax on tickets throughout the entire first quarter of 1998.
Domestic revenue per available seat mile (RASM) grew a healthy 2 percent in March and 0.4 percent for the quarter.
First quarter cost per available seat mile (CASM) was down 1.4 percent due primarily to a decrease in fuel costs.
"We continue to profitably grow out of our undersized hubs," said Greg Brenneman, president and chief operating officer. "Our first quarter results give us great momentum for 1998 as we work to provide outstanding financial results for our shareholders and profit sharing to our co-workers."
During the quarter, Continental continued its development of new strategic international alliances to enhance its presence in all regions throughout the world. Continental announced its global strategic alliance with Northwest Airlines, including cooperation with KLM. To further strengthen its presence in Asia, Continental began code-sharing with EVA Air of Taiwan. Further increasing its ever growing prominence in Latin America, the airline announced an alliance with VASP of Brazil. In Europe, Continental began code-sharing with Virgin Atlantic on transatlantic flights, and the recent bilateral agreement between the US and France cleared the way for Continental to begin code-sharing with Air France to Paris and beyond to Europe, the Mideast and Africa.
Continental continues to strengthen its route network from its Newark, Houston and Cleveland hubs. While growing its domestic route system, the airline also is inaugurating service to 13 new international destinations in 1998. In addition, Continental will inaugurate U.S. mainland to Japan service with non-stop flights from both Newark and Houston to Tokyo beginning in November and December, respectively.
Continental rewarded its employees for performance for the third straight year. On Feb. 12, Continental paid a record $105 million in employee profit sharing, approximately seven percent of employees' annual salary. And on Jan. 29, the company gave away another eight new Eddie Bauer Ford Explorers to employees for perfect attendance, bringing the total to 30 new cars given away over the past two years.
While continuing to provide superior customer service, Continental has reaped accolades from its customers and industry observers. In March, Fortune magazine named Continental the most improved company of the 1990's on its annual Most Admired Companies list. The airline received the Gold Award for "Top Airline to North America" from the 1998 European Travel Awards. Continental's OnePass won six of nine Frequent Flyer "Freddie Awards," including "Program of the Year" and "Best Elite-Level Program" rated by Inside Flyer magazine readers.
First Quarter Financial Accomplishments
During the first quarter, the airline announced a new order of 15 Boeing 737-900s to be delivered between May 2001 and July 2002 for replacement aircraft. Continental will take delivery of a total of 64 new Boeing aircraft this year, as it replaces its older aircraft with an efficient, state-of-the-art fleet. By the end of 1999, Continental will have the youngest domestic jet fleet in the industry, with an average age of 7.2 years.
In February, the airline completed a public offering of $773 million of enhanced pass through certificates at an average interest rate of 6.7 percent. The net proceeds will be used to finance the acquisition of up to 24 new Boeing aircraft scheduled to be delivered to Continental through December 1998.
In March, Continental's Board of Directors authorized the repurchase of $100 million of the company's common stock or convertible securities with the objective of maintaining a share count of 80 million shares for diluted EPS calculation purposes.
The company ended the first quarter with cash and short-term investments of $853 million.
"Continental is in solid financial shape. We're acquiring the right planes at the right price at the lowest interest rates in years. Moreover, we're making significant progress in expanding our undersized hubs at a time when long-term tax-exempt financing rates are extremely favorable," said Larry Kellner, executive vice president and chief financial officer.
Continental is the fifth largest airline in the U.S., offering more than 2,000 departures daily to 122 domestic and 70 international destinations. Operating major hubs in Newark, Houston, Cleveland and Guam, Continental is strategically positioned for transcontinental travel, and offers extensive service to Latin America and Europe via its Houston and Newark gateways.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
Financial Summary
(In millions of dollars, except per share data)(Unaudited)
| Three Months Ended March 31, 1998 |
Three Months Ended March 31, 1997 |
% Increase/ (Decrease) |
|
|---|---|---|---|
Operating Revenue: |
|||
| Passenger | $1,714 | $1,564 | 9.6 % |
| Cargo | 48 | 40 | 20.0 % |
| Mail and other | 92 | 94 | (2.1)% |
| 1,854 | 1,698 | 9.2 % | |
Operating Expenses: |
|||
| Wages, salaries and related costs |
497 | 414 | 20.0 % |
| Aircraft fuel | 190 | 229 | (17.0)% |
| Commissions | 141 | 138 | 2.2 % |
| Aircraft rentals | 156 | 131 | 19.1 % |
| Maintenance, materials and repairs | 153 | 125 | 22.4 % |
| Other rentals and landing fees | 101 | 97 | 4.1 % |
| Depreciation and amortization | 68 | 60 | 13.3 % |
| Other | 398 | 358 | 11.2 % |
| 1,704 | 1,552 | 9.8 % | |
Operating Income |
150 | 146 | 2.7 % |
Nonoperating Income (Expense): |
|||
| Net interest expense | (15) | (23) | (34.8)% |
| Other, net | 2 | 1 | 100.0 % |
| (13) | (22) | (40.9)% | |
| Income before Income Taxes | 137 | 124 | 10.5 % |
| Income Tax Provision | (52) | (46) | 13.0 % |
| Distributions on Preferred Securities of Trust, Net of Tax |
(4) | (4) | -- |
| Net Income | $ 81 | $ 74 | 9.5 % |
EARNINGS PER SHARE
(In millions, except per share data)(Unaudited)
| Earnings per Common Share | $ 1.38 | $ 1.28 | 7.8 % |
| Earnings per Common Share Assuming Dilution |
$ 1.06 | $ 0.96 | 10.4 % |
Shares used for Computation: |
|||
| Basic | 59.0 | 56.8 | 3.9 % |
| Diluted | 81.6 | 81.3 | 0.4 % |
STATISTICS (jet operations only) (a)
| Three Months Ended March 31, |
% Increase/ |
||
|---|---|---|---|
| 1998 | 1997 | (Decrease) | |
| Enplanements (thousands) | 10,072 | 9,739 | 3.4 % |
| Revenue passenger miles (millions) | 12,072 | 10,891 | 10.8 % |
| Available seat miles (millions) | 17,523 | 15,832 | 10.7 % |
| Passenger load factor | 68.9% | 68.8% | 0.1 pts. |
| Breakeven passenger load factor | 60.6% | 59.0% | 1.6 pts. |
| Passenger revenue per available seat mile | 9.12 cents | 9.29 cents | (1.8)% |
| Total revenue per available seat mile | 10.01 cents | 10.22 cents | (2.1)% |
| Cost per available seat mile | 9.14 cents | 9.27 cents | (1.4)% |
| Average yield per revenue passenger mile | 13.23 cents | 13.51 cents | (2.1)% |
| Average price per gallon of fuel | 51.79 cents | 69.38 cents | (25.4)% |
| Fuel gallons consumed (millions) | 352 | 320 | 0.0 % |
| Actual aircraft in fleet at end of period (b) |
346 | 321 | 7.8 % |
| Average stage length | 1,015 | 925 | 9.7 % |
Continental has entered into block space arrangements with certain other carriers whereby one or more of the parties is obligated to purchase capacity on the other carrier. The tables above do not include the statistics for the capacity that was purchased by or from another carrier.
(a) Excludes regional jets operated by Continental Express.
(b) Excludes six and four all-cargo 727 aircraft at CMI in 1998 and 1997, respectively.