AS FILED
WITH THE SEC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 0-9781
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2099724
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(Address of principal executive offices)
(Zip Code)
713-834-2950
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No _____
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No _____
_______________
As of April 11, 1997, 8,589,530 shares of Class A common stock and
48,992,814 shares of Class B common stock were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of dollars, except per share data)
Three Months
Ended March 31,
1997 1996
(Unaudited)
Operating Revenue:
Passenger . . . . . . . . . . . . . . . $1,564 $1,375
Cargo, mail and other . . . . . . . . . 134 114
1,698 1,489
Operating Expenses:
Wages, salaries and related costs . . . 414 364
Aircraft fuel . . . . . . . . . . . . . 229 177
Aircraft rentals. . . . . . . . . . . . 131 124
Commissions . . . . . . . . . . . . . . 138 126
Maintenance, materials and repairs. . . 125 112
Other rentals and landing fees. . . . . 97 84
Depreciation and amortization . . . . . 60 65
Other . . . . . . . . . . . . . . . . . 358 317
1,552 1,369
Operating Income . . . . . . . . . . . . 146 120
Nonoperating Income (Expense):
Interest expense. . . . . . . . . . . . (42) (47)
Interest capitalized. . . . . . . . . . 6 1
Interest income . . . . . . . . . . . . 13 9
Other, net. . . . . . . . . . . . . . . 1 12
(22) (25)
Income before Income Taxes and
Minority Interest . . . . . . . . . . . 124 95
Income Tax Provision . . . . . . . . . . (46) (2)
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of dollars, except per share data)
Three Months
Ended March 31,
1997 1996
(Unaudited)
Income before Minority Interest. . . . . $ 78 $ 93
Minority Interest. . . . . . . . . . . . - (1)
Distributions on Preferred
Securities of Trust, net of
applicable income taxes of $2 and $2,
respectively. . . . . . . . . . . . . . (4) (4)
Net Income . . . . . . . . . . . . . . . 74 88
Preferred Dividend Requirements. . . . . (1) (1)
Income Applicable to Common Shares . . . $ 73 $ 87
Earnings per Common and Common
Equivalent Share. . . . . . . . . . . . $ 1.13 $ 1.35
Earnings per Common Share
Assuming Full Dilution. . . . . . . . . $ 0.95 $ 1.18
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions of dollars, except for share data)
March 31, December 31,
ASSETS 1997 1996
(Unaudited)
Current Assets:
Cash and cash equivalents, including
restricted cash and cash equivalents
of $79 and $76, respectively . . . . . . $ 927 $1,061
Accounts receivable, net. . . . . . . . . 407 377
Spare parts and supplies, net . . . . . . 118 111
Prepayments and other . . . . . . . . . . 122 85
Total current assets . . . . . . . . . . 1,574 1,634
Property and Equipment:
Owned property and equipment:
Flight equipment . . . . . . . . . . . . 1,271 1,199
Other. . . . . . . . . . . . . . . . . . 363 338
1,634 1,537
Less: Accumulated depreciation. . . . . 389 370
1,245 1,167
Purchase deposits for flight equipment 232 154
Capital leases:
Flight equipment. . . . . . . . . . . . . 400 396
Other . . . . . . . . . . . . . . . . . . 35 31
435 427
Less: Accumulated amortization . . . . . 158 152
277 275
Total property and equipment . . . . . . 1,754 1,596
Other Assets:
Routes, gates and slots, net. . . . . . . 1,469 1,473
Reorganization value in excess of
amounts allocable to identifiable
assets, net. . . . . . . . . . . . . . . 233 237
Investments . . . . . . . . . . . . . . . 132 134
Other assets, net . . . . . . . . . . . . 139 132
Total other assets . . . . . . . . . . . 1,973 1,976
Total Assets. . . . . . . . . . . . . . $5,301 $5,206
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions of dollars, except for share data)
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
(Unaudited)
Current Liabilities:
Current maturities of long-term debt. . . $ 169 $ 201
Current maturities of capital leases. . . 68 60
Accounts payable. . . . . . . . . . . . . 608 705
Air traffic liability . . . . . . . . . . 788 661
Accrued payroll and pensions. . . . . . . 175 149
Accrued other liabilities . . . . . . . . 352 328
Total current liabilities. . . . . . . . 2,160 2,104
Long-Term Debt . . . . . . . . . . . . . . 1,318 1,368
Capital Leases . . . . . . . . . . . . . . 239 256
Deferred Credits and Other Long-Term
Liabilities:
Deferred income taxes . . . . . . . . . . 119 75
Accruals for aircraft retirements and
excess facilities. . . . . . . . . . . . 177 188
Other . . . . . . . . . . . . . . . . . . 324 331
Total deferred credits and other
long-term liabilities . . . . . . . . . 620 594
Commitments and Contingencies
Minority Interest. . . . . . . . . . . . . 16 15
Continental-Obligated Mandatorily
Redeemable Preferred Securities of
Subsidiary Trust Holding Solely
Convertible Subordinated
Debentures (A). . . . . . . . . . . . . . 242 242
Redeemable Preferred Stock . . . . . . . . 47 46
(A) The sole assets of the Trust are convertible subordinated
debentures with an aggregate principal amount of $250 million,
which bear interest at the rate of 8-1/2% per annum and mature
on December 1, 2020. Upon repayment, the Continental-
Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust will be mandatorily redeemed.
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions of dollars, except for share data)
March 31, December 31,
1997 1996
(Unaudited)
Common Stockholders' Equity:
Class A common stock - $.01 par,
50,000,000 shares authorized;
8,593,030 and 9,280,000 shares issued
and outstanding, respectively. . . . . . $ - $ -
Class B common stock - $.01 par,
200,000,000 shares authorized;
48,983,580 and 47,943,343 shares
issued and outstanding, respectively . . - -
Additional paid-in capital . . . . . . . 697 693
Accumulated deficit . . . . . . . . . . . (35) (109)
Other . . . . . . . . . . . . . . . . . . (3) (3)
Total common stockholders' equity. . . . 659 581
Total Liabilities and Stockholders'
Equity . . . . . . . . . . . . . . . . $5,301 $5,206
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONTINENTAL AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
Three Months
Ended March 31,
1997 1996
(Unaudited)
Net Cash Provided by Operating
Activities. . . . . . . . . . . . . . . $154 $145
Cash Flows from Investing Activities:
Capital expenditures. . . . . . . . . . (171) (20)
Purchase deposits refunded in
connection with aircraft delivered . . 11 6
Proceeds from sale of America West
stock. . . . . . . . . . . . . . . . . - 25
Proceeds from sale/leaseback
transactions . . . . . . . . . . . . . - 12
Other . . . . . . . . . . . . . . . . . (8) 2
Net cash (used) provided by
investing activities. . . . . . . . . (168) 25
Cash Flows from Financing Activities:
Payments on long-term debt and
capital lease obligations. . . . . . . (128) (458)
Proceeds from issuance of long-term
debt, net. . . . . . . . . . . . . . . 6 223
Proceeds from issuance of common
stock. . . . . . . . . . . . . . . . . 5 1
Dividends paid on preferred securities
of trust . . . . . . . . . . . . . . . (6) (6)
Net cash used by financing activities. (123) (240)
Net Decrease in Cash and Cash
Equivalents . . . . . . . . . . . . . . (137) (70)
Cash and Cash Equivalents - Beginning
of Period (A) . . . . . . . . . . . . . 985 603
Cash and Cash Equivalents - End of
Period (A). . . . . . . . . . . . . . . $848 $533
(A) Excludes restricted cash of $76 million and $144 million at
January 1, 1997 and 1996, respectively, and $79 million and
$124 million at March 31, 1997 and 1996, respectively.
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
Three Months
Ended March 31,
1997 1996
(Unaudited)
Supplemental Cash Flow Information:
Interest paid . . . . . . . . . . . . . $ 26 $ 46
Income taxes paid . . . . . . . . . . . $ - $ -
Investing and Financing Activities
Not Affecting Cash:
Property and equipment acquired
through the issuance of debt . . . . . $ 28 $ 28
Capital lease obligations incurred. . . $ 9 $ 1
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONTINENTAL AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In the opinion of management, the unaudited consolidated financial
statements included herein contain all adjustments necessary to
present fairly the financial position, results of operations and
cash flows for the periods indicated. Such adjustments are of a
normal recurring nature. The accompanying consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto contained in the Annual
Report of Continental Airlines, Inc. (the "Company" or
"Continental") on Form 10-K for the year ended December 31, 1996.
NOTE 1 - EARNINGS PER SHARE
The earnings per common share ("EPS") computations are based upon
earnings applicable to common shares and the average number of
shares of common stock, common stock equivalents (stock options,
warrants and restricted stock) and potentially dilutive securities
(e.g., convertible securities) outstanding. The number of shares
used in the primary EPS computations for the three months ended
March 31, 1997 and 1996 was 64,356,176 and 64,069,152,
respectively. The number of shares used in the fully-diluted EPS
computations for the three months ended March 31, 1997 and 1996 was
82,787,287 and 78,627,072, respectively. Preferred stock dividend
requirements decreased net income for this computation by
approximately $1 million for each of the three-month periods ended
March 31, 1997 and 1996.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 - "Earnings per
Share" ("SFAS 128") which specifies the computation, presentation
and disclosure requirements for EPS. SFAS 128 replaces the
presentation of primary and fully diluted EPS pursuant to
Accounting Principles Board Opinion No. 15 - "Earnings per Share"
("APB 15") with the presentation of basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing net income
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then
shared in the earnings of the entity. The Company is required to
adopt SFAS 128 with its December 31, 1997 financial statements and
restate all prior-period EPS data. The Company will continue to
account for EPS under APB 15 until that time. Under SFAS 128, the
Company's basic EPS for the three months ended March 31, 1997 and
1996 was $1.28 and $1.60 per share, respectively, and the Company's
diluted EPS for the three months ended March 31, 1997 and 1996 was
$0.96 and $1.19 per share, respectively.
