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Continental Airlines announced second quarter profit

Continental Airlines today reported second quarter 2007 net income of $228 million ($2.03 diluted earnings per share). Excluding a special charge of $7 million for pilot pension plan settlement charges, Continental recorded…

Continental Airlines today reported second quarter 2007 net income of $228 million ($2.03 diluted earnings per share). Excluding a special charge of $7 million for pilot pension plan settlement charges, Continental recorded net income of $235 million ($2.10 diluted earnings per share), an improvement of 13 percent compared to the same period last year.



Strong international revenue growth, particularly in the trans-Atlantic market, contributed to the best second quarter pre-tax profit ($232 million) that the company has posted since 2000. Continental`s second quarter operating income of $263 million increased 7.8 percent compared to the same period last year.



My co-workers delivered superb operational performance which allowed us to book the highest second quarter pre-tax profit since 2000, said Larry Kellner, Continental`s chairman and chief executive officer. When we work together as a team, we win together.



Through June 30, 2007, the company has accrued $92 million for its current year profit sharing pool, a $32 million increase over the same six-month period last year. The actual amount of profit sharing that the company will be able to distribute to employees in February 2008 depends on the company`s full year financial results. Employees have also benefited from stock options issued in connection with pay and benefit cost reductions. At yesterday`s closing stock price of $36.83 per share, the realized and unrealized gains from these options was approximately $205 million.



Second Quarter Revenue and Capacity



Passenger revenue of $3.4 billion increased 5.2 percent ($169 million) compared to the second quarter 2006, led by strong international revenue growth.



Consolidated revenue passenger miles (RPMs) for the quarter increased 5.4 percent year-over-year on a capacity increase of 4.7 percent, resulting in a record second quarter consolidated load factor of 83.2 percent, 0.5 points above the previous second quarter record set in 2006. Consolidated passenger revenue per available seat mile (RASM) for the quarter increased 0.5 percent year-over-year as a result of record load factors and increased yield from international flying, partially offset by domestic yield pressure and less regional flying.



Mainline RPMs in the second quarter of 2007 increased 6.9 percent over the second quarter 2006, on a capacity increase of 6.1 percent. Mainline load factor was a record 83.5 percent, up 0.6 points year-over-year. Continental`s mainline yield increased 1.5 percent over the same period in 2006. As a result, second quarter 2007 mainline RASM was up 2.2 percent over the second quarter of 2006.



Despite severe thunderstorms that impacted operations at its hub cities of Newark, Houston and Cleveland, Continental posted a second quarter systemwide mainline completion factor of 99.4 percent, operating 20 days without a single mainline cancellation.



Thanks to the hard work of my co-workers, we have again been able to grow our revenue faster than we grew our capacity, said Jeff Smisek, Continental`s president. Customers know that they can depend on Continental, and they prefer flying us.



Continental`s employees earned $10 million in cash incentives for the quarter by finishing first in on-time performance among the major network carriers in June, and for finishing in the top three of the major network carriers for monthly on-time performance in April and May.



The company`s U.S. Department of Transportation (DOT) on-time arrival rate was 72.2 percent, despite the weather, air traffic control ground delay programs and heavy flight loads.



Continental announced a strategic relationship with China Southern Airlines, the largest airline in China, for frequent flyer and airport lounge access reciprocity beginning in September and extensive codesharing beginning in November.



During the quarter, Continental, in conjunction with Sustainable Travel International, announced plans to offer customers the option to participate in a carbon offsetting program. The voluntary program will allow travelers to calculate the carbon footprint of their booked itinerary and purchase carbon offsets online from non-profit Sustainable Travel International. Proceeds from purchased offsets will be invested by Sustainable Travel International into high-impact sustainable environmental projects, including renewable energy, energy conservation and reforestation.



Continental and US Helicopter Corporation implemented a codeshare agreement to improve service for those connecting between Continental`s flights at New York Liberty and US Helicopter`s eight-minute shuttle service at heliports located in midtown and downtown Manhattan.



Second Quarter Financial Results



Continental`s mainline cost per available seat mile (CASM) increased 0.9 percent (1.4 percent holding fuel rate constant) in the second quarter compared to the same period last year. CASM increased 1.5 percent holding fuel rate constant and excluding special charges.



We`re facing some tough competition so we have to be tireless on the cost side of the ledger, said Jeff Misner, Continental`s executive vice president and chief financial officer. But we`ll continue to invest in our people, product and service to maintain the integrity and quality of our operation.



Continental continues to enhance its fuel efficiency. The carrier is about 35 percent more fuel efficient per mainline revenue passenger mile than it was in 1997. With mainline RPMs up 6.9 percent for the second quarter, fuel consumption increased only 5.3 percent.



Continental hedged approximately 40 percent of its expected fuel requirements for the second quarter of 2007. As of July 17, 2007, the company had hedged approximately 34 percent of its projected fuel requirements for the third quarter of 2007, and 13 percent for the fourth quarter of 2007.



Work continued in the second quarter on the company`s project to install winglets on 37 of the company`s 737-500s and 11 long-range 737-300s. Continental expects to have winglets installed on more than 200 mainline aircraft by the end of the year. Winglets increase aerodynamic efficiency and decrease drag, reducing fuel consumption and emissions by up to five percent.



Continental ended the second quarter with $3.18 billion in unrestricted cash and short-term investments.

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