News Release
Continental Airlines Reports 18th Consecutive Profitable Quarter
HOUSTON, October 18, 1999 -- Continental Airlines (NYSE: CAL and CAL.A) today reported its 18th consecutive profitable quarter with third quarter net income of $110 million ($1.56 basic and $1.53 diluted earnings per share). This exceeds First Call’s consensus estimate of $1.47 diluted earnings per share. Continental reported net income of $331 million for the first nine months of 1999 ($4.73 basic and $4.44 diluted earnings per share). Continental ended the quarter with $1.3 billion in cash and short-term investments.
Separately, Continental announced that it has sold its interest in Amadeus Global Travel Distribution S.A. for $408 million, including a special dividend. The sale, which occurred as part of Amadeus’ initial public offering, will close on Oct. 20 and will result in a fourth quarter pre-tax gain of approximately $296 million ($181 million after tax).
"We will continue to critically review our growth plan to ensure we achieve a ten percent operating margin for our business," said Gordon Bethune, Continental Airlines’ chairman and chief executive officer.
Third Quarter Operating Results
Third quarter passenger revenue rose 6.9 percent to $2.1 billion. Continental continued to grow profitably with a 9.7 percent increase in revenue passenger miles on a capacity increase of 9.8 percent. Revenue per available seat mile (RASM) declined 3.8 percent for the quarter. Changes in revenue were negatively impacted by Hurricane Floyd, which resulted in the cancellation of over 700 flights, and the prior-year benefit from the Northwest Airlines strike.
Continental continued to enjoy yield and domestic length-of-haul adjusted RASM premiums to the industry.
The airline reported that its Latin America and Micronesia operations continue to record year-over-year increases in RASM due to revenue changes that exceed capacity changes. The RASM in Europe is lower year-over-year primarily due to excess capacity in the European market. Detailed statistics by geographic region are shown below:
Third Quarter 1999 vs. Third Quarter 1998
|
Passenger |
RASM |
|
| Domestic | 3.0% | (2.5%) |
| Europe | 14.7% | (15.2%) |
| Latin America | 9.9% | 6.9% |
| Micronesia | (18.7%) | 19.9% |
| Transpacific | N/A | N/A |
Over each of the last ten quarters, Continental Express’ traffic growth exceeded capacity increases (on a quarter-over-quarter basis) by a strong margin. In the third quarter, Continental Express’ capacity increased 31.0 percent while traffic jumped 34.3 percent, resulting in a load factor increase of 1.6 percentage points.
In spite of rapidly increasing fuel prices, Continental’s cost per available seat mile (CASM) increased only 0.9 percent in the third quarter.
Continental conservatively estimates that the U.S. government’s antiquated air traffic control system cost the airline more than $75 million in the third quarter.
"We are well positioned for the new millennium with a product we are proud of, employees that like coming to work everyday, and a disciplined growth plan focused on profitability," said Greg Brenneman, president and chief operating officer.
Third Quarter Company Achievements
During the third quarter, Continental launched service from New York to Amsterdam and Tel Aviv. Continental now offers more transatlantic service from New York than any other airline.
Additionally, Continental broke ground on its Global Gateway Program at Newark International Airport to expand and improve the terminal and parking facilities, which serves the world’s No. 1 business travel market - New York.
During the quarter, Continental reached several e-commerce milestones. On-line ticket sales on the www.continental.com Web site recently passed the $5 million per week mark and increased 289 percent over the third quarter of 1998. Additionally, Continental implemented interline e-ticketing with its alliance partner America West. Detailed statistics of the growth of electronic commerce are shown below:
Electronic Commerce Growth
| Third Quarter | E-Ticket sales as a % of total sales |
Continental.com Web site sales (millions) |
| 1997 | 19% | $4 |
| 1998 | 32% | $18 |
| 1999 | 42% | $52 |
Continental’s fleet rejuvenation program continued in the third quarter with the retirement of 19 older aircraft and the introduction of 18 new Boeing jets into the fleet.