NOTE 2 - INCOME TAXES
Income taxes for the three months ended March 31, 1997 were
provided at the estimated annual effective tax rate. Such rate
differs from the federal statutory rate of 35%, primarily due to
state income taxes and the effect of certain expenses that are not
deductible for income tax purposes. The income tax provision for
the three months ended March 31, 1996 consists of foreign income
taxes. No provision for federal income taxes was recorded for the
three months ended March 31, 1996 since the Company had previously
incurred net operating losses for which a tax benefit had not
previously been recorded.
At December 31, 1996, the Company had net operating loss
carryforwards ("NOLs") of $2.3 billion for federal income tax
purposes that will expire through 2009 and federal investment tax
credit carryforwards of $45 million that will expire through 2001.
As a result of the change in ownership of the Company on April 27,
1993, the ultimate utilization of the Company's net operating
losses and investment tax credits could be limited.
For financial reporting purposes, as of December 31, 1996, a
valuation allowance of $694 million has been recognized to offset
the deferred tax assets related to a portion of the NOLs. The
Company has considered prudent and feasible tax planning strategies
in assessing the need for the valuation allowance. Realization of
a substantial portion of the Company's remaining NOLs will require
the completion by April 27, 1998 of transactions resulting in
recognition of built-in gains for federal income tax purposes. The
Company has consummated several such transactions and currently
intends to consummate one or more additional transactions. If the
Company were to determine in the future that such transactions
would not be completed and if future income were not sufficient to
recognize the benefit of previously completed transactions, an
adjustment to the net deferred tax liability of up to $85 million
would be charged to income in the period such determination was
made. In the event the Company recognizes additional tax benefits
related to NOLs and investment tax credit carryforwards
attributable to the Company's predecessor, Continental Airlines
Holdings, Inc., together with its operating subsidiaries, those
benefits would be applied to reduce reorganization value in excess
of amounts allocable to identifiable assets and other intangibles
to zero, and thereafter as an addition to paid-in capital.
NOTE 3 - OTHER
On February 28, 1997, the Board of Directors adopted the
Continental Airlines, Inc. 1997 Stock Incentive Plan (the
"Incentive Plan"), subject to approval by the stockholders of the
Company at the annual stockholders' meeting to be held on May 16,
1997. Also, on February 28, 1997, the Company granted options to
purchase approximately 1.6 million shares of Class B common stock
(of which 390,000 options were granted under the Continental
Airlines, Inc. 1994 Incentive Equity Plan and the balance was
granted under the Incentive Plan). The Incentive Plan provides
that the Company may issue shares of restricted Class B common
stock or grant options to purchase shares of Class B common stock
to non-employee directors of the Company or employees of the
Company or its subsidiaries. Subject to adjustment as provided in
the Incentive Plan, the aggregate number of shares of Class B
common stock that may be issued under the Incentive Plan may not
exceed 2,000,000 shares, which may be originally issued or treasury
shares or a combination thereof. The maximum number of shares of
Class B common stock that may be (i) subject to options granted to
any one individual during any calendar year may not exceed 200,000
shares and (ii) granted as restricted stock may not exceed 100,000
shares (in each case subject to adjustment as provided in the
Incentive Plan).
In March 1997, Continental completed a transaction involving the
issuance of $707 million of pass-through certificates. The pass-
through certificates are not direct obligations of, or guaranteed
by, Continental and are therefore not included in the accompanying
consolidated financial statements. The cash proceeds from the
transaction were deposited with an escrow agent and will enable the
Company to finance (through either leveraged leases or secured debt
financings) the debt portion of the acquisition cost of up to 30
new aircraft from The Boeing Company ("Boeing") scheduled to be
delivered to Continental between March 1997 and February 1998. One
such aircraft was delivered in March 1997 and the financing for
such aircraft utilized approximately $37 million of the proceeds
from the transaction. As of April 25, 1997 approximately $670
million of the proceeds remain on deposit. If any funds remain as
deposits at the end of the delivery period (which may be extended
to June 1998), such funds will be distributed back to the
certificate holders. Such distribution will include a make-whole
premium payable by Continental. Management believes that the
likelihood that the Company would be required to pay a material
make-whole premium is remote.
In February 1997, the Company began construction of a new hangar
and improvements to a cargo facility at the Company's hub at Newark
International Airport which is expected to be completed in the
fourth quarter of 1997. The Company expects to finance these
projects, which will cost approximately $25 million, with tax-
exempt bonds. In addition, the Company is also planning a facility
expansion at Newark which would require, among other matters,
agreements to be reached with the applicable airport authority.
In March 1997, the Company announced plans to expand its facilities
at its Hopkins International Airport hub in Cleveland. The
expansion, which will include a new jet concourse for the new
regional jet service offered by Continental's wholly owned
subsidiary, Continental Express, Inc. ("Express"), as well as other
facility improvements, is expected to cost approximately $120
million, which the Company expects will be funded principally by
the issuance of a combination of tax-exempt special facilities
revenue bonds and general airport revenue bonds by the City of
Cleveland. In connection therewith, the Company expects to enter
into long-term leases with the City of Cleveland providing for the
Company to make rental payments sufficient to service the tax-
exempt bonds.
The Company has recently begun collective bargaining agreement
negotiations with its Continental Airlines and Express pilots whose
contracts become amendable in July 1997 and October 1997,
respectively. The Company believes that mutually acceptable
agreements can be reached with such employees, although the
ultimate outcome of the negotiations is unknown at this time.
In February 1996, the Company sold approximately 1.4 million of its
1.8 million shares of America West Airlines, Inc. ("America West")
common stock for net proceeds of approximately $25 million in an
underwritten public offering. A $13 million gain was realized on
the transaction and included in other nonoperating income for the
three months ended March 31, 1996.
NOTE 4 - SUBSEQUENT EVENTS
In April 1997, Continental consummated a $160 million floating rate
(e.g., LIBOR plus 1.125% or prime) secured revolving credit
facility (the "Facility"). The revolving loans made under the
Facility will be used for the purpose of making certain predelivery
payments to Boeing for new Boeing aircraft to be delivered through
December 1999.
In April 1997, Continental redeemed for cash all of the 460,247
outstanding shares of its Series A 12% Cumulative Preferred Stock
("Series A 12% Preferred") held by an affiliate of Air Canada, a
Canadian corporation ("Air Canada"), for $100 per share plus
accrued dividends thereon. The redemption price, including accrued
dividends, totaled $47.7 million.
In April 1997, the City of Houston (the "City") completed the
offering of $190 million aggregate principal amount of tax-exempt
special facilities revenue bonds (the "IAH Bonds") payable solely
from rentals paid by Continental under long-term lease agreements
with the City. The IAH Bonds are unconditionally guaranteed by the
Company. The proceeds from the IAH Bonds will be used to finance
the acquisition, construction and installation of certain terminal
and other airport facilities located at Continental's hub at George
Bush Intercontinental Airport in Houston, including a new automated
people mover system linking Terminals B and C and 20 aircraft gates
in Terminal B into which Continental intends to expand its
operations. The expansion project is expected to be completed by
the summer of 1999.
In April 1997, the Company announced plans to build a wide-body
aircraft maintenance hangar in Honolulu, Hawaii at an estimated
cost of $24 million. Construction of the hangar, anticipated to be
completed by the second quarter of 1998, is expected to be financed
by tax-exempt special facilities revenue bonds issued by the State
of Hawaii. In connection therewith, the Company expects to enter
into long-term leases under which rental payments will be
sufficient to service the related bonds.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion may contain forward-looking statements.
In connection therewith, please see the risk factors set forth in
the Company's Form 10-K for the year ended December 31, 1996 which
identify important factors that could cause actual results to
differ materially from those in the forward-looking statements.
RESULTS OF OPERATIONS
The following discussion provides an analysis of the Company's
results of operations and reasons for material changes therein for
the three months ended March 31, 1997 as compared to the
corresponding period ended March 31, 1996.
Comparison of Three Months Ended March 31, 1997 to Three Months
Ended March 31, 1996
The Company recorded consolidated net income of $74 million for the
three months ended March 31, 1997 as compared to consolidated net
income of $88 million for the three months ended March 31, 1996.
The Company's net income in the first quarter of 1996 included a
gain of $13 million on the sale of 1.4 million shares of America
West common stock. Management believes that the Company benefitted
in the first quarters of 1996 and 1997 from the expiration of the
aviation trust fund tax (the "ticket tax"). The ticket tax was
reinstated on March 7, 1997. Management believes that the ticket
tax has a negative impact on the Company, although neither the
amount of such negative impact directly resulting from the
reimposition of the ticket tax, nor the benefit realized by its
expiration, can be precisely determined.
