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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 26, 1995
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-09781 74-2099724
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2929 Allen Parkway, Houston, Texas 77019
(Address of principal executive offices) (Zip Code)
(713) 834-5000
(Registrant's telephone number, including area code)
Item 5.Other Events.
On January 26, 1995, Continental Airlines, Inc. (the "Company") issued a
press release announcing a preliminary unaudited loss of $131.8 million,
before an expected non-operating restructuring charge in the range of
$400 million, and describing a new corporate strategy that has been adopted
by the Company's Board of Directors. The new corporate strategy includes,
among other things, plans to reduce operations at certain airport facilities,
ground certain aircraft and propose the modification of certain aircraft
leases and debt amortization schedules. As a part of its strategy, the
Company has begun discussions with certain of its aircraft lessors to provide
alternative compensation in lieu of cash payments, which could include
securities convertible into equity. The Company is also discussing with
certain of its major lenders modifications to existing debt amortization
schedules. Pending such discussions, the Company is not making payments to
these lessors and lenders that otherwise are required under current
agreements.
Attached hereto as Exhibit 99.1, and incorporated herein by reference, is the
Company's January 26, 1995 press release.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release, dated January 26, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Continental Airlines, Inc. has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CONTINENTAL AIRLINES, INC.
By /s/ Daniel P. Garton
Daniel P. Garton
Senior Vice President and
Chief Financial Officer
February 2, 1995
EXHIBIT INDEX
99.1 Press Release, dated January 26, 1995.
FOR IMMEDIATE RELEASE CONTACT: CORPORATE COMMUNICATIONS
(713) 834-5080
CONTINENTAL AIRLINES REPORTS PRELIMINARY 1994 RESULTS;
OUTLINES PLAN TO RETURN TO PROFITABILITY
HOUSTON, Jan. 26, 1995 -- Continental Airlines (NYSE: CAI.A and CAI.B)
today reported a preliminary unaudited operating loss for the 1994 fourth
quarter of $2.3 million compared to an $8.5 million operating profit in the
fourth quarter of 1993, while the preliminary unaudited loss, before
restructuring charges, for the quarter is expected to be $41.9 million,
against a net loss of $26.5 million last year. The 1993 fourth quarter loss
included a tax benefit of $12.4 million. Total revenues for both fourth
quarter periods were $1.4 billion.
For the full year 1994, the carrier reported preliminary unaudited
operating income of $23.8 million and a preliminary unaudited loss, before
restructuring charges, of $131.8 million on revenues of $5.7 billion.
(Comparison with full-year 1993 operating results is not meaningful due to
fresh-start reporting which took effect April 27, 1993.) Year-end
consolidated cash was approximately $400 million.
As a result of previously announced decisions made by management in late
1994, the company is reducing operations of certain airport facilities,
grounding aircraft and proposing the modification of certain aircraft leases.
The analysis of the financial impact of these decisions has not been
completed, but is expected to result in a non-operating charge in the range
of $400 million in 1994. The company expects to report final results in
March.
Continental Airlines also today announced a series of sweeping changes
designed to return the airline to profitability in 1995 and strengthen its
balance sheet. The airline's new corporate strategy, known as the Go Forward
Plan, is designed to solidify Continental's domestic hub operations, reduce
costs by shrinking excess capacity and improve customer service.
As part of the airline's plan, Continental will place in service 27 new,
more efficient aircraft this year for its North America operation. It has
entered into discussions with The Boeing Company and engine manufacturers to
defer for approximately two years aircraft and engine deliveries which were
to occur after 1995.
As previously announced, Continental is removing 24 less efficient
widebody aircraft from operations over the next several months. Continental
is in discussion with the lessors of these aircraft, and certain other
lessors, to provide, effective February 1, 1995, alternative compensation,
which could include securities convertible into equity, in lieu of cash
payments for the aircraft it no longer plans to fly and on 18 aircraft leases
that are significantly above market rates.
These discussions relate to approximately 13 percent of Continental's
fleet, with the remainder of the fleet and its related leases being
unaffected.
In addition, Continental is discussing with certain other major lenders
modifications to existing debt amortization schedules so as to enhance the
airline's capital structure. Pending discussions, Continental will not be
making payments to these lenders and lessors otherwise required under the
current contracts.
All other creditors will be unaffected.
NEW BOARD MEMBER
Continental announced it has named Charles A. Yamarone, 36, as a new
board member. Yamarone is executive vice president and research director at
Los Angeles-based Libra Investments, a brokerage and investment banking firm.
GO FORWARD PLAN
The Go Forward Plan, which has been approved by the company's board of
directors and is supported by its major shareholders, including Air Partners
and Air Canada, encompasses four key strategic components: Fund The Future,
Fly To Win, Make Reliability a Reality and Working Together.
Specifically, the plan includes the following: strengthening domestic
hub operations by increasing frequencies and improving schedules; reducing by
one-third Continental Lite flying (almost exclusively Lite linear system);
downgauging aircraft and overall reducing capacity by removing 21 widebody
A300s, three 747s and accelerating retirement of 17 727 aircraft, while
modernizing its domestic fleet this year by placing in service 22 737s and
five 757s which are smaller, more efficient aircraft; improving customer
service by upgrading the industry-leading OnePass frequent flyer program to
its previous status; tying employee wage increases to on-time performance;
maintaining the current low-cost position by reducing staff by up to
4,000 positions to match the reduction in capacity and eliminating other non-
value added costs.
