Weak economic environment continued to impact results
HOUSTON — Continental Airlines (NYSE: CAL) today announced a 2009 full-year net loss of $282 million ($2.18 diluted loss per share). Excluding $145 million of previously announced special charges, and a $158 million non-cash income tax benefit, Continental recorded a net loss of $295 million ($2.28 diluted loss per share) for the year.
For the fourth quarter of 2009, Continental reported a fourth quarter net income of $85 million ($0.60 diluted earnings per share). Excluding $77 million of previously announced special charges, and a $158 million non-cash income tax benefit, Continental recorded a fourth quarter net income of $4 million ($0.03 diluted earnings per share).
Full-year 2009 and fourth-quarter results continued to be adversely affected by declines in high yield traffic due to the global recession.
„My co-workers have done a superb job working through enormous challenges in 2009, while providing the best customer service and product in the business,“ said Jeff Smisek, Continental’s chairman, president and chief executive officer. „While we are seeing some business traffic increasing, we likely have a long and slow road to recovery. We remain focused on achieving and maintaining profitability.“
Fourth Quarter Revenue and Capacity
Total revenue for the fourth quarter of 2009 was $3.2 billion, a decrease of 8.3 percent compared to the same period in 2008. Passenger revenue for the fourth quarter fell 9.5 percent ($296 million) compared to the same period in 2008 due to lower yields.
Consolidated revenue passenger miles (RPMs) for the fourth quarter of 2009 increased 3.5 percent on a capacity (available seat mile, ASM) decrease of 0.6 percent year-over-year.
Consolidated load factor was a fourth quarter record 82.0 percent, 3.3 points higher than the fourth quarter of 2008. Consolidated yield for the quarter decreased 12.6 percent year-over-year. As a result, fourth quarter 2009 consolidated passenger revenue per available seat mile (RASM) decreased 9.0 percent year-over-year.
Mainline RPMs in the fourth quarter of 2009 increased 3.7 percent on a mainline capacity decrease of 0.5 percent year-over-year.
Mainline load factor of 82.6 percent was also a fourth quarter record, up 3.3 points year-over-year. Continental’s mainline yield decreased 13.6 percent in the fourth quarter over the same period in 2008. As a result, fourth quarter 2009 mainline RASM was down 9.9 percent compared to the fourth quarter of 2008.
Passenger revenue for the fourth quarter of 2009 and period-to-period comparisons of related statistics by geographic region for the company’s mainline operations and regional operations are as follows:
Percentage Increase (Decrease) in
Passenger Fourth Quarter 2009 vs. Fourth Quarter 2008
Revenue -------------------------------------------
(in millions)
-------------
Passenger
Revenue ASMs
------- ----
Domestic $1,166 (9.8)% 0.4 %
Trans-Atlantic 548 (16.3)% (11.0)%
Latin America 357 (8.1)% 5.5 %
Pacific 234 (1.2)% 16.1 %
Total Mainline $2,305 (10.4)% (0.5)%
Regional $502 (5.4)% (1.4)%
Consolidated $2,807 (9.5)% (0.6)%
Percentage Increase (Decrease) in
Fourth Quarter 2009 vs. Fourth Quarter 2008
-------------------------------------------
RASM Yield
---- -----
Domestic (10.2)% (12.3)%
Trans-Atlantic (6.0)% (14.8)%
Latin America (12.9)% (14.6)%
Pacific (14.9)% (16.5)%
Total Mainline (9.9)% (13.6)%
Regional (4.0)% (7.5)%
Consolidated (9.0)% (12.6)%
Cargo revenue in the fourth quarter of 2009 decreased 6.1 percent ($7 million) compared to the same period in 2008, principally due to lower year-over-year fuel surcharges. Other revenue during the fourth quarter of 2009 was $14 million higher than the prior year due primarily to higher bag fee revenue.
Fourth Quarter Operations
Continental’s employees earned a total of $3 million in cash incentives for on-time performance during the quarter. The company recorded a U.S. Department of Transportation (DOT) on-time arrival rate of 77.2 percent and a systemwide mainline segment completion factor of 99.4 percent during the quarter.