Passenger revenue increased 13.7%, $189 million, during the quarter
ended March 31, 1997 as compared to the same period in 1996, which
was primarily due to an 11.7% increase in revenue passenger miles
driven by an 8.8% increase in capacity.
Cargo, mail and other revenue increased 17.5%, $20 million, in the
three months ended March 31, 1997 as compared to the same period in
the prior year, principally as a result of an increase in freight
and mail volumes and in revenue related to frequent flyer mileage
credits sold to participating partners in the Company's frequent
flyer program.
Wages, salaries and related costs increased 13.7%, $50 million,
during the quarter ended March 31, 1997 as compared to the same
period in 1996, due to an increase in accruals for employee profit
sharing and other incentive programs, including the payment of
bonuses for on-time arrival performance, and an increase in wages
and salaries due to an 8.8% increase in average full-time
equivalent employees in the first quarter of 1997 compared to the
first quarter of 1996. In addition, wage rates were impacted by a
longevity pay increase for substantially all employee groups,
effective July 1, 1996.
Aircraft fuel expense increased 29.4%, $52 million, in the three
months ended March 31, 1997 as compared to the same period in the
prior year. The average price per gallon increased 17.0% from
59.31 cents in the first quarter of 1996 to 69.38 cents in the
first quarter of 1997. In addition, there was a 10.3% increase in
the quantity of jet fuel used from 290 million gallons in the first
quarter of 1996 to 320 million gallons in the first quarter of
1997, principally reflecting increased capacity.
Commission expense increased 9.5%, $12 million, in the quarter
ended March 31, 1997 as compared to the same period in the prior
year, primarily due to increased passenger revenue.
Maintenance, materials and repairs increased 11.6%, $13 million,
during the quarter ended March 31, 1997 as compared to the same
period in 1996, due principally to the volume and timing of engine
overhauls and routine maintenance as part of the Company's ongoing
maintenance program.
Other rentals and landing fees increased 15.5%, $13 million, for
the three months ended March 31, 1997 compared to the same period
in 1996, principally due to higher landing fees resulting from
increased operations.
Other operating expense increased 12.9%, $41 million, in the three
months ended March 31, 1997 as compared to the same period in the
prior year, as a result of increases in passenger services,
advertising and publicity, reservations and sales expense and other
miscellaneous expense.
Interest expense decreased 10.6%, $5 million, during the three
months ended March 31, 1997 as compared to the same period in 1996,
primarily due to the Company's refinancing initiatives, including
principal reductions of long-term debt and capital lease
obligations.
The Company's other nonoperating income (expense) in the quarter
ended March 31, 1997 included foreign exchange gains primarily
related to the Japanese yen. Other nonoperating income (expense)
in the first quarter of 1996 consisted primarily of a $13 million
gain related to the sale of 1.4 million shares of America West
common stock.
The income tax provision for the three months ended March 31, 1997
of $46 million consisted of federal, state and foreign income
taxes. The income tax provision for the three months ended
March 31, 1996 consisted solely of foreign income taxes. No
provision for federal income taxes was recorded for the three
months ended March 31, 1996 due to previously unbenefitted NOLs.
An analysis of statistical information for Continental's jet
operations for the periods indicated is as follows:
Three Months Ended Net
March 31, Increase/
1997 1996 (Decrease)
Revenue passenger miles
(millions) (1). . . . . . . . . . 10,891 9,752 11.7 %
Available seat miles
(millions) (2). . . . . . . . . .15,832 14,551 8.8 %
Block hours (thousands) (3). . . . 292 270 8.1 %
Passenger load factor (4). . . . . 68.8% 67.0% 1.8 pts.
Breakeven passenger load
factor (5). . . . . . . . . . . . 62.2% 61.0% 1.2 pts.
Passenger revenue per available
seat mile (cents) (6). . . . . . 9.29 8.90 4.4 %
Total revenue per available
seat mile (cents) (7) . . . . . . 10.22 9.77 4.6 %
Operating cost per available
seat mile (cents) (8) . . . . . . 9.27 8.92 3.9 %
Operating cost per block
hour. . . . . . . . . . . . . . .$5,017 $4,806 4.4 %
Average yield per revenue
passenger mile (cents) (9) . . . 13.51 13.28 1.7 %
Average fare per revenue
passenger . . . . . . . . . . . .$151.04 $142.54 6.0 %
Revenue passengers (thousands) . . 9,739 9,087 7.2 %
Average length of aircraft
flight (miles) . . . . . . . . . 925 876 5.6 %
Average daily utilization of
each aircraft (hours) (10) . . . 10:15 9:39 6.2 %
Actual aircraft in fleet at
end of period (11). . . . . . . . 321 311 3.2 %
(1) The number of scheduled miles flown by revenue passengers.
(2) The number of seats available for passengers multiplied by
the number of scheduled miles those seats are flown.
(3) The number of hours an aircraft is operated in revenue
service from gate-to-gate.
(4) Revenue passenger miles divided by available seat miles.
(5) The percentage of seats that must be occupied by revenue
passengers in order for the airline to break even on an
income before income taxes basis, excluding nonrecurring
charges, nonoperating items and other special items.
(6) Passenger revenue divided by available seat miles.
(7) Total revenue divided by available seat miles.
(8) Operating expenses divided by available seat miles.
(9) The average revenue received for each mile a revenue
passenger is carried.
(10) The average block hours flown per day in revenue service per
aircraft.
(11) Excludes all-cargo 727 aircraft (four in 1997 and three in
1996) at Continental Micronesia, Inc. ("CMI"), a 91%-owned
subsidiary of Continental and three A300 and one 747
Continental aircraft that were removed from service in 1995.
LIQUIDITY AND CAPITAL COMMITMENTS
In the first four months of 1997, the Company completed several
transactions intended to strengthen its long-term financial
position and enhance earnings.
In March 1997, Continental completed a transaction involving the
issuance of $707 million of pass-through certificates that will
enable the Company to finance (through either leveraged leases or
secured debt financings) the debt portion of the acquisition cost
of up to 30 new Boeing aircraft scheduled to be delivered to
Continental between March 1997 and February 1998. One such
aircraft was delivered in March 1997 and the financing for such
aircraft utilized approximately $37 million of the proceeds from
the transaction.
In April 1997, Continental consummated a $160 million secured
revolving credit facility to be used for the purpose of making
certain predelivery payments to Boeing for new Boeing aircraft to
be delivered through December 1999.
In April 1997, Continental redeemed for cash all of the 460,247
outstanding shares of its Series A 12% Preferred held by an
affiliate of Air Canada for $100 per share plus accrued dividends
thereon. The redemption price, including accrued dividends,
totaled $47.7 million.
As of March 31, 1997, Continental had firm commitments with Boeing
to take delivery of a total of 126 jet aircraft during the years
1997 through 2003 with options for an additional 90 aircraft
(exercisable subject to certain conditions). These new aircraft
will replace older, less efficient Stage 2 aircraft and allow for
growth of operations. The estimated aggregate cost of the
Company's firm commitments for the Boeing aircraft is approximately
$4.3 billion. The pass-through certificate transaction described
above will enable the Company to finance (through either leveraged
leases or secured debt financings) the debt portion of the
acquisition cost of up to 29 new Boeing aircraft. In connection
with the pass-through equipment financing, owner participants have
committed to approximately $160 million of equity financing
underlying 21 of these aircraft together with the one aircraft
delivered in March 1997. Continental has additional firm
commitments for approximately $1.1 billion of backstop financing
for its Boeing aircraft orders. However, further financing will be
needed to satisfy Continental's capital commitment for other
aircraft and aircraft-related expenditures such as spare parts,
simulators and related items. There can be no assurance that
sufficient financing will be available for all aircraft and other
capital expenditures not covered by firm financing commitments.
Deliveries of new Boeing aircraft are expected to increase aircraft
rental, depreciation and interest costs while generating cost
savings in the areas of maintenance, fuel and pilot training.
Continental has also entered into agreements to lease two DC-10-30
aircraft and will take delivery of such aircraft in May 1997.
In September 1996, Express placed an order for 25 firm EMB-145 50-
seat regional jets, with options for an additional 175 aircraft.
Neither Express nor Continental will have any obligation to take
aircraft that are not financed by a third party and leased to the
Company. However, if the Company fails to confirm the first
tranche of 25 options by August 1997, the rent associated with the
25 firm aircraft will increase by an aggregate of $33.6 million
over the 16-year life of the leases. Express has taken delivery of
six of the firm aircraft through April 25, 1997 and will take
delivery of the remaining 19 firm aircraft during the period from
May 1, 1997 through the second quarter of 1998. The Company
expects to account for all of these aircraft as operating leases.
Continental expects its cash outlays for 1997 capital expenditures,
exclusive of fleet plan requirements, to aggregate $125 million,
primarily relating to mainframe, software application and
automation infrastructure projects, aircraft modifications and
mandatory maintenance projects, passenger terminal facility
improvements and office, maintenance, telecommunications and ground
equipment. Continental's capital expenditures during the three
months ended March 31, 1997, aggregated $33 million, exclusive of
fleet plan requirements.
The Company expects to fund its future capital commitments through
internally generated funds together with general Company financings
and aircraft financing transactions. However, there can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by current
financings or firm financing commitments.
