Continental Airlines Announces Second Quarter Profit
Thursday July 20, 6:15 am ET Strong revenue growth provides highest quarterly profit since 2001; expects 2007 mainline capacity growth of 5 percent; consolidated capacity growth of 3 percent to 4 percent due to regional jet reduction
HOUSTON, July 20 /PRNewswire-FirstCall/ -- Continental Airlines (NYSE: CAL - News) today reported second quarter 2006 net income of $198 million ($1.84 diluted earnings per share), a significant improvement over its second quarter 2005 net income of $100 million ($1.26 diluted earnings per share). Excluding special charges, Continental recorded net income of $208 million ($1.93 diluted earnings per share).
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"Our plan is working and as a result, everyone wins," said Larry Kellner, chairman and chief executive officer. "Employees win with profit sharing and stock option gains, customers win with award winning service as reflected by the J.D. Power award and stockholders win with profitability."
During the quarter, ExpressJet notified Continental that ExpressJet intends to retain all 69 regional jet aircraft covered by Continental's previously announced withdrawal notice under the capacity purchase agreement with ExpressJet. Continental expects to replace between 40 and 50 of those regional jets, and has no current plans to replace the remainder. Continental is in advanced discussions to have an operator provide the capacity that it has chosen to replace, at competitive rates under a capacity purchase arrangement.
Other than the 40 to 50 regional jet aircraft that Continental expects a third party to acquire and operate to partially replace the 69 withdrawn ExpressJet aircraft, and two Boeing 777 aircraft that Continental will take delivery of in early 2007, Continental will not take any new aircraft deliveries in 2007. As a result, the carrier anticipates growing its mainline capacity approximately 5 percent and its consolidated capacity between 3 percent and 4 percent in 2007.
Second Quarter Revenue and Capacity
Passenger revenue for the quarter increased 23.1 percent ($606 million) over the same period in 2005, to $3.2 billion, with double digit percentage growth in each mainline geographic region and in regional jet operations. Additional traffic, both domestic and international, and several fare increases produced significantly higher revenue for the company. Consolidated passenger revenue per available seat mile (RASM) for the quarter increased 11.0 percent year-over-year due to increased yields and record load factors.
Consolidated revenue passenger miles (RPMs) for the quarter increased 15.2 percent year-over-year on a capacity increase of 10.9 percent, resulting in a record consolidated load factor for the quarter of 82.7 percent, 3.1 points above the same period in 2005. Consolidated yield increased 6.9 percent year-over-year.
Mainline RPMs in the second quarter of 2006 increased 14.3 percent over the second quarter 2005, on a capacity increase of 10.8 percent. Mainline load factor was a record 82.9 percent, up 2.5 points year-over-year. Continental's mainline yields during the quarter increased 6.3 percent over the same period in 2005.
During the quarter, Continental continued to maintain domestic length-of-haul adjusted yield and RASM premiums to the industry.
Passenger revenue for the second quarter of 2006 and period-to-period comparisons of related statistics by geographic region for the company's mainline and regional operations are as follows:
Percentage Increase in Passenger Second Quarter 2006 vs. Second Quarter 2005 Revenue Passenger (in millions) Revenue RASM ASMs Domestic $1,465 18.1 % 12.4 % 5.1 % Transatlantic 570 25.8 % 4.7 % 20.1 % Latin America 346 30.6 % 11.2 % 17.4 % Pacific 217 21.6 % 7.2 % 13.5 % Total Mainline $2,598 21.6 % 9.7 % 10.8 % Regional $629 30.0 % 16.6 % 11.5 % Consolidated $3,227 23.1 % 11.0 % 10.9 % Operational Accomplishments
Continental won several major awards in the quarter, including receiving the highest rank in customer satisfaction among network carriers in North America in the J.D. Power and Associates 2006 Airline Satisfaction Index Study(SM).