Unlike other major U.S. airlines, Continental has elected to replace its older aircraft, which include the DC-9, B-727 and 747. These retirements, along with new aircraft deliveries, will reduce Continental’s average jet fleet age to 7.5 years by the end of the year - the youngest of the major U.S. airlines.
Continental’s last Stage II aircraft will exit the fleet in the fourth quarter. Continental Express continues its conversion to an all-jet fleet with the delivery of nine new regional jets, including three of the new 37-seat ERJ-135s. This brings to 54 the number of regional jets in the Continental Express fleet.
Third Quarter Financial Accomplishments
To finance a portion of Continental’s Global Gateway Program at Newark International Airport, the New Jersey Economic Development Authority completed the issuance of $730.4 million of tax-exempt bonds with an average interest rate of 6.4 percent. This transaction was the largest non-investment grade tax-exempt bond issuance ever completed.
"Our facility and fleet plans prepare us well for the next 20 years, as both have long-term financing at very attractive rates," said Larry Kellner, executive vice president and chief financial officer. "In addition, in these times of volatile oil prices, our new fleet will be among the most fuel efficient in the industry."
The company also signed a global technology service agreement with EDS covering the next eight years. This agreement expands the relationship that EDS and Continental have had since 1991 and will enable the company to take advantage of the rapidly changing marketplace, especially in the areas of alliances and electronic ticket distribution.
Continental continued its previously announced $800 million stock repurchase program. To date, the company has repurchased 13.4 million shares of Class B common stock for $585 million and expects to complete the current program by the end of the year.
Corporate Background
Continental Airlines is the fifth largest airline in the U.S., offering more than 2,200 departures daily to 130 domestic and 85 international destinations. Operating major hubs in New York, Houston and Cleveland, Continental (http://www.continental.com) has extensive service throughout the Americas, and to Europe and Asia.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
FINANCIAL SUMMARY
(In millions of dollars, except per share data)
(Unaudited)
% Three Months Three Months Increase/ Ended Ended (Decrease) September 30, September 30, 1999 1998 Operating Revenue: Passenger $2,104 $1,969 6.9 % Cargo and mail 76 66 15.2 % Other 103 81 27.2 % 2,283 2,116 7.9 % Operating Expenses: Wages, salaries and related costs 644 581 10.8 % Aircraft fuel 208 181 14.9 % Aircraft rentals 197 164 20.1 % Maintenance, materials and repairs 156 150 4.0 % Commissions 154 155 (0.6)% Other rentals and landing fees 130 110 18.2 % Depreciation and amortization 93 75 24.0 % Loss on fleet retirements: Jet -- 65 NM Turboprop -- 57 NM Other 489 435 12.4 % 2,071 1,973 5.0 % Operating Income 212 143 48.3 % Nonoperating Income (Expense): Net interest expense (29) (17) 70.6 % Other, net (6) (1) NM (35) (18) 94.4 % Income before Income Taxes 177 125 41.6 % Income Tax Provision (67) (49) 36.7 % Distributions on Preferred Securities of Trust, Net of Tax -- (3) NM Net Income $110 $73 50.7 %
FINANCIAL SUMMARY
(In millions of dollars, except per share data)
(Unaudited)