As of March 31, 1997, the Company had $848 million in cash and cash
equivalents (excluding restricted cash of $79 million), compared to
$985 million (excluding restricted cash of $76 million) as of
December 31, 1996. Net cash provided by operating activities
increased $9 million during the three months ended March 31, 1997
compared to the same period in the prior year primarily due to an
improvement in operating income. Net cash used by investing
activities increased $193 million for the three months ending March
31, 1997 compared to the same period in the prior year, principally
due to an increase in fleet-related capital expenditures. Net cash
used by financing activities for the three months ended March 31,
1997 compared to the same period in the prior year decreased $117
million primarily due to a decrease in payments on long-term debt
and capital lease obligations.
Continental does not have general lines of credit and has
significant encumbered assets.
As a result of the recent weakness of the yen against the dollar
and increased fuel costs, CMI's operating earnings declined during
the past three quarters as compared to similar periods a year ago,
and are not expected to improve materially absent a stronger yen or
reduced fuel costs. The $320 million financing consummated by CMI
in July 1996 contains significant financial covenants relating to
CMI, including maintenance of a minimum fixed charge coverage
ratio, a minimum consolidated net worth and minimum liquidity, and
covenants restricting CMI's leverage, its incurrence of certain
indebtedness and its pledge of assets. The financial covenants
also limit the ability of CMI to pay dividends to Continental. In
January 1997, CMI elected to prepay $25 million of principal amount
of its bank financing rather than use such cash for other purposes.
CMI may prepay additional amounts of its bank financing to remain
in compliance with certain covenants contained in such financing.
See Notes 3 and 4 in the Notes to the Financial Statements for a
discussion of the Company's plans to expand its airport facilities
and the related financing thereof.
The Company had, as of December 31, 1996, deferred tax assets
aggregating $1.3 billion, including $804 million of NOLs. The
Company recorded a valuation allowance of $694 million against such
assets as of December 31, 1996. Realization of a substantial
portion of the Company's remaining NOLs will require the completion
by April 27, 1998 of transactions resulting in recognition of
built-in gains for federal income tax purposes. The Company has
consummated several such transactions and currently intends to
consummate one or more additional transactions. If the Company
were to determine in the future that such transactions will not be
completed and if future income is not sufficient to recognize the
benefit of previously completed transactions, an adjustment to the
net deferred tax liability of up to $85 million would be charged to
income in the period such determination was made.
As a result of NOLs, the Company will not pay United States federal
income taxes (other than alternative minimum tax) until it has
recorded approximately an additional $1.1 billion of taxable income
following December 31, 1996. Section 382 of the Internal Revenue
Code ("Section 382") imposes limitations on a corporation's ability
to utilize NOLs if it experiences an "ownership change." In
general terms, an ownership change may result from transactions
increasing the ownership of certain stockholders in the stock of a
corporation by more than 50 percentage points over a three-year
period. In the event that an ownership change should occur,
utilization of Continental's NOLs would be subject to an annual
limitation under Section 382 determined by multiplying the value of
the Company's stock at the time of the ownership change by the
applicable long-term tax-exempt rate (which is 5.5% for April
1997). Unused annual limitation may be carried over to later
years, and the amount of the limitation may under certain
circumstances be increased by the built-in gains in assets held by
the Company at the time of the change that are recognized in the
five-year period after the change. Under current conditions, if an
ownership change were to occur, Continental's annual NOL
utilization would be limited to approximately $111 million.
The Company has recently begun collective bargaining agreement
negotiations with its Continental Airlines and Express pilots whose
contracts become amendable in July 1997 and October 1997,
respectively. In addition, the Company's collective bargaining
agreements with its CMI flight attendants and CMI mechanics and
mechanic-related employees became amendable in September 1996 and
March 1997, respectively. Negotiations are in progress to amend
these two contracts. The Company believes that mutually acceptable
agreements can be reached with all such employees, although the
ultimate outcome of the negotiations is unknown at this time. The
CMI agent-classification employees' collective bargaining
agreement, which became amendable in March 1997, was ratified and
approved in April 1997. The agreement, which becomes amendable in
March 2001, provides for an 8.7% increase in wages over a four-year
period.
The Company anticipates that it will be able to offset a
significant portion of wage and other cost increases with increased
labor productivity, reduced interest and lease expenses, reduced
distribution costs and other cost savings.
Management believes that the Company's costs are likely to be
affected in the future by (i) higher aircraft rental expense as new
aircraft are delivered, (ii) higher wages, salaries and related
costs as the Company continues to compensate its employees
comparable to industry average, (iii) changes in the costs of
materials and services (in particular, the cost of fuel, which can
fluctuate significantly in response to global market conditions),
(iv) changes in governmental regulations and taxes affecting air
transportation and the costs charged for airport access, including
new security requirements, (v) changes in the Company's fleet and
related capacity and (vi) the Company's continuing efforts to
reduce costs throughout its operations, including reduced
maintenance costs for new aircraft, reduced distribution expense
from using Continental's electronic ticket product ("E-Ticket") and
the Internet for bookings, and reduced interest expense.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On December 3, 1990, the Company owned 77 aircraft and 81 spare
engines (in four collateral pools) securing debt evidenced by
equipment trust certificates. The trustees for the four col-
lateral pools moved in the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court") for "adequate
protection" payments under Sections 361 and 363 of the federal
bankruptcy code for the Company's retention and use of the
aircraft and engines after December 3, 1990, including
postpetition claims for the alleged decline in market value of
the aircraft and engines after December 3, 1990 and claims for
deterioration in the condition of the aircraft and engines in
the same period. The Bankruptcy Court rejected the adequate
protection claims that alleged market value decline. Prior to
April 16, 1993, the Company settled all of the adequate
protection claims of the trustees, except for a claim of
approximately $117 million for alleged market value decline of
29 aircraft and 81 spare engines in the fourth collateral pool.
On April 16, 1993, the Bankruptcy Court rejected the market
value decline claims of the trustees for the fourth collateral
pool in their entirety and incorporated those findings into its
order confirming the Plan of Reorganization. The trustees for
the fourth collateral pool appealed from these orders, but
failed to obtain a stay pending appeal. The Company opposed
these appeals on the merits and sought dismissal of the appeals
on the grounds they were made moot by the substantial
consummation of the Plan of Reorganization. The United States
District Court for the District of Delaware (the "District
Court") dismissed the appeals as moot, and the trustees appealed
to the Third Circuit Court of Appeals (the "Third Circuit")
seeking review of the District Court's mootness determination
and the Bankruptcy Court's finding on the merits. The Third
Circuit affirmed the District Court's dismissal in February
1996, but subsequently granted a rehearing en banc. In July
1996, the Third Circuit, acting en banc, also affirmed the
District Court's dismissal. The trustees petitioned for a writ
of certiorari to the U.S. Supreme Court which petition was
denied on January 3, 1997. On January 31, 1997, the trustees
petitioned the U.S. Supreme Court for a rehearing of the
trustees' previous petition, which petition was denied on
February 25, 1997. The U.S. Supreme Court's action terminated
this litigation in favor of Continental.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1* Continental Airlines, Inc. 1997 Stock Incentive Plan
-- incorporated by reference to Exhibit 4.3 to
Continental's Form S-8 Registration Statement (No.
333-23165).
10.2* Amended and restated employment agreement between
the Company and Jeffery A. Smisek, as amended. (1)
10.3 Supplemental Agreement No. 2 to Purchase Agreement
No. 1951 between the Company and Boeing, dated March
5, 1997, relating to the purchase of Boeing 737
aircraft. (1)(2)
10.4 Letter Agreement No. 6-1162-GOC-044 to Purchase
Agreement No. 1783 between the Company and Boeing,
dated March 21, 1997, relating to the purchase of
Boeing 757-224 aircraft. (1)(2)
11.1 Statement Regarding Computation of Per Share Earnings
27.1 Financial Data Schedule.
_______________
*These exhibits relate to management contracts or
compensatory plans or arrangements.
(1) Filed herewith.
(2) The Company has applied to the Commission for
confidential treatment of a portion of this exhibit.
(b) Reports on Form 8-K:
(i) Report dated January 3, 1997 reporting an Item 5.
"Other Event". No financial statements were filed
with the report, which announced that the U.S.
Supreme Court denied a petition for a writ of
certiorari that had been filed in connection with
litigation stemming from the Company's 1993
bankruptcy reorganization.
(ii) Report dated March 21, 1997 reporting an Item 5.
"Other Event". No financial statements were filed
with the report, which announced the completion of a
private placement of $707.3 million of pass through
certificates.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CONTINENTAL AIRLINES, INC.
(Registrant)
Date: April 28, 1997 by: /s/ Lawrence W. Kellner
Lawrence W. Kellner
Executive Vice President and
Chief Financial Officer
(On behalf of Registrant)
Date: April 28, 1997 /s/ Michael P. Bonds
Michael P. Bonds
Vice President and Controller
(Chief Accounting Officer)
EXHIBIT 10.2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement")
is made by and between CONTINENTAL AIRLINES, INC., a Delaware
corporation ("Company"), and Jeffery A. Smisek ("Executive").
W I T N E S S E T H:
WHEREAS, Company and Executive are parties to that certain
Employment Agreement dated as of June 5, 1995 (the "Current
Agreement"); and
WHEREAS, the Human Resources Committee of the Board of
Directors, at its November 2, 1995 meeting, authorized the
amendment of the employment agreements of officers of the Company,
selected on a performance basis by the Chief Executive Officer of
the Company, with respect to certain matters; and
WHEREAS, Executive has been so selected by the Chief Executive
Officer; and
WHEREAS, in connection therewith, the parties desire to amend
the Current Agreement and restate it, as so amended, in its
entirety as this Agreement;
NOW, THEREFORE, for and in consideration of the mutual
promises, covenants and obligations contained herein, Company and
Executive agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment; Effective Date. Company agrees to employ
Executive and Executive agrees to be employed by Company, beginning
as of the Effective Date (as hereinafter defined) and continuing
for the period of time set forth in Article 2 of this Agreement,
subject to the terms and conditions of this Agreement. For
purposes of this Agreement, the "Effective Date" shall be June 6,
1995.