Global Reach with Star Alliance
Continental Airlines joined Star Alliance in the fourth quarter of 2009, providing significantly improved benefits to customers including access to the world’s largest airline network and reciprocal frequent flier and airport lounge benefits with Star Alliance’s 25 other member airlines around the world.
„Thanks to the focus and hard work of my co-workers, we successfully transitioned to Star Alliance,“ said Jim Compton, Continental’s executive vice president and chief marketing officer. „Our hubs are a perfect fit for Star Alliance and our customers now enjoy a network second to none.“
To enhance connectivity with Star Alliance member carriers, Continental launched nonstop service between Houston and Frankfurt, Germany on Nov. 1, 2009 and announced that it will launch daily nonstop service between its New York hub at Newark Liberty International Airport and Munich beginning March 27, 2010. Also in connection with joining Star Alliance, the company began service to several new destinations during the quarter, including nonstop service between Houston and Edmonton, Canada, and daily nonstop service from Houston and Cleveland to Washington Dulles International Airport. In addition, Continental began new service from Guam and Honolulu to Nadi, Fiji on Dec. 18, 2009.
To facilitate easy connections between Continental’s flights and those of other Star Alliance airlines, Continental successfully relocated its operations at several key airports, including Chicago, Frankfurt, Narita, Honolulu and Beijing.
Continental, United and All Nippon Airways (ANA) filed an application with the DOT for antitrust immunity to enable the three carriers to create a more efficient and comprehensive trans-Pacific network, generating substantial service and pricing benefits for consumers. The trans-Pacific joint venture – the first of its kind between the U.S. and Asia – will also enable Continental, United and ANA to compete more effectively with other global alliances, each of which has a significant presence in Tokyo.
Notable Product Enhancements
Continental’s first aircraft with new flat-bed BusinessFirst seats took to the skies in the fourth quarter of 2009, with installation complete on three aircraft; two Boeing 777s and a 757-200. Flat-bed seats are being installed on Continental’s entire fleet of Boeing 777, 757-200, 767-200 and substantially all of its 767-400 aircraft, and on its Boeing 787 fleet as the aircraft are delivered to Continental.
Continental continued to install DIRECTV(R) on its aircraft during the quarter, with the new service now offered on 53 aircraft. DIRECTV(R) offers customers the choice of more than 100 channels of live television and previously recorded programming. The company has completed installation of DIRECTV(R) on its Boeing 737-900ER fleet and expects to complete installation of DIRECTV(R) on its entire fleet of Boeing 737 Next-Generation aircraft by the end of 2010.
Continental announced that this summer, it will begin installing Gogo Inflight Internet service on its fleet of 21 Boeing 757-300 aircraft.
Cashless cabin was introduced to Continental’s customers in the fourth quarter of 2009. Flight crews now accept credit and debit cards exclusively for on-board purchases (except duty-free) on Continental flights.
Continental was recognized many times for its product and services during the fourth quarter of 2009. The company was named the Best Large Domestic Airline for Premium Class and Best Value for the Money (International) among all airlines in Zagat’s 2009 Airline Survey. Continental won top honors in two categories in the 2009 OAG Airline Industry Awards, „Best Executive/Business Class“ and „Best Airline Based in North America“ and Continental outranked its U.S. network competitors to take top honors in Business Travel News‘ Annual Airline Survey for the second consecutive year.
Fourth Quarter Costs
Due primarily to significantly lower jet fuel costs, Continental’s mainline cost per available seat mile (CASM) decreased 8.6 percent in the fourth quarter compared to the same period last year. The average mainline price of a gallon of fuel dropped 31.7 percent year-over-year and mainline fuel consumption fell by 1.5 percent. Holding fuel rate constant and excluding special charges, fourth quarter 2009 mainline CASM increased 1.4 percent compared to the fourth quarter of 2008, on a mainline ASM decline of 0.5 percent.
