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How does CAL lose money on 79% load fact

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Nov 28, 2001
HOUSTON, April 1 (Reuters) - Continental Airlines (CAL) on Monday said its unit revenues for March fell 6 percent to 8 percent compared with a year earlier as the carrier steadily recovered from the travel slump sparked by the Sept. 11 attacks on the United States.

Continental Airlines, the No. 5 U.S. carrier, said fuel price and revenue trends are challenging its ability to meet its outlook for a second quarter profit. Unit revenues -- a barometer of airline performance -- must improve further for the airline to post a profit, it said. In February, its unit revenues were down 11 percent.

The airline has said it expects to post a significant first-quarter loss, but expects to end that period with about $1.2 billion in cash, including $147 million from aircraft financing.

Continental said its system-wide load factor -- a measure of the percent of seats filled on its aircraft -- rose 4.1 points in March to 79.4 percent from a year earlier though on a smaller fleet capacity.

Continental airlines shares closed Monday trading down 67 cents, or 2.37 percent, at $27.65 on the New York Stock Exchange.
The load factors are high but the ticket prices aren't. Actually, preliminary data indicates that the company achieved profitability for the first time since September 11 during the month of March (quote from CAL's daily news update). Believe me, if there is a profit to be made, Continental will make one. Obviously, if CAL can't profit, nobody can (except SWA).


The pilots start negotiating in less than three months. Now would be a bad time for CAL to report better than expected earnings. Don't you agree?
It is all about the yield. Sure you can have a butt in everyseat, but what are you charging for the ride. I think the breakeven load factor at AA is something like 85%, we aren't close to that. I think we are loosing about $6 million a day. I think UAL's breakeven load factor is something like 93%!?
The same way NWA loses money with a 81.9% load factor. When you give your seats away for nothing, you don't make any money. The old formula RASM - CASM = Profit (Loss) still applies.
Bad Formulas

They lose money because the CEOs heads are still up their asses. They are trying to gouge businessmen (most of who aren't flying commercially anymore) while giving away the other 90% of the seats. There is no way I would pay for first class now, you really don't get anything special other than a little larger seat-on domestic flights anyhow. It doesn't even seperate you from the normal cretins in the back anymore! :)
Yield and Overhead

While the points made about yield may be on target, the fact is that it is on a great deal less flying.


Tomorrow CAL only flew 1 aircraft all day and it was 100% full. That's great but the fact is that they are paying for an entire fleet of equipment, gates that may now be under utilized, ground equipment that may be under utilized, more security costs and expenses, insurance costs skyrocketing etc etc,....

They may be paying for parked aircraft and other financial obligations not so easily stopped when flying decreases.

Without starting a flame war, the fact that the question was asked reflects that sometime we forget this is a very complex business. Many do not understand the complexities at all and some are so single issue focused they cannot deal with the forrest because a tree is in the way...

There is much more to it than load factors.

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