% Nine Months Nine Months Increase/ Ended Ended (Decrease) September 30, September 30, 1999 1998 Operating Revenue: Passenger $6,032 $5,571 8.3 % Cargo and mail 213 202 5.4 % Other 292 233 25.3 % 6,537 6,006 8.8 % Operating Expenses: Wages, salaries and related costs 1,882 1,599 17.7 % Aircraft fuel 512 554 (7.6)% Aircraft rentals 570 482 18.3 % Maintenance, materials and repairs 454 455 (0.2)% Commissions 439 448 (2.0)% Other rentals and landing fees 365 310 17.7 % Depreciation and amortization 266 215 23.7 % Loss on fleet retirements: Jet - 65 NM Turboprop - 57 NM Other 1,421 1,248 13.9 % 5,909 5,433 8.8 % Operating Income 628 573 9.6 % Nonoperating Income (Expense): Net interest expense (80) (47) 70.2 % Other, net 3 11 (72.7)% (77) (36) NM Income before Income Taxes, Cumulative Effect of a Change in Accounting Principle and Extraordinary Charge 551 537 2.6 % Income Tax Provision (214) (206) 3.9 % Distributions on Preferred Securities of Trust, Net of Tax - (10) NM Income before Cumulative Effect of a Change in Accounting Principle and Extraordinary Charge 337 321 5.0 % Cumulative Effect of a Change in Accounting Principle, Net of Tax (6) - NM Extraordinary Charge, Net of Tax - (4) NM Net Income $331 $317 4.4 %
STATISTICS (jet operations only)(a)
Three Months % Ended September 30, Increase/ 1999 1998 (Decrease) Enplanements (thousands) 11,922 11,655 2.3 % Revenue passenger miles (millions) 16,394 14,944 9.7 % Available seat miles (millions) 21,573 19,642 9.8 % Passenger load factor 76.0% 76.1% (0.1) pts. Breakeven passenger load factor 66.4% 62.8% 3.6 pts. Passenger revenue per available seat mile 8.87¢ 9.22¢ (3.8)% Total revenue per available seat mile 9.81¢ 10.06¢ (2.5)% Cost per available seat mile (b) 8.90¢ 8.82¢ 0.9 % Average yield per revenue passenger mile 11.68¢ 12.12¢ (3.6)% Average price per gallon of fuel 48.70¢ 44.59¢ 9.2 % Fuel gallons consumed (millions) 404 389 3.9 % Actual aircraft in fleet at end of period (c) 359 359 0.0 % Average stage length 1,141 1,067 6.9 % Nine Months % Ended September 30, Increase/ 1999 1998 (Decrease) Enplanements (thousands) 34,193 32,988 3.7 % Revenue passenger miles (millions) 45,050 40,691 10.7 % Available seat miles (millions) 60,961 55,739 9.4 % Passenger load factor 73.9% 73.0% 0.9 pts. Breakeven passenger load factor 64.0% 60.9% 3.1 pts. Passenger revenue per available seat mile 9.06¢ 9.24¢ (1.9)% Total revenue per available seat mile 9.99¢ 10.12¢ (1.3)% Cost per available seat mile (b) 9.02¢ 8.93¢ 1.0 % Average yield per revenue passenger mile 12.27¢ 12.66¢ (3.1)% Average price per gallon of fuel 41.97¢ 47.66¢ (11.9)% Fuel gallons consumed (millions) 1,158 1,115 3.9 % Actual aircraft in fleet at end of period (c) 359 359 0.0 % Average stage length 1,110 1,040 6.7 % 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 another carrier. (a) Excludes regional jets operated by Continental Express (b) Excludes loss on fleet retirements in 1998 (c) Excludes four and six all-cargo 727 aircraft at CMI in 1999 and 1998, respectively.
EARNINGS PER SHARE
(In millions of dollars, except per share data)
(Unaudited)
% Three Months Three Months Increase/ Ended Ended (Decrease) September 30, September 30, 1999 1998 Earnings per Common Share $ 1.56 $ 1.21 28.9 % Earnings per Common Share Assuming Dilution $ 1.53 $ 0.97 57.7 % Shares used for Computation: Basic 70.8 60.3 17.4 % Diluted 72.1 79.9 (9.8)% % Three Months Three Months Increase/ Ended Ended (Decrease) September 30, September 30, 1999 1998 Earnings per Common Share: Income Before Extraordinary Charge and Accounting Change $ 4.81 $ 5.33 (9.8)% Extraordinary Charge - (0.06) NM Accounting Change (0.08) - NM Net Income $ 4.73 $ 5.27 (10.2)% Earnings per Common Share Assuming Dilution: Income Before Extraordinary Charge and Accounting Change $ 4.51 $ 4.15 8.7 % Extraordinary Charge - (0.05) NM Accounting Change (0.07) - NM Net Income $ 4.44 $ 4.10 8.3 % Shares used for Computation: Basic 70.1 60.0 16.8 % Diluted 75.5 80.9 (6.7)%