„Our entire team has done an excellent job holding the line on costs and working more efficiently,“ said Zane Rowe, Continental’s executive vice president and chief financial officer. „As you see with our new aircraft, flat-bed seats, DIRECTV(R) and audio video on demand, we will continue to invest in our product where it makes sense.“
Fuel expense for the quarter declined $388 million (32.4 percent) compared to the same period in 2008 as a result of a decrease in fuel prices and lower volumes.
Fleet Changes Continue to Improve Efficiency
Continental continued to improve fuel efficiency during the quarter by retiring older aircraft and adding modern, fuel-efficient aircraft to its fleet. During the quarter, the company took delivery of one new Boeing 737-900ER and three leased Boeing 757-300 aircraft. In addition, Continental removed from service four older Boeing 737-300 aircraft. Continental’s young, fuel-efficient fleet continues to provide a natural hedge against the cost of jet fuel.
Continental continued to install winglets on its fleet of Boeing 757-300 aircraft. All of the company’s 737-500s, 700s, 800s, 900s and 757-200s have winglets. The company expects to complete installation of winglets on its entire narrowbody fleet by the end of the second quarter of 2010.
Continental is scheduled to take delivery of 12 Boeing 737 aircraft and two Boeing 777 aircraft in 2010, and expects to take delivery of one leased Boeing 757-300 aircraft in the first quarter of 2010. By the end of the first quarter of 2010, the company expects to remove from service its last three Boeing 737-300 aircraft.
Cash and Liquidity
Continental ended the fourth quarter with $2.86 billion in unrestricted cash and short-term investments.
During the fourth quarter, Continental completed the sale of $644 million of enhanced equipment trust certificates to be secured by a total of 19 owned aircraft. A portion of the proceeds from the sale of the certificates will be used to finance the company’s purchase of nine new Boeing 737-800 and two Boeing 777 aircraft and the remainder of the proceeds will be used for general corporate purposes. The funds are expected to be received in the first half of 2010.
Also in the fourth quarter, the company issued $230 million of 4.5% convertible debt. The notes mature on Jan. 15, 2015, and are convertible into Continental’s common stock at an initial conversion price of approximately $19.87 per share.
2009 in Review
During 2009, Continental took a number of steps to strengthen its cash balance and competitive position, and continued to distinguish itself from competitors. Continental:
- Raised approximately $1.7 billion through the issuance of enhanced equipment trust certificates, other new secured borrowings, convertible debt and common stock.
- Inaugurated daily nonstop service between New York and Shanghai, linking the world’s leading financial center and top business and tourism destination with China’s center for finance and trade. In addition, Continental began daily nonstop service between its Houston hub and Frankfurt and between Houston and Rio de Janeiro.
- Took delivery of 13 Boeing 737-900ER and three leased Boeing 757-300 aircraft. In addition, the company removed from service 20 Boeing 737-300 aircraft and eight Boeing 737-500 aircraft.
- Delivered solid operational performance, operating 101 days without a single mainline flight cancellation. The company recorded a DOT mainline segment completion factor of 99.5 percent and a systemwide on-time arrival rate of 78.8 percent for the year.
- Rated as the top airline on FORTUNE magazine’s World’s Most Admired Airline on its 2009 list of World’s Most Admired Companies for the sixth consecutive year.
- Became the first commercial carrier to successfully demonstrate the use of sustainable biofuel to power an aircraft in North America.
- Paid employees $25 million ($595 per employee) in cash incentive payments for monthly on-time performance.
- Contributed $176 million to its defined benefit pension plans. In addition, the company contributed $34 million to its defined benefit pension plans in January 2010. Since the beginning of 2002, Continental has contributed approximately $1.8 billion to its defined benefit pension plans.
- Provided scholarships to 210 employees and dependents through the Continental Scholarship Fund, which is the largest number of awards ever made by the fund. Since 2002, the scholarship fund has assisted 1,235 employees or their dependents. Scholarship funds are donated by employees and raised by the Continental Management Association.
- Donated nearly $1 million through Continental’s WE CARE Employee Fund, which assisted 437 employees in times of need.
Picture: Carstino Delmonte/ Touristikpresse.net
