News Release
Continental Airlines Earnings Per Share Jumps 29%; Highest Quarterly Profit In 64-Year Company History
HOUSTON, July 20, 1998 -- Continental Airlines (NYSE: CAI.B and CAI.A) today reported record second quarter pre-tax income of $275 million, the highest in company history. This record represents a 32 percent improvement over second quarter 1997 pre-tax income of $208 million. Continental's record quarter was achieved as passenger revenue grew faster (14.7%) than capacity (12.7%), with an all-time high load factor of 73.6 percent, and a healthy operating margin of 13.8 percent, continuing to demonstrate Continental's ability to grow profitably.
This is the thirteenth consecutive period Continental has reported record quarterly earnings. After taxes, the company reported income of $167 million ($2.74 basic and $2.11 diluted earnings per share), compared to $128 million ($2.22 basic and $1.63 diluted earnings per share) for the same period in 1997. These results exceed First Call analysts diluted estimate of $2.01 per share and exclude a $4 million extraordinary charge for debt prepayment.
Continental reported pre-tax income of $412 million and income of $248 million (excluding the extraordinary charge) for the first six months of 1998 ($4.13 basic and $3.16 diluted earnings per share). This represents a 24 percent increase in pre-tax profits and a 23 percent increase in diluted earnings per share over the same period in 1997.
"Continental has reestablished itself as an industry leader through strong employee relations, superior customer service and savvy financial planning. We continue to show growing strength in every area of our business," said Continental Chairman and Chief Executive Officer Gordon M. Bethune.
Second Quarter Operating Results
Revenue per available seat mile (RASM) and cost per available seat mile (CASM) both showed improvement in the second quarter. RASM was 10.27 cents, an improvement over 10.24 cents, and CASM was 8.85 cents compared to 8.90 cents in the same quarter of 1997.
Continental said it was extremely pleased with how quickly the market has profitably absorbed its additional seat capacity as it continues to expand its underdeveloped hubs in New York/Newark, Houston and Cleveland.
During the quarter, Continental continued to strengthen and grow its position in Latin America while increasing system contribution and maintaining essentially flat unit revenues on existing routes. Continental completed a strategic acquisition of a minority ownership stake in COPA (Compania Panamena de Aviacion, S.A.), signed an agreement to acquire a minority interest in ACES (Aerolineas Centrales de Colombia, S.A.), and inaugurated new flights to Mexico, Aruba, Venezuela and Chile. On July 1, the airline launched its code- share with VASP (Viacao Aerea Sao Paulo S.A.), Brazil's second largest carrier. Continental is the No. 2 U.S. carrier to Latin America in number of destinations and passengers served, providing service to 37 cities in 21 countries.
In Europe, Continental grew capacity by 31 percent and increased unit revenue by 3 percent. Continental inaugurated service to Dublin and Shannon, Ireland and started service to Glasgow, Scotland on July 15. Continental now offers service to 13 cities in 8 European countries. In addition, Continental launched its new code share service with Air France on June 19.
In response to the economic downturn in Asia, Continental reduced Pacific capacity by 14 percent while increasing load factor by 3.7 points. The reduced capacity was profitably redeployed to the domestic system. Pacific revenue accounts for 6.2 percent of Continental's total revenue. Continental also announced a code share agreement with Air China to jointly market flights between the U.S. and China.
"Our employees continue to do a great job delivering a product we are all proud of. As a result, we have been able to continue our profitable growth," said Greg Brenneman, president and chief operating officer.
During the quarter, Continental and its pilot's union signed a new 5-year contract that took less than one year to negotiate. The contract brings pilots up to industry standard wages while allowing the airline to enjoy work rules that allow it to be a competitive with its larger competitors. Continental's dispatcher's union also renegotiated a new 5-year contract with the company in only four days. The contract has been ratified by its members.
Continental continues to focus on superior customer service. In April, Continental introduced its first all new 124-seat Boeing 737-700. This month, it became the first U.S. airline to operate the larger 155-seat Boeing 737-800. To date, Continental has accepted 30 aircraft of the 64 new Boeing aircraft the airline is scheduled to receive this year. This fleet rejuvenation program will result in an average domestic jet fleet age of 7.2 years by the end of 1999, making Continental's the youngest fleet in the U.S. industry. The new aircraft are equipped with state-of-the-art video systems. In addition, the airline has completed installation of the new GTE airfone system on all of its Stage 3 narrow body fleet, and three-quarters of its wide body fleet.
In May, the airline introduced international electronic ticketing (E-ticket) services to Panama and Mexico and announced that it will expand its services to 25 countries in Latin America, the Caribbean and Europe by year's end.
