Continental Posts Loss

NavinRJohnson

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FYI for all, hit the press an hour ago:

NEW YORK (Reuters) - Continental Airlines Inc. on Friday reiterated it expects to post a significant loss for the year due to high fuel costs, depressing its shares on concern its turnaround may be falling short.
Continental and its U.S. rivals have been struggling with soaring fuel prices and fierce competition from low-cost rivals. The Air Transport Association, an industry group, estimated on Thursday that U.S. airlines' fuel costs could soar by $9.2 billion to $30.6 billion this year.

"It obviously is pointing out the fact that extreme fuel cost pressures are offsetting a lot of the progress that Continental has made on the labor cost front in the last few months," said William Warlick, a credit analyst at Fitch.

"It highlights the problems that all of the legacy carriers are facing now with this spike in energy costs."

Houston-based Continental said it expects to achieve $300 million in savings in 2005 from pay and benefit reduction agreements with all of its unions except the one representing flight attendants, with which it is still negotiating.

But the airline said it expects full-year fuel costs to nearly double to $2.9 billion from $1.6 billion in 2004.

Analysts expect other major U.S. airlines to lose money this year, with the exception of discounters such as Southwest Airlines Co. and JetBlue Airways Corp. They have lower employee costs and, in the case of Southwest, hedges allowing fuel purchases at below current fuel prices.

In a letter to investors, Continental also forecast it would end the third quarter with an unrestricted cash and short-term investments balance of $1.9 billion to $2 billion. It expects to end the year with a balance of $1.5 billion.

'SUBSTANTIAL' CASH POSITION

That matches previous forecasts, in a sign that the recent spike in fuel prices has not worsened its liquidity outlook. Continental is one of the industry's healthier carriers.

"They've got a pretty substantial cash position," said Helane Becker, an analyst at the Benchmark Cos., adding she had cut her full-year profit forecast for the airline.

"They're still generating cash and as you go into the end of the year, you've got bookings for Christmas and the holiday season and people are still going to fly," she said.

Continental shares were down 55 cents, or 4.4 percent, at $12.05 in midday trading on the New York Stock Exchange, making them the worst performers among U.S. airlines.

Continental shares were down 6.9 percent so far this year through Thursday, but they have still outperformed the beleaguered U.S. airline sector by 22 percent.

"Basically, it just took the steam out of Continental's progress to date, but it's nothing that should be unexpected given what happened with energy prices," said Julius Maldutis, an analyst with Aviation Dynamics.

Continental expects available seats to increase by 9.7 percent in the third quarter and 7.1 percent for the full year, led by increased flights to Asia, including new service between Newark, New Jersey, and Beijing.

Load factor, or the percentage of seats filled on each flight, will be stable or up slightly in the third quarter, Continental forecast. Domestic load factor is seen rising about two points from a year ago.

Continental estimated its average jet fuel cost per gallon at $1.89 in the third quarter and $1.76 for the full year. Last year the average was $1.34.

Continental reported an $86 million net loss for the first half. Last year, Continental posted a $363 million net loss.

The airline must pay several bills before year-end, including $63 million for pensions and $74 million for debt principal and capital lease payments in the third quarter.
 
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