1.2 Position. From and after the Effective Date, Company
shall employ Executive in the position of Senior Vice President,
General Counsel and Secretary of Company, or in such other position
or positions as the parties mutually may agree.
1.3 Duties and Services. Executive agrees to serve in the
position referred to in paragraph 1.2 and to perform diligently and
to the best of his abilities the duties and services appertaining
to such office as set forth in the Bylaws of Company in effect on
the Effective Date, as well as such additional duties and services
appropriate to such office which the parties mutually may agree
upon from time to time.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other
provisions hereof, Company agrees to employ Executive for a three-
year period beginning on the Effective Date.
2.2 Company's Right to Terminate. Notwithstanding the
provisions of paragraph 2.1, Company, acting pursuant to an express
resolution of the Board of Directors of Company (the "Board of
Directors") or the Human Resources Committee of the Board of
Directors (the "HR Committee"), shall have the right to terminate
Executive's employment under this Agreement at any time for any of
the following reasons:
(i) upon Executive's death;
(ii) upon Executive's becoming incapacitated for a
period of at least 180 days by accident, sickness or other
circumstance which renders him mentally or physically
incapable of performing the material duties and services
required of him hereunder on a full-time basis during such
period;
(iii) for cause, which for purposes of this Agreement
shall mean Executive's gross negligence or willful misconduct
in the performance of, or Executive's abuse of alcohol or
drugs rendering him unable to perform, the material duties
and services required of him pursuant to this Agreement;
(iv) for Executive's material breach of any provision
of this Agreement which, if correctable, remains uncorrected
for 30 days following written notice to Executive by Company
of such breach; or
(v) for any other reason whatsoever, in the sole
discretion of the Board of Directors or the Human Resources
Committee.
2.3 Executive's Right to Terminate. Notwithstanding the
provisions of paragraph 2.1, Executive shall have the right to
terminate his employment under this Agreement at any time for any
of the following reasons:
(i) the assignment to Executive by the Board of
Directors or HR Committee or other officers or representatives
of Company of duties materially inconsistent with the duties
associated with the position described in paragraph 1.2 as
such duties are constituted as of the Effective Date;
(ii) a material diminution in the nature or scope of
Executive's authority, responsibilities, or title from those
applicable to him as of the Effective Date;
(iii) the occurrence of material acts or conduct on the
part of Company or its officers or representatives which
prevent Executive from performing his duties and
responsibilities pursuant to this Agreement;
(iv) Company requiring Executive to be permanently
based anywhere outside a major urban center in Texas;
(v) the taking of any action by Company that would
materially adversely affect the corporate amenities enjoyed by
Executive on the Effective Date;
(vi) a material breach by Company of any provision of
this Agreement which, if correctable, remains uncorrected for
30 days following written notice of such breach by Executive
to Company; or
(vii) for any other reason whatsoever, in the sole
discretion of Executive.
2.4 Notice of Termination. If Company or Executive desires
to terminate Executive's employment hereunder at any time prior to
expiration of the term of employment as provided in paragraph 2.1,
it or he shall do so by giving written notice to the other party
that it or he has elected to terminate Executive's employment
hereunder and stating the effective date and reason for such
termination, provided that no such action shall alter or amend any
other provisions hereof or rights arising hereunder.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the period of this Agreement,
Executive shall receive a minimum annual base salary equal to the
greater of (i) $250,000.00 or (ii) such amount as the parties
mutually may agree upon from time to time. Executive's annual base
salary at the date of this Agreement is $300,000.00. Executive's
annual base salary shall be paid in equal installments in
accordance with Company's standard policy regarding payment of
compensation to executives but no less frequently than semimonthly.
3.2 Bonus Programs. Executive shall participate in each cash
bonus program maintained by Company on and after the Effective Date
(including, without limitation, participation effective as of March
27, 1995 in any such program maintained for the year during which
such date occurs) at a level which is not less than the maximum
participation level made available to any other executive of
Company at substantially the same title or level of Executive
(determined without regard to period of service or other criteria
that might otherwise be necessary to entitle Executive to such
level of participation).
3.3 Vacation and Sick Leave. During each year of his
employment, Executive shall be entitled to vacation and sick leave
benefits equal to the maximum available to any Company executive,
determined without regard to the period of service that might
otherwise be necessary to entitle Executive to such vacation or
sick leave under standard Company policy.
3.4 Other Perquisites. During his employment hereunder,
Executive shall be afforded the following benefits as incidences of
his employment:
(i) Business and Entertainment Expenses - Subject to
Company's standard policies and procedures with respect to
expense reimbursement as applied to its executive employees
generally, Company shall reimburse Executive for, or pay on
behalf of Executive, reasonable and appropriate expenses
incurred by Executive for business related purposes, including
dues and fees to industry and professional organizations,
costs of entertainment and business development, and costs
reasonably incurred as a result of Executive's spouse
accompanying Executive on business travel.
(ii) Parking - Company shall provide at no expense to
Executive a parking place convenient to Executive's office and
a parking place at Intercontinental Airport in Houston, Texas.
(iii) Other Company Benefits - Executive and, to the
extent applicable, Executive's family, dependents and
beneficiaries, shall be allowed to participate in all
benefits, plans and programs, including improvements or
modifications of the same, which are now, or may hereafter be,
available to similarly-situated Company employees. Such
benefits, plans and programs may include, without limitation,
profit sharing plan, thrift plan, annual physical
examinations, health insurance or health care plan, life
insurance, disability insurance, pension plan, pass privileges
on Continental Airlines, Flight Benefits and the like.
Company shall not, however, by reason of this paragraph be
obligated to institute, maintain, or refrain from changing,
amending or discontinuing, any such benefit plan or program,
so long as such changes are similarly applicable to executive
employees generally.
ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION
4.1 By Expiration. If Executive's employment hereunder shall
terminate upon expiration of the term provided in paragraph 2.1
hereof, then all compensation and all benefits to Executive
hereunder shall terminate contemporaneously with termination of his
employment; provided, however, that Executive shall be provided
with Flight Benefits for the remainder of Executive's lifetime.
4.2 By Company. If Executive's employment hereunder shall be
terminated by Company prior to expiration of the term provided in
paragraph 2.1 hereof then, upon such termination, regardless of the
reason therefor, all compensation and all benefits to Executive
hereunder shall terminate contemporaneously with the termination of
such employment, except if such termination shall be for any reason
other than those encompassed by paragraphs 2.2(i), (ii), (iii) or
(iv), then Company shall (a) pay Executive on or before the
effective date of such termination a lump-sum, cash payment in an
amount equal to the Termination Payment (as such term is defined in
paragraph 4.7), (b) provide Executive with Flight Benefits (as such
term is defined in paragraph 4.7) for the remainder of Executive's
lifetime, (c) provide Executive with Outplacement Services (as such
term is defined in paragraph 4.7), and (d) provide Executive and
his eligible dependents with Continuation Coverage (as such term is
defined in paragraph 4.7) for the Severance Period.
4.3 By Executive. If Executive's employment hereunder shall
be terminated by Executive prior to expiration of the term provided
in paragraph 2.1 hereof then, upon such termination, regardless of
the reason therefor, all compensation and benefits to Executive
hereunder shall terminate contemporaneously with the termination of
such employment, except if such termination shall be pursuant to
paragraphs 2.3(i), (ii), (iii), (iv), (v), or (vi), then Company
shall provide Executive with the payments and benefits described in
clauses (a) through (d) of paragraph 4.2.
4.4 Certain Additional Payments by Company. Notwithstanding
anything to the contrary in this Agreement, if any payment,
distribution or provision of a benefit by Company to or for the
benefit of Executive, whether paid or payable, distributed or
distributable or provided or to be provided pursuant to the terms
of this Agreement or otherwise (a "Payment"), would be subject to
an excise or other special additional tax that would not have been
imposed absent such Payment (including, without limitation, any
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended), or any interest or penalties with respect to
such excise or other additional tax (such excise or other
additional tax, together with any such interest or penalties, are
hereinafter collectively referred to as the "Excise Tax"), Company
shall pay to Executive an additional payment (a "Gross-up Payment")
in an amount such that after payment by Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes), including any income taxes and Excise Taxes imposed on any
Gross-up Payment, Executive retains an amount of the Gross-up
Payment (taking into account any similar gross-up payments to
Executive under the Incentive Plan (as such term is defined in
paragraph 4.7)) equal to the Excise Tax imposed upon the Payments.