The airline also won OAG's "Best Airline Based in North America" for the third year in a row and "Best Executive/Business Class" for the fourth year in a row at the OAG Airline of the Year Awards 2006. In addition, Continental received Priority Pass' "Lounge of the Year" for its Terminal E Presidents Club at Houston Bush Intercontinental Airport for the second consecutive year.
In July, Continental won the Operations award at Airline Business magazine's Airline Strategy Awards 2006. The company was selected for a combination of reasons, including the excellent operations it has developed at its two main hubs: Houston and New York/Newark.
"Our co-workers continue to deliver the best product in the business," said Jeff Smisek, president. "As we continue to grow, we are also adding solid year-over-year unit revenue gains, driving excellent revenue growth."
Continental's employees continued to work together to deliver a systemwide mainline completion factor of 99.8 percent and operate 23 days without a single mainline cancellation in spite of disruptive weather at its Houston and New York area hubs. The company recorded a U.S. Department of Transportation on-time arrival rate of 71.5 percent during the quarter, which was impacted by the weather as well as air traffic control ground delay programs and record load factors.
The company continued its ongoing international expansion during the quarter, inaugurating three new European routes. Continental began nonstop service between its New York hub at Newark Liberty International Airport and Barcelona, Spain; Cologne, Germany; and Copenhagen, Denmark. Continental serves more nonstop transatlantic destinations from the New York area than any other carrier, with service to 28 cities in 15 countries.
Continental signed new, five-year agreements with Expedia, Inc., Sabre Travel Network, Travelocity, Galileo and Cheap Tickets during the quarter, under which Continental's full range of products and services, including all fares and inventory, are marketed through their related sites and systems.
Sales at continental.com continued to be strong in the second quarter, up 55 percent over the second quarter 2005. The company is on target to achieve $3 billion of sales on continental.com this year.
Continental unveiled a new animal kennel facility at its Houston hub at George Bush Intercontinental Airport, the first airline-owned kennel on airport property in the United States. This new service will be offered to the carrier's four-legged customers that utilize the carrier's acclaimed PetSafe service.
Second Quarter Financial Results
Continental's mainline cost per available seat mile (CASM) increased 8.1 percent in the second quarter compared to the same period last year, primarily due to record high fuel prices. CASM decreased 1.5 percent holding fuel rate constant, excluding employee profit sharing accruals and special charges.
"After five years of challenges and hard work, it's great to see a pay-off for everyone's efforts.
Thursday July 20, 6:15 am ET Strong revenue growth provides highest quarterly profit since 2001; expects 2007 mainline capacity growth of 5 percent; consolidated capacity growth of 3 percent to 4 percent due to regional jet reduction
HOUSTON, July 20 /PRNewswire-FirstCall/ -- Continental Airlines (NYSE: CAL - News) today reported second quarter 2006 net income of $198 million ($1.84 diluted earnings per share), a significant improvement over its second quarter 2005 net income of $100 million ($1.26 diluted earnings per share). Excluding special charges, Continental recorded net income of $208 million ($1.93 diluted earnings per share).
