News Release
Continental Continues to Outperform the Industry, Reporting 25th Consecutive Profitable Quarter
One of only two major air carriers expected to report first half profits
HOUSTON, July 16, 2001 -- Continental Airlines (NYSE: CAL) today reported second quarter net income of $42 million ($0.74 diluted earnings per share). This marks the 25th consecutive profitable quarter for Continental and exceeds the First Call consensus of $0.58 diluted earnings per share.
Continental attributes its continuing success to strong employee morale, reliable on-time flights and a high level of customer service. Continental, which ranked first in on-time arrivals among major carriers in 2000 in the U.S. Department of Transportation's (DOT) Air Travel Consumer Report, continues to be an industry leader for on-time arrivals. The airline posted second quarter on- time performance of 82.6 percent, a 5.6 percentage point improvement over the same period last year. In spite of Tropical Storm Allison, Continental completed an above industry average of 98.9 percent of its flights.
Our team of 56,300 employees has once again demonstrated how working together works for us all," said Gordon Bethune, Continental Airlines' chairman and chief executive officer. "We've outperformed our competitors both financially and operationally by remaining focused on the fundamentals of running a good airline."
Second Quarter Operating Results
Second quarter passenger revenue was $2.4 billion. Capacity grew by 6.7 percent, including the addition of the New York to Hong Kong flight in March. Load factor of 74.8 percent for the second quarter of 2001 was the second highest in the company's history for that quarter.
Continental continued to enjoy domestic length-of-haul adjusted revenue per available seat mile (RASM) and yield premiums to the industry. Latin America recorded a year-over-year increase in RASM in the second quarter. The domestic RASM decline reflected the impact of yield pressures due to the economic slowdown and drop in business traffic. Pacific RASM declined principally as a result of the addition of the new Hong Kong route. Statistics by geographic market are shown below:
Second Quarter 2001 vs. Second Quarter 2000 Passenger Revenue RASM ASMs Domestic (4.1)% (9.7)% 6.2 % Latin America 6.2 % 3.3 % 2.8 % Transatlantic (3.2)% (2.8)% (0.5)% Pacific 16.4 % (13.8)% 35.1 %
Despite the devastating effects of Tropical Storm Allison, Continental's second quarter operating performance was outstanding. The airline continues to be among the top U.S. major carriers for completion factor and on-time performance. In addition, Continental experienced significantly fewer air traffic control delays due to better coordination between the airline and the Federal Aviation Administration at all levels.
"Continental Airlines consistently outpaces the industry thanks to the tremendous efforts of our employees," said Larry Kellner, president of Continental Airlines. "Despite record-setting floods in Houston spawned by Tropical Storm Allison, our employees continue to work together to weather the obstacles that come their way."
The positive growth trend in online bookings, including continental.com, continued in the second quarter with sales in excess of $250 million. In addition, the number of eTicketed passengers continues to grow and now represents 74 percent of domestic travel. Continental has enhanced its position as the industry leader in interline eTicketing, with United Airlines joining the growing list of already successful interline eTicketing agreements Continental enjoys with Northwest and America West airlines. Interline eTicketing allows customers to use a single interchangeable electronic ticket when their itineraries include travel on both carriers.
During the second quarter, Continental launched its 18th transatlantic route with daily nonstop service between New York and London Stansted. Continental also announced new nonstop service between NewYork and Houston Hobby effective September 2001, and between Houston and Amsterdam effective May 2002.
Additionally, Continental Express, the regional airline partner of Continental Airlines, inaugurated daily nonstop service between Houston and Zacatecas, Mexico.
Continental continued its award-winning trend in the second quarter, garnering four top Freddie Awards for its OnePass frequent flyer program, more than any other airline. The airline also received top honors in the first Customer Service Awards given by Smart Money magazine, and achieved the highest rating for outstanding management among U.S. based global carriers according to Aviation Week & Space Technology.
Second Quarter Financial Results
Continental's cost per available seat mile in the second quarter was 3.5 percent lower (4.4 percent lower holding fuel rate constant) than the same period last year. Lower revenue related and distribution costs, along with maintenance savings from a younger fleet, offset increases in wages and fuel. Other costs remained relatively constant on a per unit basis compared to the previous year as a result of the company's continued disciplined focus on eliminating non-value added costs.
The company again ended the quarter with more than $1 billion in cash.
