Continental's capacity reductions....press release

[Kugelblitz]

Losing Cologne really sucks, what a fantastic layover that one was.

 

[cybourg10]

Most of the COEX routes that are going away were flown by the 135s, we will start parking those this fall I believe. I am also suprised that CLE took it that hard, I believe the Paris flights are still starting later this year? I don't believe CAL is doing this to set up a merger, just trimming the fat for now.....

 

[A19]

Add Guam-Hong Kong, and Saipan-Manila to cut routes

 

[MILF Hunter]

Cash is king. We somehow managed to increase our cash and cash equivalents from $2.39B in the first quarter to $3.30B in the second quarter. All of this was done while hedging almost 50% of our fuel costs for the remainder of the year.

Fuel Costs. High fuel prices continue to increase our costs and diminish our profitability. Although we have
recently experienced some success raising ticket prices (including fuel surcharges) in response to record high fuel
costs, current levels of jet fuel prices are having an adverse effect on our results of operations, financial condition
and liquidity. We believe that our young, fuel-efficient fleet continues to provide us with a competitive advantage
relative to our peers. Based on our expected fuel consumption in 2008, a one dollar increase in the price of crude oil
will increase our annual fuel expense by approximately $45 million, holding the refining margin constant and before
considering the impact of our fuel hedging program. As of March 31, 2008, we had hedged approximately 18% and
5% of our projected fuel requirements for the second and third quarters of 2008, respectively, using heating oil
option contracts.


You are hedged at 5% for the 2nd and 3rd quarters. I'm assuming Continental is raising capital because they are a high debt airline. Continental has 414 airplanes on lease(some are regional).

 

[Ex737Driver]

Fuel Costs. High fuel prices continue to increase our costs and diminish our profitability. Although we have
recently experienced some success raising ticket prices (including fuel surcharges) in response to record high fuel
costs, current levels of jet fuel prices are having an adverse effect on our results of operations, financial condition
and liquidity. We believe that our young, fuel-efficient fleet continues to provide us with a competitive advantage
relative to our peers. Based on our expected fuel consumption in 2008, a one dollar increase in the price of crude oil
will increase our annual fuel expense by approximately $45 million, holding the refining margin constant and before
considering the impact of our fuel hedging program. As of March 31, 2008, we had hedged approximately 18% and
5% of our projected fuel requirements for the second and third quarters of 2008, respectively, using heating oil
option contracts.


You are hedged at 5% for the 2nd and 3rd quarters. I'm assuming Continental is raising capital because they are a high debt airline. Continental has 414 airplanes on lease(some are regional).

Incorrect and old news as of yesterday. Here's the new info;


Continental Airlines getting credit card payment
Thursday June 12, 4:22 pm ET
By Adam Schreck, AP Business Writer Continental Airlines to receive $413 million for extended credit card deal with Chase

NEW YORK (AP) -- Continental Airlines Inc. said Thursday it will get a $413 million initial payment under its cobranded credit card deal with Chase Bank USA, adding to the carrier's cash cushion as it prepares to book severance and other charges in the coming months.
The agreement with Chase extends the credit card deal through the end of 2016, Houston-based Continental said in a filing with the Securities and Exchange Commission. Of the initial payment, $235 million covers the advance purchase of frequent flyer mileage credits.
Continental said it expects to have between $3.2 billion and $3.3 billion on hand at the end of the second quarter.
Including fuel taxes and hedges, the carrier predicted it will spend an average of $3.45 per gallon on fuel this year, and a penny more per gallon during the second quarter.
Airlines try to enter into hedging contracts ahead of time to lock in more favorable rates for the future, but doing so has grown increasingly difficult as the cost of fuel has soared in recent months.
For this quarter, Continental said it has about 20 percent of its fuel needs hedged. The airline has about 43 percent of its fuel needs hedged in the third quarter, and 48 percent in the fourth quarter. Those hedges could be valuable if oil prices rise sharply in the second half of the year -- the biggest bets are on crude oil trading between about $120 and $140 a barrel in the second half of the year.
Early Thursday, light sweet, crude for July delivery was down $1.75 in electronic trading on the New York Mercantile Exchange to trade at $134.45.
The carrier reiterated plans to cut 3,000 jobs, but did not spell out which positions would be lost. The expected job cuts represent about 6.5 percent of the company's work force of 45,000.
Continental last week said it would slash capacity by 11 percent, and retire 67 Boeing 737-300 and 737-500 planes by the end of 2009.
The downsizing is expected to result in potentially large accounting charges related to planes and spare parts, severance costs, contract termination costs and other expenses. Continental said Thursday it "is not able at this time to estimate the amount and timing of these charges."
For the next six weeks, Continental said it is "comfortable" with its forward bookings and expects demand will "remain solid throughout the summer."
While domestic and Latin American bookings over the next six weeks are running higher than at this time last year, trans-Atlantic bookings are down 2 to 3 percentage points and bookings to Asia are running 4 to 5 points behind last year. Profit margins are typically wider on international routes than on domestic ones. Continental Airlines shares rose 39 cents, or 3.2 percent, to $12.49.

