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Continental Airlines reported a first quarter 2009 net loss of $136 million ($1.10 diluted loss per share). First quarter results were adversely affected by significant declines in high yield traffic as many business travelers curtailed travel or purchased lower yield economy tickets due to the weakened economy. Fuel expense declined $527 million (41.8 percent) in the first quarter 2009 compared to the first quarter 2008. Excluding $4 million of aircraft-related charges, Continental recorded a net loss of $132 million ($1.07 diluted loss per share).
"My co-workers did a great job of working together to meet continued challenges during a tough quarter," said Larry Kellner, Continental’s chairman and chief executive officer. "They displayed resilience and remained focused on running a solid operation."
Total revenue for the quarter was $3.0 billion, a decrease of 17.0 percent compared to the same period in 2008. Passenger revenue for the quarter fell 18.8 percent ($606 million) compared to the same period last year due to lower fares and passenger traffic declines. Consolidated average fares dropped 7.4 percent during the quarter compared to first quarter 2008, declining 16.3 percent in March 2009 versus March 2008.
Consolidated revenue passenger miles (RPMs) for the first quarter decreased 11.2 percent year-over-year on a capacity decrease of 7.2 percent, resulting in a first quarter consolidated load factor of 75.2 percent, 3.3 points lower than the first quarter of 2008.
Consolidated yield for the first quarter decreased 8.6 percent year-over-year. Consolidated passenger revenue per available seat mile (RASM) for the first quarter decreased 12.5 percent year-over-year.
Mainline RPMs in the first quarter of 2009 decreased 11.2 percent compared to the first quarter of 2008, on a capacity decrease of 7.6 percent year-over-year.
Mainline load factor was 75.8 percent, down 3.0 points year-over-year. Continental’s mainline yield decreased 7.6 percent in the first quarter over the same period in 2008. As a result, first quarter 2009 mainline RASM was down 11.2 percent compared to the first quarter of 2008.
Cargo revenue in the first quarter 2009 decreased 30.3 percent ($37 million) compared to the same period 2008, due to reduced freight volume and lower pricing. Other revenue increased 15.6 percent ($35 million) due to checked bag fees, partially offset by changes in how certain costs are accounted for under Continental’s capacity purchase agreement with ExpressJet.
First quarter operations and notable accomplishments
During the quarter, Continental recorded a U.S. Department of Transportation (DOT) on-time arrival rate of 76.4 percent and a systemwide mainline segment completion factor of 99.2 percent and employees earned a total of $3 million in cash incentives for achieving on-time performance goals.
The DOT tentatively approved the application for Continental to join the existing antitrust immunized alliance between United Airlines and eight other Star Alliance member carriers. This alliance will benefit consumers, ensure global competition with other antitrust immunized alliances and encourage the retention and growth of open skies between the U.S. and other nations. Continental remains a full member of SkyTeam through Oct. 24, 2009, and is focused on providing a customer-friendly transition to Star.
"We are excited to be joining Star Alliance, which will bring unparalleled benefits to our customers worldwide, and growth opportunities for Continental and its employees," said Jeff Smisek, president and chief operating officer. "We look forward to working with our Star partners, as we create new and substantial competition with other global alliances."
Continental was again rated the top airline on Fortune magazine’s annual airline industry list of World’s Most Admired Companies. This is the sixth consecutive year that Continental has topped that list. The rankings are determined in a survey of corporate and airline executives, boards of directors and industry analysts. Companies are evaluated according to quality of products/services, global competitiveness, people management, social responsibility, innovation, use of corporate assets, financial soundness, long-term investment and quality of management.
Continental was the first U.S. carrier to inaugurate daily nonstop scheduled service between New York and Shanghai on March 25, linking the world’s financial center and top business and tourism destination with China’s center for finance and trade. With the new service to Shanghai, Continental is the only airline in the world providing daily nonstop service between New York and three Chinese cities; Shanghai, Beijing and Hong Kong.
Continental received approval from the DOT to operate daily year-round nonstop service between its Houston hub at Bush Intercontinental Airport and Rio de Janeiro, Brazil and through flight service between New Orleans and Rio de Janeiro beginning summer 2009, pending final government approvals.
During the quarter, Continental began installing DIRECTV, which will provide up to 80 channels of live, satellite-based television programming, movies and TV shows on its aircraft. More than 200 of Continental’s next generation Boeing 737s and 757-300 aircraft will be equipped with the system by the end of 2010.
Continental contributed $50 million to its defined benefit pension plans during the first quarter of 2009. On April 9, 2009, the company contributed an additional $50 million to its defined benefit pension plans.
Continental was the first commercial carrier to successfully demonstrate the use of sustainable biofuel to power an aircraft in North America. During the demonstration flight, Continental’s test pilots successfully conducted a number of flight maneuvers, and the biofuel met all performance requirements as compared to traditional jet fuel. The biofuel blend included components derived from algae and jatropha plants, both sustainable, second-generation sources that do not impact food crops or water resources or contribute to deforestation.
Continental continued to improve fuel efficiency during the quarter by adding modern, fuel-efficient aircraft to its fleet and installing winglets on additional aircraft. During the quarter, Continental took delivery of four new Boeing 737-900ERs. In addition, the company removed from service three Boeing 737-300s and returned to service two Boeing 737-500s that were temporarily grounded at Dec. 31, 2008.
Continental is currently scheduled to take delivery of nine Boeing 737 aircraft in the remaining nine months of 2009. The company has also agreed to lease four Boeing 757-300 aircraft from Boeing Capital Corporation that are expected to be placed into service in the first half of 2010. By the end of 2009, the company expects to remove 27 additional Boeing 737-300 and 737-500 aircraft from service.
Continental installed winglets on nine of the company’s 737 aircraft during the quarter, and now has winglets on over 275 of its mainline aircraft. In February, Aviation Partners Boeing, a joint venture of Aviation Partners, Inc. and The Boeing Company, completed the world’s first blended 757-300 winglet installation on one of Continental’s aircraft. Continental plans to begin installing winglets on all 757-300s later this year. All of the company’s 737-500s, 700s, 800s, 900s and 757-200s have winglets, as do select aircraft from Continental’s 737-300 series fleets. Winglets increase aerodynamic efficiency and decrease drag, reducing fuel consumption and emissions by up to five percent.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