During the second quarter, Continental completed two public offerings of pass-through certificates totaling $901 million at an effective average interest rate of 6.87 percent. The proceeds will be used to finance the debt portion of the acquisition cost of 21 new Boeing aircraft that are scheduled for delivery from October 2001 to June 2002. On July 13, 2001, Continental priced a public offering of $200 million of pass-through certificates at an interest rate of 7.57 percent.
During the second quarter, Continental took delivery of its first Boeing 737- 900. The all new 737-900 is Continental's first 737 to feature a mid-cabin fourth lavatory for passenger convenience, an amenity Continental is installing on all of its 737-800 and -900 fleet. Continental also took delivery of two Boeing 767-200 and two Boeing 737-800 aircraft in the second quarter. Continental Express took delivery of 11 new regional jets in the second quarter.
On July 10, Continental Airlines announced that its wholly owned subsidiary, ExpressJet Holdings, Inc. (ExpressJet), which operates Continental's regional airline partner Continental Express, filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering of its Class A common stock. Soon after the six-month anniversary of the planned offering, subject to receipt of a favorable ruling from the Internal Revenue Service, Continental Airlines intends to spin-off to its stockholders the remaining shares of ExpressJet in a tax-free distribution. In connection with that announcement, the company suspended its stock repurchase program until a date to be announced in the future.
Corporate Background
Continental Airlines is the fifth largest airline in the U.S., offering more than 2,500 departures daily to 136 domestic and 92 international destinations. Operating hubs in Newark, Houston, Cleveland and Guam, Continental (continental.com) serves more international cities than any other U.S. carrier, including extensive service throughout the Americas, Europe and Asia.
Continental Airlines will conduct a regular quarterly telephone briefing today to discuss these results with the financial community at 9:30 a.m. CDT/10:30 a.m. EDT. To listen to a live broadcast of this briefing via the World Wide Web, go to continental.com/corporate.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES FINANCIAL SUMMARY (In millions of dollars, except per share data) (Unaudited) Three Months Three Months % Ended Ended Increase/ June 30, 2001 June 30, 2000 (Decrease) Operating Revenue: Passenger $2,420 $2,424 (0.2)% Cargo, mail and other 136 147 (7.5)% 2,556 2,571 (0.6)% Operating Expenses: Wages, salaries and related costs 800 719 11.3 % Aircraft fuel 349 313 11.5 % Aircraft rentals 223 210 6.2 % Maintenance, materials and repairs 162 171 (5.3)% Landing fees and other rentals 153 138 10.9 % Reservations and sales 124 120 3.3 % Commissions 106 141 (24.8)% Depreciation and amortization 111 98 13.3 % Passenger servicing 96 91 5.5 % Other 295 284 3.9 % 2,419 2,285 5.9 % Operating Income 137 286 (52.1)% Nonoperating Income (Expense): Net interest expense (44) (27) 63.0 % Other, net (13) (9) 44.4 % (57) (36) 58.3 % Income before Income Taxes and Extraordinary Charge 80 250 (68.0)% Income Tax Provision (36) (97) (62.9)% Distributions on Preferred Securities of Trust, net of tax (2) -- NM Income before Extraordinary Charge 42 153 (72.5)% Extraordinary Charge, Net of Tax -- (4) NM Net Income $ 42 $ 149 (71.8)% CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES FINANCIAL SUMMARY (In millions of dollars, except per share data) (Unaudited) Six Months Six Months % Ended Ended Increase/ June 30, 2001 June 30, 2000 (Decrease) Operating Revenue: Passenger $4,726 $4,561 3.6 % Cargo, mail and other 282 287 (1.7)% 5,008 4,848 3.3 % Operating Expenses: Wages, salaries and related costs 1,558 1,391 12.0 % Aircraft fuel 694 647 7.3 % Aircraft rentals 437 416 5.0 % Maintenance, materials