 

[AWACoff]

Add Guam-Hong Kong, and Saipan-Manila to cut routes

As well as GUM-DPS. That's cut Oct. 2nd. Where else can you get a massage for $4/hr...? July is looking kinda thin out here in hafa adai land.

 

[Andy]

I wonder why they are cutting some international flights. I thought those were supposed to be money makers

There's been (and continues to be) a lot of international capacity added, driving down yields. And I'd expect international passenger traffic to soften considerably going forward.

 

[Andy]

Not everybody who is cutting capacity is necessarily in the process of merging with someone. I know a lot of people are hoping that we will merge with UAL, but I honestly don't think that is going to happen. Like USair, the books on UAL scared our people off and that is likely the end of any merger issues.

While that's the accepted line of though on pilot message boards, CAL was within hours of merging with UAL.
I'm convinced that the combined carrier was unable to find investors to throw a bunch of additional equity at them. A merger is a costly undertaking; it cost AMR somewhere north of $1B to merge TWA. A CAL/UAL hookup would likely be two to three times that expense.

While UAL's books are bad, so is every airline. At this point, it's hard to say which airlines will be around in 5 years. Well, except for Southwest.

 

[Andy]

Incorrect and old news as of yesterday. Here's the new info;


Continental Airlines getting credit card payment
Thursday June 12, 4:22 pm ET
By Adam Schreck, AP Business Writer Continental Airlines to receive $413 million for extended credit card deal with Chase

NEW YORK (AP) -- Continental Airlines Inc. said Thursday it will get a $413 million initial payment under its cobranded credit card deal with Chase Bank USA, adding to the carrier's cash cushion as it prepares to book severance and other charges in the coming months.
The agreement with Chase extends the credit card deal through the end of 2016, Houston-based Continental said in a filing with the Securities and Exchange Commission. Of the initial payment, $235 million covers the advance purchase of frequent flyer mileage credits.
Continental said it expects to have between $3.2 billion and $3.3 billion on hand at the end of the second quarter.
Including fuel taxes and hedges, the carrier predicted it will spend an average of $3.45 per gallon on fuel this year, and a penny more per gallon during the second quarter.
Airlines try to enter into hedging contracts ahead of time to lock in more favorable rates for the future, but doing so has grown increasingly difficult as the cost of fuel has soared in recent months.
For this quarter, Continental said it has about 20 percent of its fuel needs hedged. The airline has about 43 percent of its fuel needs hedged in the third quarter, and 48 percent in the fourth quarter. Those hedges could be valuable if oil prices rise sharply in the second half of the year -- the biggest bets are on crude oil trading between about $120 and $140 a barrel in the second half of the year.
Early Thursday, light sweet, crude for July delivery was down $1.75 in electronic trading on the New York Mercantile Exchange to trade at $134.45.
The carrier reiterated plans to cut 3,000 jobs, but did not spell out which positions would be lost. The expected job cuts represent about 6.5 percent of the company's work force of 45,000.
Continental last week said it would slash capacity by 11 percent, and retire 67 Boeing 737-300 and 737-500 planes by the end of 2009.
The downsizing is expected to result in potentially large accounting charges related to planes and spare parts, severance costs, contract termination costs and other expenses. Continental said Thursday it "is not able at this time to estimate the amount and timing of these charges."
For the next six weeks, Continental said it is "comfortable" with its forward bookings and expects demand will "remain solid throughout the summer."
While domestic and Latin American bookings over the next six weeks are running higher than at this time last year, trans-Atlantic bookings are down 2 to 3 percentage points and bookings to Asia are running 4 to 5 points behind last year. Profit margins are typically wider on international routes than on domestic ones. Continental Airlines shares rose 39 cents, or 3.2 percent, to $12.49.

Thanks for the press clipping. It looks like your management is being very proactive. I had been concerned about your cash balance.
They also increased hedging considerably since the end of March. I think that the 10Q said that CAL had been hedged for the year at ~18% of consumption. Of course, as we cut, consumption decreases.

 

[MILF Hunter]

Incorrect and old news as of yesterday. Here's the new info;



Including fuel taxes and hedges, the carrier predicted it will spend an average of $3.45 per gallon on fuel this year, and a penny more per gallon during the second quarter.

what price did they get a hedge at if they expect to pay 3.45 a gallon?

P.S.
I filled up my gas tank today. I am 100% hedged for the rest of the week at 3.89.

