This is a summary of the fourth quarter fiscal 2006 earnings call conducted by Continental Airlines (CAL) on January 18, 2007
Management:
-
Chairman of the Board & CEO Larry Kellner
-
President Jeffery Smisek
-
Executive Vice President – Marketing Jim Compton
-
Executive Vice President & CFO Jeff Misner
-
Executive Vice President – Operations Mark Morgan
Key Investor Issues:
- Total revenue was up 12.3% to $3.2 billion from $2.85 billion in 2005.
- The firm reported a net loss of $26 million or 29 cents per share, a 39.5% improvement from a loss of $43 million or 53 cents a share in the prior year.
- Consolidated revenue passenger miles (RPMs) increased 8.7% year-over-year on a capacity increase of 6.1%, resulting in a consolidated load factor of 79.8%.
Full Year Highlights:
- Total revenue was up by 17% to just over $13.1 billion.
- The firm reported net income of $304 million or $3.86 a share, up from a loss of $68 million or 96 cents a share.
Fourth Quarter Highlights:
Total revenue was up 12.3% to $3.2 billion from $2.85 billion in the prior year as a result of growth in mainline capacity.
- Passenger revenue increased 10.6% ($274 million) over the same period in 2005 to $2.9 billion.
- Consolidated revenue passenger miles (RPMs) increased 8.7% year-over-year on a capacity increase of 6.1%, resulting in a consolidated load factor of 79.8%.
- Consolidated yield increased 1.8% while consolidated revenue per available seat mile (RASM) increased 4.3% year-over- year due to increased yield and record load factors.
- Mainline RPMs increased 8.8% over the fourth quarter 2005, on a capacity increase of 6.0% percent.
- The firm reported a net loss of $26 million or 29 cents per share, a 39.5% improvement from a loss of $43 million or 53 cents a share in the prior year due to revenue growth.
On Valentine’s Day, the firm handed out $111 million profit sharing checks to employees and the realized and unrealized gains from stock options issued to co-workers in connection with pay and benefit reductions now total nearly $300 million.
- Mainline RASM was up 5.5% with a year-over-year yield gain of 2.9% and a year-over-year load factor increase of 2.1 points to 80.2%.
- Regional RASM was down 1.1% due to yields being down 2.4%, as load factor was up 1.1 point to 77.2% as performance was hurt by increased competition in regional markets and the resulting downward pressure on yields and tougher year-over-year comparisons.
- The firm achieved a system-wide mainline completion factor of 99.6%, operating 26 days without a single flight cancellation.
Fuel costs per gallon, including taxes, averaged $2.64, down 3.3% year-over-year which includes the impact of fuel hedges.
- As of January 17th, the firm had hedged approximately 55% of the projected fuel requirements for the first quarter using a combination of petroleum swap contracts, heating oil swaps and zero cost collars on heating oil.
- For the second quarter, it has hedged approximately 21% of the projected fuel requirements through a combination of instruments similar to the first quarter
- On the fleet, the firm placed into service two new Boeing 737-800 aircraft, bringing the total in-service mainline aircraft count to 366.
Continental issued $200 million of 8.75% unsecured notes due 2011 and ended the quarter with $2.48 billion of unrestricted cash and short-term investments and the restricted cash balance was $265 million.
- Full year capital expenditure, was $300 million or $381 million including net purchase deposits paid.
- Purchase deposits together with the fleet and fleet related expenditures account for just over $400 million of the $620 million.
- In addition, the firm has several strategic non-fleet capital expenditure projects slated for this year with quick paybacks.
Operational Highlights:
- Twice during the quarter, Continental paid its employees bonuses for finishing in the top three of the network carriers for monthly on time performance.
- Despite severe winter weather in some parts of the U.S., Continental''s employees worked together to deliver a systemwide mainline completion factor of 99.6% for the quarter, operating 26 days without a single mainline cancellation.
- The company recorded a U.S. Department of Transportation (DOT) on-time arrival rate of 73.7%, which was adversely impacted by the weather, air traffic control ground delay programs and record load factors.
Continental outranked all other U.S. carriers to be chosen as the Best Airline for North American Travel in Business Traveler magazine''s 2006 Readers'' Choice Best in Business Travel Survey.
- The company placed highest among U.S. airlines for Best Flight Attendants and Best In-flight Services.
- The company introduced new BusinessFirst menus on international flights and completed the installation of Audio/Video on Demand (AVOD) in the BusinessFirst cabins of its entire Boeing 757-200 fleet used on transatlantic flights from its New York hub at Newark Liberty International Airport.
The new AVOD allows customers to choose from up to 25 movies, 25 short-subject programs and 50 compact discs.
- The company has also installed in-seat AC power ports that don''t require an adapter on these aircraft in BusinessFirst and economy class seats located forward of the overwing emergency exit.
- US Helicopter Corporation and Continental launched a new alliance during the quarter to provide eight-minute shuttle service between Manhattan and its New York hub at Newark Liberty.
Strategic Highlights:
- The firm has one of the youngest and most fuel efficient fleets in the industry and will continue to pursue ways to drive more fuel efficiency and lower variable costs.
- Over the next 3 years, it will take delivery of 65 new aircraft that will help achieve the long-term goal of consistent measured growth and allow it to retire older, less fuel efficient aircraft.
- The firm has built modern hub facilities that are strategically located for international growth and continue to invest in those facilities.