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[URL="http://us.a2.yimg.com/us.yimg.com/a/th/the_motley_fool/300x250_sa-marvel_110_103105.gif"]http://us.a2.yimg.com/us.yimg.com/a/th/the_motley_fool/300x250_sa-marvel_110_103105.gif[/URL]if (window.yzq_a == null) document.write("");if (window.yzq_a){yzq_a('p', 'P=7x8PFUSOxCZhnZz3RGJ5qwI4QpvUGkS_XGMAAHpN&T=1disvps81%2fX%3d1153391715%2fE%3d7811758%2fR%3dfin%2fK%3d5%2fV%3d1.1%2fW%3d8%2fY%3dYAHOO%2fF%3d2793801959%2fH%3dY29udGVudD0iZWFybmluZ3MiIGNvYnJhbmQ9IjxhIGhyZWY9aHR0cDovL3d3dy5wcm5ld3N3aXJlLmNvbS95YWhvby8.PGltZyBib3JkZXI9MCBzcmM9aHR0cDovL3VzLmkxLnlpbWcuY29tL3VzLnlpbWcuY29tL2kvdXMvZmkvZ3IvcGFydG5lcl9sb2dvcy9wcm5ld3N3aXJlXzE3MHgzM19sb2dvLmdpZiBhbHQ9UFJfTmV3c3dpcmU.PC9hPiIgY2FjaGVoaW50PSI3ODExNzU4IiBjYWNoZWhpbnQ9Ijc4MTE3NTgi%2fS%3d1%2fJ%3dB8C28E44');yzq_a('a', '&U=13980qdal%2fN%3dgLh3AESOxJU-%2fC%3d439064.8965372.9742330.8049217%2fD%3dLREC%2fB%3d3096029');}http://us.bc.yahoo.com/b?P=7x8PFUSOxCZhnZz3RGJ5qwI4QpvUGkS_XGMAAHpN&T=1dmis38ul%2fX%3d1153391715%2fE%3d7811758%2fR%3dfin%2fK%3d5%2fV%3d2.1%2fW%3d8%2fY%3dYAHOO%2fF%3d734023684%2fH%3dY29udGVudD0iZWFybmluZ3MiIGNvYnJhbmQ9IjxhIGhyZWY9aHR0cDovL3d3dy5wcm5ld3N3aXJlLmNvbS95YWhvby8.PGltZyBib3JkZXI9MCBzcmM9aHR0cDovL3VzLmkxLnlpbWcuY29tL3VzLnlpbWcuY29tL2kvdXMvZmkvZ3IvcGFydG5lcl9sb2dvcy9wcm5ld3N3aXJlXzE3MHgzM19sb2dvLmdpZiBhbHQ9UFJfTmV3c3dpcmU.PC9hPiIgY2FjaGVoaW50PSI3ODExNzU4IiBjYWNoZWhpbnQ9Ijc4MTE3NTgi%2fQ%3d-1%2fS%3d1%2fJ%3dB8C28E44&U=13980qdal%2fN%3dgLh3AESOxJU-%2fC%3d439064.8965372.9742330.8049217%2fD%3dLREC%2fB%3d3096029Operating income in the second quarter of 2006 was $244 million, more than double that of the second quarter of 2005, in spite of fuel price increases costing over $200 million and including a $60 million accrual for employee profit sharing.
"Our plan is working and as a result, everyone wins," said Larry Kellner, chairman and chief executive officer. "Employees win with profit sharing and stock option gains, customers win with award winning service as reflected by the J.D. Power award and stockholders win with profitability."
During the quarter, ExpressJet notified Continental that ExpressJet intends to retain all 69 regional jet aircraft covered by Continental's previously announced withdrawal notice under the capacity purchase agreement with ExpressJet. Continental expects to replace between 40 and 50 of those regional jets, and has no current plans to replace the remainder. Continental is in advanced discussions to have an operator provide the capacity that it has chosen to replace, at competitive rates under a capacity purchase arrangement.
Other than the 40 to 50 regional jet aircraft that Continental expects a third party to acquire and operate to partially replace the 69 withdrawn ExpressJet aircraft, and two Boeing 777 aircraft that Continental will take delivery of in early 2007, Continental will not take any new aircraft deliveries in 2007. As a result, the carrier anticipates growing its mainline capacity approximately 5 percent and its consolidated capacity between 3 percent and 4 percent in 2007.
Second Quarter Revenue and Capacity
Passenger revenue for the quarter increased 23.1 percent ($606 million) over the same period in 2005, to $3.2 billion, with double digit percentage growth in each mainline geographic region and in regional jet operations. Additional traffic, both domestic and international, and several fare increases produced significantly higher revenue for the company. Consolidated passenger revenue per available seat mile (RASM) for the quarter increased 11.0 percent year-over-year due to increased yields and record load factors.
Consolidated revenue passenger miles (RPMs) for the quarter increased 15.2 percent year-over-year on a capacity increase of 10.9 percent, resulting in a record consolidated load factor for the quarter of 82.7 percent, 3.1 points above the same period in 2005. Consolidated yield increased 6.9 percent year-over-year.
