This summary is based on the second quarter fiscal 2007 earnings call conducted by Continental Airlines, Inc. (CAL: chart) on July 19, 2007.
Management
Chairman & CEO: Larry Kellner
President: Jeff Smisek
EVP & CFO: Jeff Misner
EVP, Marketing: Jim Compton
SVP of Corporate Communications: Ned Walker
Director of IR: DeAnne Gabel
Key Investors Issues
- The earnings per share, excluding special items, were $2.10 per share.
- The company earned $3.4 billion in passenger revenues showing an increase of 5.2%.
- On the cost side, on a year-over-year basis, the increase in same quarter costs was primarily attributable to increased flying, higher maintenance costs and increase in profit-sharing and other variable compensation.
- The company continues to face cost pressures both on an absolute basis, as well as on a relative basis.
- It is expected that overall demand will remain strong in the third quarter with mainline load factor up year-over-year to between 84% and 85% and with a regional load factor coming in higher at between 80% and 81%
Second Quarter Highlights
Revenues Strong international revenue growth contributed to the best second quarter pre-tax profit ($232 million) that the company has posted since 2000.
International Operations The plans are to continue to execute growth plan with a focus on international expansion.
Domestic Operations, Domestic yields in general were down year-over-year in the second quarter.
Combined internal revenue During the quarter good top-line growth was achieved with passenger revenue increasing 5.2% to $3.4 billion.
Operating income Continental''s second quarter operating income of $263 million increased 7.8% compared to the same period last year.
For the second quarter, Continental reported net income of $235 million or profit of $2.10 per diluted share excluding special items, which is a 13% improvement over the same period last year.
Including special charges, they reported a net income of $228 million or a profit of $2.03 per diluted share for the quarter. Through June 30th, the company accrued $92 million for profit-sharing this year, which is a $32 million improvement over the same six month period last year.
The actual amount of profit-sharing to be distributed to co-workers next February is dependent on the company''s full year 2007 financial results.
Continental Airline workers earn $10 million in cash incentives during the quarter for finishing first in on-time monthly performance among the major network carriers in June and for finishing in the top three major network carriers in both April and May.
The company posted a record second quarter consolidated load factor of 83.2%, half a point higher than the records set last year.
While operating at a tough domestic revenue environment, present expectations are to grow mainline capacity at 3% to 4% rather than the previous target of 5% to 7%. The long-term plan beyond 2008 is to grow mainline capacity an average of 5% to 7% annually
The company, in relationship with Sustainable Travel International, plans to offer customers the option to participate in a Carbon Offsetting Program.
Proceeds from the purchased offsets will be invested into high impact sustainable environmental projects. The installation of winglets on more than 200 aircraft by the end of the year will itself reduce fuel consumptions and emissions by up to 5% by reducing drag and increasing aerodynamic efficiency.
The company is well positioned with 25 firm orders and options for many more Boeing 787 Dreamliners and will enable it to execute their international growth plan competitively.
Continental will for the first time have access to London Heathrow, while likely facing increased competition across the Atlantic and the prospect of additional European consolidation. Meanwhile in the U.S., new low-cost carriers are entering the market and existing low-cost carriers are growing. Domestic market environment, although bolstered by strong summer demand, to continue to experience soft yields. High energy prices are a matter of concern. The company has the only powerhouse hub in the New York area, and in Houston their hub at Bush Intercontinental serves as a premier gateway to Latin America.
The company achieved a systemwide mainline segment completion factor of 99.4% during the quarter despite bad weather.
During the quarter, good top-line growth was achieved with passenger revenue increasing 5.2% to $3.4 billion. As a result of record load factors and increased international yields, consolidated passenger revenue per available seat mile for the quarter increased to 0.5% year-over-year despite pressure on domestic yields and reduction in regional flying.
