News Release
Continental Airlines Reports 14th Record Quarter; Pre-Tax Income Grows 33 Percent; Cash at All-Time High
HOUSTON, October 16, 1998 -- Continental Airlines (NYSE: CAI.A and CAI.B) today reported record third quarter pre-tax income of $247 million, exclusive of previously announced fleet charges. This record represents a 33 percent improvement over third quarter 1997 pre-tax income of $186 million as earnings momentum has continued to build through 1998.
This is the fourteenth consecutive period Continental has reported record quarterly earnings. After taxes, and excluding special charges, the company reported net income of $150 million ($2.49 basic and $1.94 diluted earnings per share), compared to income of $114 million ($1.97 basic and $1.48 diluted earnings per share) for the same period in 1997. Including the special charges, Continental reported net income of $73 million ($1.21 basic and $0.97 diluted earnings per share).
Continental reported pre-tax income of $659 million and income of $398 million for the first nine months of 1998 ($6.62 basic and $5.10 diluted earnings per share), excluding special charges. This represents a 27 percent increase in pre-tax profits and a 26 percent increase in diluted earnings per share over the same period in 1997. Including the special charges, Continental reported net income of $317 million ($5.27 basic and $4.10 diluted earnings per share) for the first nine months of 1998.
"The real success story of Continental is our employees. Our consistent top-quality service sets us apart from the industry, and it's reflected in our bottom line," said Continental Chairman and Chief Executive Officer Gordon M. Bethune.
Third quarter Operating Results
Revenue per available seat mile (RASM) remained flat for the quarter while cost per available seat mile (CASM) declined 1.8 percent. CASM was 8.82 cents compared to 8.98 cents in the same quarter of 1997.
Operationally, Continental hit all-time record load factors every month of the quarter. Load factor was 77.2 percent in July, 78.1 percent in August and 72.7 percent in September.
Company Highlights
During the quarter, Continental continued to strengthen its underdeveloped international hub in New York/Newark. Expanded international operations from Newark include Glasgow, Scotland and San Jose, Costa Rica. The company also announced plans for new service to Zurich, Switzerland and Brussels, Belgium. From its Newark hub, the company will serve 15 destinations to Europe and 18 destinations to Latin America by the spring of 1999. Later this quarter, Continental will inaugurate daily non-stop service between Newark and Tokyo's Narita Airport.
Continental also is now the number one carrier in the lucrative New York City transcontinental market.
Customers and employees throughout Continental's system are showing great enthusiasm for Continental's newest acquisition -- the Boeing 777. Continental will operate its new "Queen of the Skies," on its new U.S. mainland to Tokyo service, and will be the first U.S. carrier to fly the luxury jetliner across the Pacific.
Continental continued to make strides in the Latin American market with new strategic alliances with ASERCA Airlines Venezuela and Air Aruba. These new agreements complement Continental's existing Latin alliance partners -- COPA of Panama, VASP of Brazil and ACES of Colombia.
"The 43,000 men and women of Continental are doing a terrific job everyday. Their efforts have allowed our growth to be profitably absorbed," said Greg Brenneman, president and chief operating officer. "We will continue to add capacity to our franchise hubs where we can do so profitably. Our flexible fleet plan allows us to expand or contract as the market warrants."
During the quarter, the company reported its dispatcher's union ratified a new 5-year contract with the company, which was negotiated in only four days. Earlier this month, Continental also announced a tentative agreement with its mechanics union for a 4 -year contract. The agreement improves wages and work rules for all employees in Continental's technical operations area.
To date, Continental has accepted 66 new jet aircraft, including two Boeing 777s this year. Passengers will enjoy Continental's new aircraft equipped with state-of-the-art video systems and quieter jet engines, while the company benefits from fuel efficient aircraft and economies of scale from a more standardized fleet.
Third quarter Financial Accomplishments
In September, the company's Board of Directors authorized an increase in the size of the company's stock repurchase program from $200 million to $300 million. The company has purchased 3.7 million shares for $197 million since the inception of this program in March 1998.
The company ended the third quarter with approximately $1.3 billion in cash and short-term investments.