 

[Palomino]

Incorrect and old news as of yesterday. Here's the new info;


Continental Airlines getting credit card payment
Thursday June 12, 4:22 pm ET
By Adam Schreck, AP Business Writer Continental Airlines to receive $413 million for extended credit card deal with Chase

NEW YORK (AP) -- Continental Airlines Inc. said Thursday it will get a $413 million initial payment under its cobranded credit card deal with Chase Bank USA, adding to the carrier's cash cushion as it prepares to book severance and other charges in the coming months.
The agreement with Chase extends the credit card deal through the end of 2016, Houston-based Continental said in a filing with the Securities and Exchange Commission. Of the initial payment, $235 million covers the advance purchase of frequent flyer mileage credits.
Continental said it expects to have between $3.2 billion and $3.3 billion on hand at the end of the second quarter.
Including fuel taxes and hedges, the carrier predicted it will spend an average of $3.45 per gallon on fuel this year, and a penny more per gallon during the second quarter.
Airlines try to enter into hedging contracts ahead of time to lock in more favorable rates for the future, but doing so has grown increasingly difficult as the cost of fuel has soared in recent months.
For this quarter, Continental said it has about 20 percent of its fuel needs hedged. The airline has about 43 percent of its fuel needs hedged in the third quarter, and 48 percent in the fourth quarter. Those hedges could be valuable if oil prices rise sharply in the second half of the year -- the biggest bets are on crude oil trading between about $120 and $140 a barrel in the second half of the year.
Early Thursday, light sweet, crude for July delivery was down $1.75 in electronic trading on the New York Mercantile Exchange to trade at $134.45.
The carrier reiterated plans to cut 3,000 jobs, but did not spell out which positions would be lost. The expected job cuts represent about 6.5 percent of the company's work force of 45,000.
Continental last week said it would slash capacity by 11 percent, and retire 67 Boeing 737-300 and 737-500 planes by the end of 2009.
The downsizing is expected to result in potentially large accounting charges related to planes and spare parts, severance costs, contract termination costs and other expenses. Continental said Thursday it "is not able at this time to estimate the amount and timing of these charges."
For the next six weeks, Continental said it is "comfortable" with its forward bookings and expects demand will "remain solid throughout the summer."
While domestic and Latin American bookings over the next six weeks are running higher than at this time last year, trans-Atlantic bookings are down 2 to 3 percentage points and bookings to Asia are running 4 to 5 points behind last year. Profit margins are typically wider on international routes than on domestic ones. Continental Airlines shares rose 39 cents, or 3.2 percent, to $12.49.

...and what was our cash balance when we signed Garbage (Contract) '02?...

 

[RSixer]

Not buying it!

I know, I know... the cost of fuel, blah, blah blah. These are all cuts that Cal has been looking to do for a while anyway, most of it is express or seasonal flights. CAL is still trying to figure out what to really do with CLE since they acquired it. They may furlough up to 400 guys (depending on how many take early outs), well gee, thats just about how many people got hired after age 65 had passed. The airplanes to be parked, were going to be parked anyway. Maybe Im wrong, but all the Airlines are in contract negotiations right now, hmmm maybe they are just trying to scare us? No they wouldn't do that. Southwest isn't preaching doom and gloom, maybe thats because they are the one airline that doesn't try to f@%k with their employees heads.

 

[Kugelblitz]

Not to flamebait - again- I would reiterate that there are a lot of industry survivors/life support types like myself here. I have already had one airline promise me in a merger that 'principally' all the jobs would be saved and then that devolved to 'your just lucky to have a job', which then completely disintegrated to a furlough which has now been 5 years and counting. The utter hardship of starting over again - which I have done twice since my 37th birthday- is not worth it to me, and I will not hand my '06 CAL hire date to someone who has been at UAL since '98 (just to use an arbitrary date). I hired on at CAL not UAL and see no reason to let UAL's problems become my problems.

Where it is true that pilots don't have any say in the financial machinations of Wall Street, planes don't fly if we don't move them. I (and many others) would just as soon shut this place down than keep it available for someone else to cherry pick for their own career fortunes down the line using some sort of fuzzy, nihilistic logic as to why their taking my job is 'right and just'. I have heard that one before.

Nonetheless, I do sincerely wish the best to you and all the others at UAL, having gone through this very situation myself (and may yet revisit it) I would certainly never wish job loss on anyone else.

 

[dudemize]

There's been (and continues to be) a lot of international capacity added, driving down yields. And I'd expect international passenger traffic to soften considerably going forward.

Andy,

That's something I've been thinking about recently. With all the airlines focused on international expansion, and with Open Skies cranking up, it seems to me that international will be just like domestic is now, i.e. too much capacity.

 

[Andy]

Andy,

That's something I've been thinking about recently. With all the airlines focused on international expansion, and with Open Skies cranking up, it seems to me that international will be just like domestic is now, i.e. too much capacity.

Combine that with a worldwide recession. I see a lot of posts where people don't expect a recession in the rest of the world - that there's a decoupling of the US and rest of the world's economies. That's not true. Spain's economy is collapsing, and now the UK's real estate market is falling apart. There are other countries in the EU that are running into similar problems.
India's real estate market is starting to correct. And India had the largest percentage gains in real estate in the world. It's going to get ugly there; the government is talking of cutting fuel subsidies.
China is hanging in there through the Olympics, but their largest customer is the US. With people buying less here in the states, how could anyone think that it won't impact China's economy.