Mainline RPMs in the second quarter of 2006 increased 14.3 percent over the second quarter 2005, on a capacity increase of 10.8 percent. Mainline load factor was a record 82.9 percent, up 2.5 points year-over-year. Continental's mainline yields during the quarter increased 6.3 percent over the same period in 2005.
During the quarter, Continental continued to maintain domestic length-of-haul adjusted yield and RASM premiums to the industry.
Passenger revenue for the second quarter of 2006 and period-to-period comparisons of related statistics by geographic region for the company's mainline and regional operations are as follows:
Percentage Increase in Passenger Second Quarter 2006 vs. Second Quarter 2005 Revenue Passenger (in millions) Revenue RASM ASMs Domestic $1,465 18.1 % 12.4 % 5.1 % Transatlantic 570 25.8 % 4.7 % 20.1 % Latin America 346 30.6 % 11.2 % 17.4 % Pacific 217 21.6 % 7.2 % 13.5 % Total Mainline $2,598 21.6 % 9.7 % 10.8 % Regional $629 30.0 % 16.6 % 11.5 % Consolidated $3,227 23.1 % 11.0 % 10.9 % Operational Accomplishments
Continental won several major awards in the quarter, including receiving the highest rank in customer satisfaction among network carriers in North America in the J.D. Power and Associates 2006 Airline Satisfaction Index Study(SM).
The airline also won OAG's "Best Airline Based in North America" for the third year in a row and "Best Executive/Business Class" for the fourth year in a row at the OAG Airline of the Year Awards 2006. In addition, Continental received Priority Pass' "Lounge of the Year" for its Terminal E Presidents Club at Houston Bush Intercontinental Airport for the second consecutive year.
In July, Continental won the Operations award at Airline Business magazine's Airline Strategy Awards 2006. The company was selected for a combination of reasons, including the excellent operations it has developed at its two main hubs: Houston and New York/Newark.
"Our co-workers continue to deliver the best product in the business," said Jeff Smisek, president. "As we continue to grow, we are also adding solid year-over-year unit revenue gains, driving excellent revenue growth."
Continental's employees continued to work together to deliver a systemwide mainline completion factor of 99.8 percent and operate 23 days without a single mainline cancellation in spite of disruptive weather at its Houston and New York area hubs. The company recorded a U.S. Department of Transportation on-time arrival rate of 71.5 percent during the quarter, which was impacted by the weather as well as air traffic control ground delay programs and record load factors.
The company continued its ongoing international expansion during the quarter, inaugurating three new European routes. Continental began nonstop service between its New York hub at Newark Liberty International Airport and Barcelona, Spain; Cologne, Germany; and Copenhagen, Denmark. Continental serves more nonstop transatlantic destinations from the New York area than any other carrier, with service to 28 cities in 15 countries.
Continental signed new, five-year agreements with Expedia, Inc., Sabre Travel Network, Travelocity, Galileo and Cheap Tickets during the quarter, under which Continental's full range of products and services, including all fares and inventory, are marketed through their related sites and systems.
Sales at continental.com continued to be strong in the second quarter, up 55 percent over the second quarter 2005. The company is on target to achieve $3 billion of sales on continental.com this year.
Continental unveiled a new animal kennel facility at its Houston hub at George Bush Intercontinental Airport, the first airline-owned kennel on airport property in the United States. This new service will be offered to the carrier's four-legged customers that utilize the carrier's acclaimed PetSafe service.
Second Quarter Financial Results
Continental's mainline cost per available seat mile (CASM) increased 8.1 percent in the second quarter compared to the same period last year, primarily due to record high fuel prices. CASM decreased 1.5 percent holding fuel rate constant, excluding employee profit sharing accruals and special charges.
"After five years of challenges and hard work, it's great to see a pay-off for everyone's efforts.
JB still has a "better product."