"Significant change is underway at Continental to help us meet
aggressive goals for the future," said President and Chief Executive Officer
Gordon M. Bethune. "Key strategic strength in our four hubs and low
operating costs will be leveraged for maximum benefit. We will continue to
attack underperforming routes, non-value added costs, unsatisfactory service
levels, and any perception that we can't be the number one airline for our
customers."
FUND THE FUTURE
The actions outlined today, combined with an emphasis on revenue
generation and continued strict control over other capital expenditures are
expected to improve Continental's cash position by at least several hundred
million dollars over the next two years.
FLY TO WIN
Fly To Win is a comprehensive business plan incorporating pricing,
scheduling, cost reduction and marketing programs designed to maximize
efficiencies and assure optimum revenues from every flight segment.
The company is in the process of executing a system-wide job reduction
plan which corresponds to the reduction in capacity. Beginning this month
and continuing through summer, the company will eliminate up to 4,000 jobs
including executive and management positions at its headquarters and in the
field.
The new alliance with America West Airlines is expected to produce
further efficiencies as the two carriers work to maximize synergistic
benefits of ground-handling and customer service agreements, as well as the
code-sharing agreement.
Last week Continental announced it has reinstated several popular
elements of its award-winning OnePass frequent flyer program, while
strengthening its relationship with travel agents. The award-winning
international BusinessFirst cabin is being expanded from 26 to 38 seats on
certain aircraft in response to strong customer demand on routes from North
America to London and Paris. Readers of London-based Executive Travel
magazine recently rated Continental the best North American airline for
transatlantic travel based on 20 different service features.
MAKE RELIABILITY A REALITY
The airline's renewed emphasis on reliability entails improving
operational performance and on-time reliability system wide. The airline has
named two executives to improve its on-time performance, baggage handling and
customer satisfaction.
In addition, it has tied the restoration of employee longevity pay
increases to on-time performance. Employees have been notified that a
planned wage snap-back scheduled for March 31 will not take place, given that
the airline is not profitable. Instead, a new self-funding performance-based
plan will take effect. Employees will have the opportunity to earn extra pay
each month as the company meets operating performance targets related to
Department of Transportation on-time arrival statistics. Bethune has
scheduled a series of employee meetings for the week of Feb. 6 to outline the
new plan.
WORKING TOGETHER
In support of the tangible service improvements, Continental is making
changes to the working environment to benefit employees. The goal is to get
all employees to work together as a team while improving operational
performance and customer service. Reinforcing the new senior management's
open-door policy, company leaders have hosted hundreds of employees for
informal get-togethers in the executive offices, with more sessions
scheduled. Dozens of headquarters workers reported to hub airports during
the peak holiday travel periods to provide support for the customer service
staff.
In addition to naming Gordon Bethune as CEO, over the past few months
the company has added senior executives in pricing, scheduling, distribution,
human resources, airport services and finance. All of these executives have
successful track records at profitable companies.
Continental said it and the International Association of Continental
Pilots have begun the mediation process with the National Mediation Board,
and the two groups are meeting separately over the next week with the
mediator in Florida for preliminary discussions. To date, many issues have
been agreed tentatively upon. Additionally, the company has reached
agreement with its pilot union to implement a company-offered leave of
absence program and early out program that both parties believe will
substantially reduce the impact on the pilot group as the fleet is reduced in
size.
Also supporting this aspect of the Go Forward Plan are numerous
suppliers who have joined Continental in meeting higher standards for
efficiency and cost-effectiveness in parts inventory, overhaul and
distribution.
Continental is the nation's fifth largest airline serving 161 cities on
five continents. The Houston-based airline celebrated its 60th anniversary
in 1994, and currently employs approximately 40,000 people including
approximately 4,000 pilots, 5,600 flight attendants, 9,500 full-time and
part-time customer service staff, and 4,500 reservation personnel.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
STATISTICS (Jet Operations Only)
Three Months Ended Twelve Months Ended
December 31, December 31,
1994 1993 1994 1993
Enplanements (thousands) . . 10,709 9,684 42,202 38,628
Revenue passenger
miles (millions) . . . . . 10,434 9,844 41,588 42,324
Available seat
miles (millions) . . . . . 17,229 15,764 65,861 67,011
Passenger load factor. . . . 60.6% 62.4% 63.1% 63.2%
Breakeven passenger
load factor. . . . . . . . 60.4% 60.7% 62.4% 63.3%
Passenger revenue per
available seat
mile (cents) . . . . . . . 6.84 7.24 7.22 7.17
Cost per available
seat mile (cents). . . . . 7.49 7.83 7.80 7.96
Average yield per revenue
passenger mile (cents) . . 11.29 11.59 11.44 11.35
Average price per gallon
of fuel (cents). . . . . . 55.78 58.48 53.52 59.59
Fuel gallons
consumed (thousands) . . . 344,979 320,716 1,348,781 1,333,326
Actual aircraft in fleet
at end of period . . . . . 330 316 330 316
Average stage length . . . . 723 797 727 856
Completion factor. . . . . . 98.1% 97.5% 97.5% 98.2%
Number of employees. . . . . 41,700 42,200 41,700 42,200
Full-time equivalent
employees. . . . . . . . . 37,800 38,800 37,800 38,800