and repairs 322 330 (2.4)% Landing fees and other rentals 294 267 10.1 % Reservations and sales 252 235 7.2 % Commissions 220 274 (19.7)% Depreciation and amortization 216 193 11.9 % Passenger servicing 187 176 6.3 % Other 615 570 7.9 % 4,795 4,499 6.6 % Operating Income 213 349 (39.0)% Nonoperating Income (Expense): Net interest expense (86) (57) 50.9 % Other, net (28) (19) 47.4 % (114) (76) 50.0 % Income before Income Taxes and Extraordinary Charge 99 273 (63.7)% Income Tax Provision (44) (106) (58.5) Distributions on Preferred Securities of Trust, net (4) -- NM Income before Extraordinary Charge 51 167 (69.5)% Extraordinary Charge, Net of Tax -- (4) NM Net Income $ 51 $ 163 (68.7)% CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES STATISTICS (jet operations only) (a) Three Months Ended June 30, % Increase/ 2001 2000 (Decrease) Enplanements (thousands) 12,256 12,084 1.4 % Revenue passenger miles (millions) 17,053 16,491 3.4 % Available seat miles (millions) 22,813 21,384 6.7 % Cargo ton miles (millions) 245 271 (9.6)% Passenger load factor 74.8% 77.1% (2.3)pts. Breakeven passenger load factor 66.9% 64.0% 2.9 pts. Passenger revenue per available seat mile 9.52¢ 10.32¢ (7.8)% Total revenue per available seat mile 10.28¢ 11.14¢ (7.7)% Cost per available seat mile 9.41¢ 9.75¢ (3.5)% Cost per available seat mile, holding fuel rate constant 9.32¢ 9.75¢ (4.4)% Average yield per revenue passenger mile 12.73¢ 13.38¢ (4.9)% Average price per gallon of fuel, excluding fuel taxes 81.49¢ 75.52¢ 7.9 % Average price per gallon of fuel, including fuel taxes 85.71¢ 79.73¢ 7.5 % Fuel gallons consumed (millions) 391 386 1.3 % Actual aircraft in fleet at end of period 377 363 3.9 % Average stage length 1,193 1,156 3.2 % Six Months Ended June 30, % Increase/ 2001 2000 (Decrease) Enplanements (thousands) 23,476 23,285 0.8 % Revenue passenger miles (millions) 32,167 31,496 2.1 % Available seat miles (millions) 44,271 42,334 4.6 % Cargo ton miles (millions) 498 536 (7.1)% Passenger load factor 72.7% 74.4% (1.7) pts. Breakeven passenger load factor 66.1% 66.0% 0.1 pts. Passenger revenue per available seat mile 9.63¢ 9.83¢ (2.0)% Total revenue per available seat mile 10.44¢ 10.64¢ (1.9)% Cost per available seat mile 9.65¢ 9.71¢ (0.6)% Cost per available seat mile, holding fuel rate constant 9.59¢ 9.72¢ (1.3)% Average yield per revenue passenger mile 13.26¢ 13.21¢ 0.4 % Average price per gallon of fuel, excluding fuel taxes 83.61¢ 79.25¢ 5.5 % Average price per gallon of fuel, including fuel taxes 88.09¢ 83.49¢ 5.5 % Fuel gallons consumed (millions) 759 763 (0.5)% Actual aircraft in fleet at end of period 377 363 3.9 % Average stage length 1,179 1,143 3.1 % Continental has entered into block space arrangements with certain other carriers whereby one or both of the carriers 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. CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES EARNINGS PER SHARE (In millions, except per share data) (Unaudited) Three Months Three Months % Ended Ended Increase/ June 30, 2001 June 30, 2000 (Decrease) Basic Earnings per Share: Income Before Extraordinary Charge $ 0.77 $ 2.52 (69.4)% Extraordinary Charge -- (0.08) NM Net Income $ 0.77 $ 2.44 (68.4)% Diluted Earnings per Share: Income Before Extraordinary Charge $ 0.74 $ 2.46 (69.9)% Extraordinary Charge -- (0.07) NM Net Income $ 0.74 $ 2.39 (69.0)% Shares used for Computation: Basic 54.2 60.9 (11.0)% Diluted 59.2 62.2 (4.8)% Six Months Six Months % Ended Ended Increase/ June 30, 2001 June 30, 2000 (Decrease) Basic Earnings per Share: Income Before Extraordinary Charge $ 0.93 $ 2.68 (65.3)% Extraordinary Charge -- (0.07) NM Net Income $ 0.93 $ 2.61 (64.4)% Diluted Earnings per Share: Income Before Extraordinary Charge $ 0.91 $ 2.64 (65.5)% Extraordinary Charge -- (0.07) NM Net Income $ 0.91 $ 2.57 (64.6)% Shares used for Computation: Basic 54.6 62.1 (12.1)% Diluted 59.9 63.2 (5.2)%