Company and Executive shall make an initial determination as to
whether a Gross-up Payment is required and the amount of any such
Gross-up Payment. Executive shall notify Company in writing of any
claim by the Internal Revenue Service which, if successful, would
require Company to make a Gross-up Payment (or a Gross-up Payment
in excess of that, if any, initially determined by Company and
Executive) within ten business days after the receipt of such
claim. Company shall notify Executive in writing at least ten
business days prior to the due date of any response required with
respect to such claim if it plans to contest the claim. If Company
decides to contest such claim, Executive shall cooperate fully with
Company in such action; provided, however, Company shall bear and
pay directly or indirectly all costs and expenses (including
additional interest and penalties) incurred in connection with such
action and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of
Company's action. If, as a result of Company's action with respect
to a claim, Executive receives a refund of any amount paid by
Company with respect to such claim, Executive shall promptly pay
such refund to Company. If Company fails to timely notify
Executive whether it will contest such claim or Company determines
not to contest such claim, then Company shall immediately pay to
Executive the portion of such claim, if any, which it has not
previously paid to Executive.
4.5 Payment Obligations Absolute. Company's obligation to
pay Executive the amounts and to make the arrangements provided in
this Article 4 shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which
Company (including its subsidiaries and affiliates) may have
against him or anyone else. All amounts payable by Company shall
be paid without notice or demand. Executive shall not be obligated
to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Article 4, and,
except as provided in paragraph 4.7 with respect to Continuation
Coverage, the obtaining of any such other employment (or the
engagement in any endeavor as an independent contractor, sole
proprietor, partner, or joint venturer) shall in no event effect
any reduction of Company's obligations to make (or cause to be
made) the payments and arrangements required to be made under this
Article 4.
4.6 Liquidated Damages. In light of the difficulties in
estimating the damages upon termination of this Agreement, Company
and Executive hereby agree that the payments and benefits, if any,
to be received by Executive pursuant to this Article 4 shall be
received by Executive as liquidated damages. Payment of the
Termination Payment pursuant to paragraphs 4.2 or 4.3 shall be in
lieu of any severance benefit Executive may be entitled to under
any severance plan or policy maintained by Company.
4.7 Certain Definitions and Additional Terms. As used
herein, the following capitalized terms shall have the meanings
assigned below:
(i) "Annualized Compensation" shall mean an amount
equal to the sum of (1) Executive's annual base salary
pursuant to paragraph 3.1 in effect immediately prior to
Executive's termination of employment hereunder and (2) a
deemed annual bonus which shall be equal to 25% of the amount
described in clause (1) of this paragraph 4.7(i);
(ii) "Change in Control" shall have the meaning
assigned to such term in the Incentive Plan (as amended by the
First Amendment thereto) in effect as of the date of execution
of this Agreement;
(iii) "Continuation Coverage" shall mean the continued
coverage of Executive and his eligible dependents under
Company's welfare benefit plans available to executives of
Company who have not terminated employment (or the provision
of equivalent benefits), including, without limitation,
medical, health, dental, life insurance, disability, vision
care, accidental death and dismemberment, and prescription
drug, at no greater cost to Executive than that applicable to
a similarly situated Company executive who has not terminated
employment; provided, however, that (1) subject to clause (2)
below, the coverage under a particular welfare benefit plan
(or the receipt of equivalent benefits) shall terminate upon
Executive's receipt of comparable benefits from a subsequent
employer and (2) if Executive (and/or his eligible dependents)
would have been entitled to retiree coverage under a
particular welfare benefit plan had he voluntarily retired on
the date of his termination of employment, then such coverage
shall be continued as provided in such plan upon the
expiration of the period Continuation Coverage is to be
provided pursuant to this Article 4. Notwithstanding any
provision in this Article 4 to the contrary, Executive's
entitlement to any benefit continuation pursuant to Section
601 et. seq. of the Employee Retirement Income Security Act of
1974, as amended, shall commence at the end of the period of,
and shall not be reduced by the provision of, any applicable
Continuation Coverage;
(iv) "Flight Benefits" shall mean flight benefits on
each airline operated by the Company or any of its affiliates
or any successor or successors thereto (the "CO system"),
consisting of the highest priority space available flight
passes for Executive and his eligible family members (as such
eligibility is in effect on the date hereof), a UATP card (or,
in the event of discontinuance of the UATP program, a similar
charge card permitting the purchase of air travel through
direct billing to the Company or any of its affiliates or any
successor or successors thereto (a "Similar Card")) in
Executive's name for charging flights (in any fare class) on
the CO system for Executive, Executive's spouse, Executive's
family and significant others as determined by Executive, a
Gold Elite OnePass Card (or similar highest category successor
frequent flyer card) in Executive's name for use on the CO
system, a membership for Executive and Executive's spouse in
the Company's President's Club (or any successor program
maintained in the CO system) and reimbursement (while an
officer of the Company) of up to $10,000 annually for U.S.
federal, state or local income taxes on imputed income
resulting from such flights (such imputed income to be
calculated during the term of such Flight Benefits at the
lowest published fare (i.e., 21 day advance purchase coach
fare or other lowest available fare) for the applicable flight
on the date of such flight, regardless of the actual fare
class booked or flown, or as otherwise required by law);
(v) "Incentive Plan" shall mean Company's 1994
Incentive Equity Plan, as amended;
(vi) "Outplacement Services" shall mean outplacement
services, at Company's cost and for a period of twelve months
beginning on the date of Executive's termination of
employment, to be rendered by an agency selected by Executive
and approved by the Board of Directors or HR Committee (with
such approval not to be unreasonably withheld);
(vii) "Severance Period" shall mean:
(1) in the case of a termination of Executive's
employment with Company that occurs within two years after the
date upon which a Change in Control occurs, a period
commencing on the date of such termination and continuing for
thirty-six months; or
(2) in the case of a termination of Executive's
employment with Company that occurs prior to a Change in
Control or after the date which is two years after a Change in
Control occurs, a period commencing on the date of such
termination and continuing for twenty-four months; and
(viii) "Termination Payment" shall mean an amount equal
to Executive's Annualized Compensation multiplied by a
fraction, the numerator of which is the number of months in
the Severance Period and the denominator of which is twelve.
Executive agrees that, after receipt of an invoice or other
accounting statement therefor, he will promptly (and in any event
within 45 days after receipt of such invoice or other accounting
statement) reimburse the Company for all charges on Executive's
UATP card (or Similar Card) which are not for flights on the CO
system and which are not otherwise reimbursable to Executive under
the provisions of paragraph 3.4(i) hereof. Executive agrees that
the credit availability under Executive's UATP card (or Similar
Card) may be suspended if Executive does not timely reimburse the
Company as described in the foregoing sentence; provided, that,
immediately upon the Company's receipt of Executive's reimbursement
in full, the credit availability under Executive's UATP card (or
Similar Card) will be restored. The sole cost to Executive of
flights on the CO system pursuant to use of Executive's Flight
Benefits will be the imputed income with respect to flights on the
CO system charged on Executive's UATP card (or Similar Card),
calculated throughout the term of Executive's Flight Benefits at
the lowest published fare (i.e., 21 day advance purchase coach fare
or other lowest available fare) for the applicable flight on the
date of such flight, regardless of the actual fare class booked or
flown, or as otherwise required by law, and reported to Executive
as required by applicable law. With respect to any period with
respect to which the Company is obligated to provide up to $10,000
of reimbursement for income taxes as described in paragraph 4.7
(iv) above, Executive will provide to the Company, upon request, a
calculation or other evidence of Executive's marginal tax rate
sufficient to permit the Company to calculate accurately the amount
to be so reimbursed to Executive, and Executive understands that
the Company will not make any gross-up payment to Executive with
respect to the income attributable to such reimbursement. Executive
agrees that he will not resell or permit to be resold any tickets
issued on the CO system in connection with the Flight Benefits.
Executive shall be issued a UATP card (or Similar Card), a Gold
Elite OnePass Card (or similar highest category successor frequent
flyer card), a membership card in the Company's Presidents Club (or
any successor program maintained in the CO system) for Executive
and Executive's spouse, an appropriate flight pass identification
card and an Employee Travel Card, each valid at all times during
the term of Executive's Flight Benefits.
ARTICLE 5: MISCELLANEOUS
5.1 Interest and Indemnification. If any payment to
Executive provided for in this Agreement is not made by Company
when due, Company shall pay to Executive interest on the amount
payable from the date that such payment should have been made until
such payment is made, which interest shall be calculated at 3% plus
the prime or base rate of interest announced by Texas Commerce Bank
National Association (or any successor thereto) at its principal
office in Houston, Texas (but not in excess of the highest lawful
rate), and such interest rate shall change when and as any such
change in such prime or base rate shall be announced by such bank.
If Executive shall obtain any money judgment or otherwise prevail
with respect to any litigation brought by Executive or Company to
enforce or interpret any provision contained herein, Company, to
the fullest extent permitted by applicable law, hereby indemnifies
Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full
all such fees and disbursements and (ii) to pay prejudgment
interest on any money judgment obtained by Executive from the
earliest date that payment to him should have been made under this
Agreement until such judgment shall have been paid in full, which
interest shall be calculated at the rate set forth in the preceding
sentence.
5.2 Notices. For purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and
shall be deemed to have been duly given when personally delivered
or when mailed by United States registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Company to: Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: General Counsel
If to Executive to: Jeffery A. Smisek
5211 Briar Drive
Houston, Texas 77056
or to such other address as either party may furnish to the other
in writing in accordance herewith, except that notices of changes
of address shall be effective only upon receipt.
5.3 Applicable Law. This contract is entered into under, and
shall be governed for all purposes by, the laws of the State of
Texas.