Conde Nast Traveler magazine named Continental's BusinessFirst the Best Transpacific and Transatlantic Business class among all U.S. airlines. Entrepreneur magazine awarded Continental Best Transatlantic Business Class.
The alliance between Continental and Northwest Airlines continues to be reviewed by the Department of Justice and the Department of Transportation, and the parties have provided additional information to both reviewing agencies. Continental continues to be disappointed with the slow pace of the review and cannot predict the timing or outcome of these governmentalprocesses.
Second Quarter Financial Accomplishments
In May, the company's Board of Directors authorized an increase in the size of the company's stock repurchase program from $100 million to $200 million. The program is designed to maintain a share count of 80 million shares for diluted EPS calculation purposes. The company has purchased 2.2 million shares for $132 million since the inception of this program in March 1998.
The company ended the second quarter with $1.2 billion in cash and short- term investments.
"We've been able to finance more than $6 billion since 1995 because we have consistent product and service integrity at Continental. We're planning for our future success while keeping a vigilant eye on everyday operations," 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 125 domestic and 67 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.
FINANCIAL SUMMARY
(In millions of dollars, except per share data)(Unaudited)
|
Three Months Ended |
Three Months Ended |
Increase/ |
||
|
Operating Revenue: |
||||
|
Passenger |
$1,888 |
$1,646 |
14.70% |
|
|
Cargo |
68 |
63 |
7.90% |
|
|
Other |
80 |
77 |
3.90% |
|
|
2,036 |
1,786 |
14.00% |
||
|
Operating Expenses: |
||||
|
Wages, salaries and related costs |
521 |
429 |
21.40% |
|
|
Aircraft fuel |
183 |
210 |
-12.90% |
|
|
Aircraft rentals |
162 |
128 |
26.60% |
|
|
Commissions |
152 |
147 |
3.40% |
|
|
Maintenance, materials and repairs |
152 |
128 |
18.80% |
|
|
Other rentals and landing fees |
99 |
98 |
1.00% |
|
|
Depreciation and amortization |
72 |
62 |
16.10% |
|
|
Other |
415 |
353 |
17.60% |
|
|
1,756 |
1,555 |
12.90% |
||
|
Operating Income |
280 |
231 |
21.20% |
|
|
Nonoperating Income (Expense): |
||||
|
Net interest expense |
-15 |
-20 |
-25.00% |
|
|
Other, net |
10 |
-3 |
NM |
|
|
-5 |
-23 |
-78.30% |
||
|
Income before Income Taxes and Extraordinary Charge |
275 |
208 |
32.20% |
|
|
Income Tax Provision |
-105 |
-77 |
36.40% |
|
|
Distributions on Preferred Securities of Trust, Net of Tax |
-3 |
-3 |
- |
|
|
Income before Extraordinary Charge |
167 |
128 |
30.50% |
|
|
Extraordinary Charge, Net of Tax |
-4 |
- |
NM |
|
|
Net Income |
$163 |
$128 |
27.30% |
|
FINANCIAL SUMMARY
(In millions of dollars, except per share data)(Unaudited)
|
Six Months Ended |
Six Months Ended |
Increase/ |
||
|
Operating Revenue: |
||||
|
Passenger |
$3,602 |
$3,210 |
12.20% |
|
|
Cargo |
136 |
123 |
10.60% |
|
|
Other |
152 |
151 |
0.70% |
|
|
3,890 |
3,484 |
11.70% |
||
|
Operating Expenses: |
||||
|
Wages, salaries and related costs |
1,018 |
843 |
20.80% |
|
|
Aircraft fuel |
373 |
439 |
-15.00% |
|
|
Aircraft rentals |
318 |
259 |
22.80% |
|
|
Commissions |
293 |
285 |
2.80% |
|
|
Maintenance, materials and repairs |
305 |
253 |
20.60% |
|
|
Other rentals and landing fees |
200 |
195 |
2.60% |
|
|
Depreciation and amortization |
140 |
122 |
14.80% |
|
|
Other |
813 |
711 |
14.30% |
|
|
3,460 |
3,107 |
11.40% |
||
|
Operating Income |
430 |