"Continental's flexible growth plan is generating both strong earnings momentum and cash flow," said Larry Kellner, executive vice president and chief financial officer.
Continental, Northwest Airlines, Air Partners and the Department of Justice have been in discussions regarding the Justice Department's concerns about Northwest's acquisition of an interest in Continental and related matters, as well as certain aspects of the Northwest/Continental alliance. Continental expects that these discussions will be concluded shortly. If the parties are unable to reach agreement, the company anticipates that the Justice Department will file a lawsuit challenging the transactions.
"At this point, we can't predict whether the Justice Department's concerns will be addressed by agreement or by litigation," said Jeffery A. Smisek, Continental's executive vice president and general counsel. "If there is litigation, we expect that the implementation of our global alliance with Northwest will be delayed."
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 and Cleveland, Continental (http://www.flycontinental.com) 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 Three Months Ended Increase/ September 30, 1998 September 30, 1997 (Decrease) Operating Revenue: Passenger $1,969 $1,750 12.5 % Cargo and mail 66 64 3.1 % Other 81 76 6.6 % 2,116 1,890 12.0 % Operating Expenses: Wages, salaries and related costs 581 462 25.8 % Aircraft fuel 181 221 (18.1)% Aircraft rentals 164 141 16.3 % Commissions 155 152 2.0 % Maintenance, materials and repairs 150 147 2.0 % Other rentals and landing fees 110 104 5.8 % Depreciation and amortization 75 64 17.2 % Loss on fleet retirements: Jet 65 --- NM Turboprop 57 --- NM Other 435 392 11.0 % 1,973 1,683 17.2 % Operating Income 143 207 (30.9)% Nonoperating Income (Expense): Net interest expense (17) (19) (10.5)% Other, net (1) (2) (50.0)% (18) (21) (14.3)% Income before Income Taxes and Extraordinary Charge 125 186 (32.8)% Income Tax Provision (49) (69) (29.0)% Distributions on Preferred Securities of Trust, Net of Tax (3) (3) --- Income before Extraordinary Charge 73 114 (36.0)% Extraordinary Charge, Net of Tax --- (4) NM Net Income $ 73 $110 (33.6)% CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES FINANCIAL SUMMARY (In millions of dollars, except per share data) (Unaudited) % Nine Months Ended Nine Months Ended Increase/ September 30, 1998 September 30, 1997 (Decrease) Operating Revenue: Passenger $5,571 $4,960 12.3 % Cargo and mail 202 187 8.0 % Other 233 227 2.6 % 6,006 5,374 11.8 % Operating Expenses: Wages, salaries and related costs 1,599 1,305 22.5 % Aircraft fuel 554 660 (16.1)% Aircraft rentals 482 400 20.5 % Commissions 448 437 2.5 % Maintenance, materials and repairs 455 400 13.8 % Other rentals and landing fees 310 299 3.7 % Depreciation and amortization 215 186 15.6 % Loss on fleet retirements: Jet 65 --- NM Turboprop 57 --- NM Other 1,248 1,103 13.1 % 5,433 4,790 13.4 % Operating Income 573 584 (1.9)% Nonoperating Income (Expense): Net interest expense (47) (62) (24.2)% Other, net 11 (4) NM (36) (66) (45.5)% Income before Income Taxes and Extraordinary Charge 537 518 3.7 % Income Tax Provision (206) (192) 7.3 % Distributions on Preferred Securities of Trust, Net of Tax (10) (10) --- Income before Extraordinary Charge 321 316 1.6 % Extraordinary Charge, Net of Tax (4) (4) --- Net Income $317 $312 1.6 % STATISTICS (jet operations only)(A) Three Months % Ended September 30, Increase/ 1998 1997 (Decrease) Enplanements (thousands) 11,655 10,822 7.7 % Revenue passenger miles (millions) 14,944 13,038 14.6 % Available seat miles (millions) 19,642 17,686 11.1 % Passenger load factor 76.1% 73.7% 2.4 pts. Breakeven passenger load factor 62.8% 61.8% 1.0 pts. Passenger revenue per available seat mile 9.22 cents 9.18 cents 0.4 % Total revenue per available seat mile 10.06 cents 10.05 cents 0.1 % Cost per available seat mile (B) 8.82 cents 8.98 cents (1.8)% Average yield per revenue passenger mile 12.12 cents 12.45 cents (2.7)% Average price per gallon of fuel 44.59 cents 60.23 cents (26.0)% Fuel gallons consumed (millions) 389 353 10.2 % Actual aircraft in fleet at end of period (C) 359 334 7.5 % Average stage length 1,067 991 7.7 % Nine Months % Ended September 30, Increase/ 1998 1997 (Decrease) Enplanements (thousands) 32,988 31,022 6.3 % Revenue passenger miles (millions) 40,691 35,851 13.5 % Available seat miles (millions) 55,739 50,004 11.5 % Passenger load factor 73.0% 71.7% 1.3 pts. Breakeven passenger load factor 60.9% 59.6% 1.3 pts. Passenger revenue per available seat mile 9.24 cents 9.26 cents (0.2)% Total revenue per available seat mile 10.12 cents 10.16 cents (0.4)% Cost per available seat mile (B) 8.93 cents 9.05 cents (1.3)% Average yield per revenue passenger mile 12.66 cents 12.91 cents (1.9)% Average price per gallon of fuel 47.66 cents 63.45 cents (24.9)% Fuel gallons consumed (millions) 1,115 1,004 11.1 % Actual aircraft in fleet at end of period (C) 359 334 7.5 % Average stage length 1,040 954 9.0 %
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 another carrier.
(A) Excludes regional jets operated by Continental Express
(B) Excludes loss on fleet retirements
(C) Excludes six and four all-cargo 727 aircraft at CMI in 1998 and 1997, respectively.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES EARNINGS PER SHARE For the Quarter Ended September 30, 1998 (In millions of dollars, except per share data) (Unaudited) Basic Diluted EPS EPS EPS Calculation Excluding Fleet Charges: Net Income $ 72.7 $ 72.7 Fleet Charges 77.4 77.4 Net Income before Fleet Charges 150.1 150.1 Net Interest Added Back on Convertible Securities --- 5.2 Adjusted Net Income 150.1 155.3 Weighted Average Number of Shares 60.3 79.9 Earnings Per Share $ 2.49 $ 1.94 EPS Calculation Including Fleet Charges: Net Income $ 72.7 $ 72.7 Net Interest Added Back on Convertible Securities --- 5.2 Adjusted Net Income 72.7 77.9 Weighted Average Number of Shares 60.3 79.9 Earnings Per Share $ 1.21 $ 0.97 CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES EARNINGS PER SHARE (In millions of dollars, except per share data) (Unaudited) Three Months Three Months % Ended Ended Increase/ Sept. 30, Sept. 30, (Decrease) 1998 1997 Earnings per Common Share: Income Before Extraordinary Charge $ 1.21 $ 1.97 (38.6)% Extraordinary Charge --- (0.07) NM Net Income $ 1.21 $ 1.90 (36.3)% Earnings per Common Share Assuming Dilution: Income Before Extraordinary Charge $ 0.97 $ 1.48 (34.5)% Extraordinary Charge --- (0.04) NM Net Income $ 0.97 $ 1.44 (32.6)% Shares used for Computation: Basic 60.3 58.0 4.0 % Diluted 79.9 80.4 (0.6)% Nine Months Nine Months % Ended Ended Increase/ Sept. 30, Sept. 30, (Decrease) 1998 1997 Earnings per Common Share: Income Before Extraordinary Charge $ 5.33 $ 5.47 (2.6)% Extraordinary Charge (0.06) (0.07) (14.3)% Net Income $ 5.27 $ 5.40 (2.4)% Earnings per Common Share Assuming Dilution: Income Before Extraordinary Charge $ 4.15 $ 4.06 2.2 % Extraordinary Charge (0.05) (0.04) 25.0 % Net Income $ 4.10 $ 4.02 2.0 % Shares used for Computation: Basic 60.0 57.4 4.5 % Diluted 80.9 81.0 (0.1)%