5.4 No Waiver. No failure by either party hereto at any time
to give notice of any breach by the other party of, or to require
compliance with, any condition or provision of this Agreement shall
be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
5.5 Severability. If a court of competent jurisdiction
determines that any provision of this Agreement is invalid or
unenforceable, then the invalidity or unenforceability of that
provision shall not affect the validity or enforceability of any
other provision of this Agreement, and all other provisions shall
remain in full force and effect.
5.6 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original,
but all of which together will constitute one and the same
Agreement.
5.7 Withholding of Taxes and Other Employee Deductions.
Company may withhold from any benefits and payments made pursuant
to this Agreement all federal, state, city and other taxes as may
be required pursuant to any law or governmental regulation or
ruling and all other normal employee deductions made with respect
to Company's employees generally.
5.8 Headings. The paragraph headings have been inserted for
purposes of convenience and shall not be used for interpretive
purposes.
5.9 Gender and Plurals. Wherever the context so requires,
the masculine gender includes the feminine or neuter, and the
singular number includes the plural and conversely.
5.10 Successors. This Agreement shall be binding upon and
inure to the benefit of Company and any successor of the Company,
including without limitation any person, association, or entity
which may hereafter acquire or succeed to all or substantially all
of the business or assets of Company by any means whether direct or
indirect, by purchase, merger, consolidation, or otherwise. Except
as provided in the preceding sentence, this Agreement, and the
rights and obligations of the parties hereunder, are personal and
neither this Agreement, nor any right, benefit or obligation of
either party hereto, shall be subject to voluntary or involuntary
assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party.
5.11 Term. This Agreement has a term co-extensive with the
term of employment as set forth in paragraph 2.1. Termination
shall not affect any right or obligation of any party which is
accrued or vested prior to or upon such termination.
5.12 Entire Agreement. Except as provided in (i) the benefits,
plans, and programs referenced in paragraph 3.4(iii), (ii) any
signed written agreement heretofore or contemporaneously executed
by Company and Executive with respect to Awards (as defined in the
Incentive Plan) under the Incentive Plan, or (iii) any signed
written agreement hereafter executed by Company and Executive, this
Agreement constitutes the entire agreement of the parties with
regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties and agreements
between the parties with respect to employment of Executive by
Company. Without limiting the scope of the preceding sentence, all
prior understandings and agreements among the parties hereto
relating to the subject matter hereof are hereby null and void and
of no further force and effect. Any modification of this Agreement
shall be effective only if it is in writing and signed by the party
to be charged.
5.13 Deemed Resignations. Any termination of Executive's
employment shall constitute an automatic resignation of Executive
as an officer of Company and each affiliate of Company, and an
automatic resignation of Executive from the Board of Directors (if
applicable) and from the board of directors of any affiliate of
Company.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 15th day of November, 1995.
CONTINENTAL AIRLINES, INC.
By: /s/ Gordon M. Bethune
Name: Gordon M. Bethune
Title: Chief Executive Officer
"EXECUTIVE"
/s/ Jeffery A. Smisek
Jeffery A. Smisek
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and Jeffery A. Smisek ("Executive").
WITNESSETH:
WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995 (the "Existing Agreement"); and
WHEREAS, the Human Resources Committee of the Board of
Directors of the Company, on April 17, 1996, authorized the
execution and delivery on behalf of the Company of this Amendment;
and
WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual
promises, covenants and obligations contained herein, Company and
Executive agree as follows:
1. Paragraph 2.1 of the Existing Agreement is hereby amended to
read in its entirety as follows:
"2.1 Term. Unless sooner terminated pursuant to other
provisions hereof, Company agrees to employ Executive for a
four-year period beginning on the Effective Date."
2. Paragraph 4.3 of the Existing Agreement is hereby amended to
read in its entirety as follows:
"4.3 By Executive. If Executive's employment hereunder shall
be terminated by Executive prior to expiration of the term
provided in paragraph 2.1 hereof then, upon such termination,
regardless of the reason therefor, all compensation and
benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment,
except Executive shall be provided Flight Benefits (as such
term is defined in paragraph 4.7) for the remainder of
Executive's lifetime and, if such termination shall be
pursuant to paragraphs 2.3(i), (ii), (iii), (iv), (v), or
(vi), then Company shall provide Executive with the payments
and benefits described in clauses (a), (c) and (d) of para-
graph 4.2."
3. Paragraph 4.7(ii) of the Existing Agreement is hereby amended
to read in its entirety as follows:
"(ii) "Change in Control" shall have the meaning assigned to
such term in the Incentive Plan (as amended by the Board of
Directors on April 19, 1996 and in effect on such date);"
4. Contemporaneously with his execution and delivery hereof,
Executive is executing and delivering to the Company a Waiver and
Amendment to Employee Stock Option Grant and a Waiver and Amendment
to Restricted Stock Grant in the forms thereof previously approved
by the Human Resources Committee of the Board of Directors of the
Company.
5. The Existing Agreement, as amended by this Amendment, is hereby
ratified and confirmed and shall continue in full force and effect
in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 19th day of April, 1996.
CONTINENTAL AIRLINES, INC.
By: /s/ Gordon M. Bethune
Name: Gordon M. Bethune
Title: Chief Executive Officer
EXECUTIVE
/s/ Jeffery A. Smisek
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and Jeffery A. Smisek ("Executive").
WITNESSETH:
WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995, as amended by Amendment to Employment Agreement dated as of
April 19, 1996 (the "Existing Agreement"); and
WHEREAS, the Human Resources Committee of the Board of
Directors of the Company, on September 30, 1996, authorized the
execution and delivery on behalf of the Company of this Amendment;
and
WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual
promises, covenants and obligations contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Company and Executive agree as follows:
1. Paragraph 4.7(i) of the Existing Agreement is hereby amended to
read in its entirety as follows:
"(i) "Annualized Compensation" shall mean an amount equal to
the sum of (1) Executive's annual base salary pursuant to
paragraph 3.1 in effect immediately prior to Executive's
termination of employment hereunder and (2) a deemed annual
bonus which shall be equal to the Bonus Percentage of the
amount described in clause (1) of this paragraph 4.7(i). The
"Bonus Percentage" shall be a percentage equal to the annual
percentage of base salary (i.e., 0% to 125%) paid or payable
to a participant under the Company's Executive Bonus Program
(and its predecessor or any successor plan or program) with
respect to the most recent fiscal year ended prior to
Executive's termination of employment; provided that, with
respect to fiscal year 1996 only, no amount attributable to
the 25% cash bonus paid January 2, 1996 and approved by the
Human Resources Committee of the Board of Directors of the
Company at its meeting on November 2, 1995 shall be included
in the Bonus Percentage."
2. The Existing Agreement, as amended by this Amendment, is hereby
ratified and confirmed and shall continue in full force and effect
in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 30th day of September, 1996.
CONTINENTAL AIRLINES, INC.
By: /s/ Gordon M. Bethune
Name: Gordon M. Bethune
Title: Chief Executive Officer
EXECUTIVE
/s/ Jeffery A. Smisek
Exhibit 10.3
Supplemental Agreement No. 2
to
Purchase Agreement No. 1951
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 737 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of March 5, 1997,
by and between THE BOEING COMPANY, a Delaware corporation with its
principal office in Seattle, Washington (Boeing) and CONTINENTAL
AIRLINES, INC., a Delaware corporation with its principal office in
Houston, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement
No. 1951 dated July 23, 1996, as amended and supplemented, relating
to Boeing Model 737-500, 737-600, 737-700 and 737-800 aircraft (the
Agreement);
WHEREAS, Buyer has exercised a Model 737-700 for Model 737-800
substitution right; Boeing and Buyer have reached agreement on the
configuration for the Model 737-700 and Model 737-800 Aircraft; and
have agreed on [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]; and
WHEREAS, Boeing and Buyer have agreed to amend the Agreement
to incorporate the effect of these and certain other changes;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
1. Table of Contents:
Remove and replace, in its entirety, the "Table of Contents",
with the Table of Contents attached hereto, to reflect the changes
made by this Supplemental Agreement No. 2.
2. Articles:
Remove and replace, in its entirety, "Article 3. Price of
Aircraft", with "Article 3. Price of Aircraft" attached hereto, to
incorporate the new Special Features and Basic Price for the Model
737-724 and Model 737-824 Aircraft that result from incorporating
Exhibits A-1 and A-2 into the Agreement.
3. Table 1:
Remove and replace, in its entirety, "Table 1. Aircraft
Deliveries and Description", with "Table 1. Aircraft Deliveries and
Description" attached hereto, to reflect the substitution of eight
Model 737-724 Aircraft for eight previously selected Model 737-824
Aircraft, change BFE to SPE and incorporate the latest escalation
estimates into the calculation of the Advance Payment Base Prices.
4. Exhibits:
Remove and replace, in their entirety, Exhibits A-1 and A-2,
entitled "Aircraft Configuration", with Exhibits A-1 and A-2
attached hereto, to incorporate the special features selected by
Buyer for the Model 737-724 and Model 737-824 Aircraft.
5. Letter Agreements:
5.1 Remove and replace, in its entirety, Letter Agreement
1951-2R1, "Seller Purchased Equipment", with Letter Agreement 1951-
2R2, "Seller Purchased Equipment", to incorporate into the letter
agreement the estimated dollar value for the SPE for the Model 737-
500, 737-600 and 737-800.
5.2 Add Letter Agreement 6-1162-GOC-015, attached hereto,
to document the agreement with respect to Change Request
0221CG3017, Category IIIA landings.