377 |
14.10% |
|
|
Nonoperating Income (Expense): |
||||
|
Net interest expense |
-30 |
-43 |
-30.20% |
|
|
Other, net |
12 |
-2 |
NM |
|
|
-18 |
-45 |
-60.00% |
||
|
Income before Income Taxes and Extraordinary Charge |
412 |
332 |
24.10% |
|
|
Income Tax Provision |
-157 |
-123 |
27.60% |
|
|
Distributions on Preferred Securities of Trust, Net of Tax |
-7 |
-7 |
- |
|
|
Income before Extraordinary Charge |
248 |
202 |
22.80% |
|
|
Extraordinary Charge, Net of Tax |
-4 |
- |
NM |
|
|
Net Income |
$244 |
$202 |
20.80% |
|
STATISTICS (jet operations only)(a)
|
Three Months Ended |
% Increase/ |
||
|
1998 |
1997 |
||
|
Enplanements (thousands) |
11,261 |
10,462 |
7.60% |
|
Revenue passenger miles (millions) |
13,675 |
11,922 |
14.70% |
|
Available seat miles (millions) |
18,574 |
16,486 |
12.70% |
|
Passenger load factor |
73.60% |
72.30% |
1.3 pts. |
|
Breakeven passenger load factor |
59.00% |
57.70% |
1.3 pts. |
|
Passenger revenue per available seat mile |
9.394 |
9.314 |
0.90% |
|
Total revenue per available seat mile |
10.274 |
10.244 |
0.30% |
|
Cost per available seat mile |
8.854 |
8.904 |
-0.60% |
|
Average yield per revenue passenger mile |
12.754 |
12.874 |
-0.90% |
|
Average price per gallon of fuel |
46.964 |
61.174 |
-23.20% |
|
Fuel gallons consumed (millions) |
374 |
331 |
13.00% |
|
Actual aircraft in fleet at end of period (b) |
353 |
325 |
8.60% |
|
Average stage length |
1,038 |
944 |
10.00% |
|
Six Months Ended |
% Increase/ |
||
|
1998 |
1997 |
||
|
Enplanements (thousands) |
21,333 |
20,201 |
5.60% |
|
Revenue passenger miles (millions) |
25,747 |
22,813 |
12.90% |
|
Available seat miles (millions) |
36,097 |
32,318 |
11.70% |
|
Passenger load factor |
71.30% |
70.60% |
0.7 pts. |
|
Breakeven passenger load factor |
59.80% |
58.30% |
1.5 pts. |
|
Passenger revenue per available seat mile |
9.254 |
9.304 |
-0.50% |
|
Total revenue per available seat mile |
10.154 |
10.234 |
-0.80% |
|
Cost per available seat mile |
8.994 |
9.084 |
-1.00% |
|
Average yield per revenue passenger mile |
12.984 |
13.174 |
-1.40% |
|
Average price per gallon of fuel |
49.304 |
65.204 |
-24.40% |
|
Fuel gallons consumed (millions) |
726 |
651 |
11.50% |
|
Actual aircraft in fleet at end of period (b) |
353 |
325 |
8.60% |
|
Average stage length |
1,026 |
935 |
9.70% |
|
|||
|
|||
|
|||
EARNINGS PER SHARE
(In millions of dollars, except per share data)(Unaudited)
|
Three Months Ended |
Three Months Ended |
Increase/ |
||
|
Earnings per Common Share: |
||||
|
Income Before Extraordinary Charge |
$2.74 |
$2.22 |
23.40% |
|
|
Extraordinary Charge |
-0.06 |
- |
NM |
|
|
Net Income |
$2.68 |
$2.22 |
20.70% |
|
|
Earnings per Common Share Assuming |
||||
|
Dilution: |
||||
|
Income Before Extraordinary Charge |
$2.11 |
$1.63 |
29.40% |
|
|
Extraordinary Charge |
-0.05 |
- |
NM |
|
|
Net Income |
$2.06 |
$1.63 |
26.40% |
|
|
Shares used for Computation: |
||||
|
Basic |
60.7 |
57.4 |
5.70% |
|
|
Diluted |
81.3 |
81.3 |
- |
|
|
Six Months Ended |
Six Months Ended |
% Increase/ |
||
|
Earnings per Common Share: |
||||
|
Income Before Extraordinary Charge |
$4.13 |
$3.50 |
18.00% |
|
|
Extraordinary Charge |
-0.05 |
- |
NM |
|
|
Net Income |
$4.08 |
$3.50 |
16.60% |
|
|
Earnings per Common Share Assuming |
||||
|
Dilution: |
||||
|
Income Before Extraordinary Charge |
$3.16 |
$2.58 |
22.50% |
|
|
Extraordinary Charge |
-0.04 |
- |
NM |
|
|
Net Income |
$3.12 |
$2.58 |
20.90% |
|
|
Shares used for Computation: |
||||
|
Basic |
59.9 |
57.1 |
4.90% |
|
|
Diluted |
81.5 |
81.3 |
0.20% |
|