5.3 Remove and replace, in its entirety, Letter Agreement
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT], to incorporate into the letter agreement
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] requested by Buyer.
The Agreement will be deemed to be supplemented to the extent
herein provided as of the date hereof and as so supplemented will
continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY CONTINENTAL AIRLINES, INC.
By: Gunar Clem By: Brian Davis
Its: Attorney-In-Fact Its: Vice President
TABLE OF CONTENTS
Page SA
Number Number
ARTICLES
1. Subject Matter of Sale. . . . . . . . . 1-1 SA 1
2. Delivery, Title and Risk
of Loss . . . . . . . . . . . . . . . . 2-1
3. Price of Aircraft . . . . . . . . . . . 3-1 SA 2
4. Taxes . . . . . . . . . . . . . . . . . 4-1
5. Payment . . . . . . . . . . . . . . . . 5-1
6. Excusable Delay . . . . . . . . . . . . 6-1
7. Changes to the Detail
Specification . . . . . . . . . . . . . 7-1 SA 1
8. Federal Aviation Requirements and
Certificates and Export License . . . . 8-1 SA 1
9. Representatives, Inspection,
Flights and Test Data . . . . . . . . . 9-1
10. Assignment, Resale or Lease . . . . . .10-1
11. Termination for Certain Events. . . . .11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance . . . . . . . . . . . . .12-1
13. Buyer Furnished Equipment and
Spare Parts . . . . . . . . . . . . . .13-1
14. Contractual Notices and Requests. . . .14-1
15. Miscellaneous . . . . . . . . . . . . .15-1
TABLES
1. Aircraft Deliveries and
Descriptions. . . . . . . . . . . . . . T-1 SA 2
TABLE OF CONTENTS
SA
Number
EXHIBITS
A-1 Aircraft Configuration - Model 737-724 SA 2
A-2 Aircraft Configuration - Model 737-824 SA 2
A-3 Aircraft Configuration - Model 737-624 SA 1
A-4 Aircraft Configuration - Model 737-524 SA 1
B Product Assurance Document . . . . . . SA 1
C Customer Support Document - Code Two -
Major Model Differences. . . . . . . . . . . . . . . SA 1
C1 Customer Support Document - Code Three -
Minor Model Differences. . . . . . . . SA 1
D Aircraft Price Adjustments - New
Generation Aircraft . . . . . . . . . SA 1
D1 Airframe and Engine Price Adjustments -
Current Generation Aircraft. . . . . . SA 1
E Buyer Furnished Equipment
Provisions Document. . . . . . . . . . SA 1
F Defined Terms Document . . . . . . . .
TABLE OF CONTENTS
SA
Number
LETTER AGREEMENTS
1951-1 Not Used . . . . . . . . . . . . . . .
1951-2R2 Seller Purchased Equipment . . . . . . SA 2
1951-3R1 Option Aircraft-Model 737-824 Aircraft SA 1
1951-4R1 Waiver of Aircraft Demonstration . . . SA 1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1951-6 Configuration Matters. . . . . . . . .
1951-7R1 Spares Initial Provisioning. . . . . . SA 1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1951-9 Option Aircraft-Model 737-624 Aircraft SA 1
1951-10 Configuration Matters [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURIITES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] - Model 737-624
Aircraft . . . . . . . . . . . . . . . SA 1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
TABLE OF CONTENTS
SA
Number
RESTRICTED LETTER AGREEMENTS
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-MMF-308R1 Disclosure of Confidential . . . SA 1
Information
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-GOC-015 Category III A Landing Feature. . SA 2
SUPPLEMENTAL AGREEMENTS DATED AS OF:
Supplemental Agreement No. 1 . . . . . . . October 10,1996
Supplemental Agreement No. 2 . . . . . . . March 5, 1997
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Current Generation Aircraft.
3.1.1.1 Special Features are the features listed
in Exhibit A-4 which Buyer has selected for incorporation in
Current Generation Aircraft.
3.1.1.2 Base Airframe Price is the Aircraft Basic
Price excluding the price of Special Features and Engines.
3.1.1.3 Engine Price is the price established by
the Engine manufacturer for the Engines installed on the Aircraft
including all accessories, equipment and parts set forth in Exhibit
D-1.
3.1.1.4 Aircraft Basic Price is comprised of the
Base Airframe Price, the Engine Price and the price of the Special
Features.
3.1.1.5 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airframe, Engine and
Special Features) as calculated pursuant to Exhibit D-1.
3.1.1.6 Base Airplane Price is the Aircraft Basic
Price excluding the price of Special Features, but including
Engines.
3.1.2 New Generation Aircraft
3.1.2.1 Special Features are the features listed
in Exhibits A-1, A-2 and A-3, which Buyer has selected for
incorporation in New Generation Aircraft.
3.1.2.2 Base Airplane Price is the Aircraft Basic
Price excluding the price of Special Features, but including
Engines.
3.1.2.3 Aircraft Basic Price is comprised of the
Base Airplane Price and the price of the Special Features.
3.1.2.4 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airplane and Special
Features) as calculated pursuant to Exhibit D.
3.2 Aircraft Basic Price.
3.2.1 Current Generation Aircraft:
3.2.1.1 Model 737-524 Aircraft.
The Aircraft Basic Price of each 737-524
Aircraft, expressed in July 1995 dollars, is set forth below:
Base Airframe Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED
Engine Price SEPARATELY WITH THE
SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO
Aircraft Basic Price A REQUEST FOR CONFIDENTIAL
TREATMENT.]
3.2.2 New Generation Aircraft.
3.2.2.1 Model 737-624 Aircraft.
The Aircraft Basic Price of each 737-624
Aircraft, expressed in July 1995 dollars, is set forth below:
Base Airplane Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED
SEPARATELY WITH THE
Aircraft Basic Price SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL
TREATMENT.]
3.2.2.2 Model 737-724 Aircraft.
The Aircraft Basic Price of each 737-724
Aircraft, expressed in July 1995 dollars, is set forth below:
Base Airplane Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED
SEPARATELY WITH THE
Aircraft Basic Price SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL
TREATMENT.]
3.2.2.3 Model 737-824 Aircraft.
The Aircraft Basic Price of each 737-824
Aircraft, expressed in July 1995 dollars, is set forth below:
Base Airplane Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED
SEPARATELY WITH THE
Aircraft Basic Price SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL
TREATMENT.]
3.3 Aircraft Price. The total amount that Buyer is to pay
for the Aircraft at the time of delivery (Aircraft Price) will be
established at the time of delivery of such Aircraft to Buyer and
will be the sum of:
3.3.1 the Aircraft Basic Price, set forth in Table 1;
plus
3.3.2 the Economic Price Adjustments for the Aircraft
Basic Price, as calculated pursuant to the formulas set forth in
Exhibits D or D-1, as applicable; plus
3.3.3 other price adjustments made pursuant to this
Agreement or other written agreements executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance
payment purposes, the estimated delivery prices of the Aircraft
have been established, using currently available forecasts of the
escalation factors used by Boeing as of the date of signing this
Agreement. The Advance Payment Base Price of each Aircraft is set
forth in Table 1.
3.4.2 Adjustment of Advance Payment Base Prices -
Long-Lead Aircraft. For Aircraft scheduled for delivery 36 months
or more after the date of this Agreement, the Advance Payment Base
Prices appearing in Article 3.4.1 will be used to determine the
amount of the first advance payment to be made by Buyer on the
Aircraft. No later than 25 months before the scheduled month of
delivery of each affected Aircraft, Boeing will increase or
decrease the Advance Payment Base Price of such Aircraft as
required to reflect the effects of (i) any adjustments in the
Aircraft Basic Price pursuant to this Agreement and (ii) the
then-current forecasted escalation factors used by Boeing. Boeing
will provide the adjusted Advance Payment Base Prices for each
affected Aircraft to Buyer, and the advance payment schedule will
be considered amended to substitute such adjusted Advance Payment
Base Prices.
Table 1 to
Purchase Agreement 1951
Airraft Deliveries and Descriptions
Model 737-500 Aircraft
CFM56-3C1 Engines
Detail Specification No. D6-38606-11 dated March 1, 1996
Exhibit A-4
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
AIRCRAFT CONFIGURATION
Dated March 5, 1997
relating to
BOEING MODEL 737-724 AIRCRAFT
Exhibit A-1
The Detail Specification is Customer Detail Specification
D6-38808-42 dated as of January 6, 1997. Such Detail
Specification will be comprised of Boeing Configuration
Specification D6- 38808 Revision F dated March 8, 1996 as amended
to incorporate the applicable specification language to reflect
the effect of the changes set forth in the Change Requests and
Master Changes listed below, including the effects of such
changes on Manufacturer's Empty Weight (MEW) and Operating Empty
Weight (OEW). Such Change Requests and Master Changes are set
forth in Boeing Document D6-39049. As soon as practicable,
Boeing will furnish to Buyer copies of the Detail Specification,
which copies will reflect the effect of such changes. The
Aircraft Basic Price will reflect and include all effects of such
changes of price, except such Aircraft Basic Price will not
include the price effects of Change Requests changing Buyer
Furnished Equipment to Seller Purchased Equipment.
[CONFIDENTIAL
MATERIAL
OMITTED AND
FILED
SEPARATELY WITH
THE SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT.]
0110CG3021
MODEL 737-700 AIRPLANE
0221CG3017
CATEGORY IIIA (50 FOOT DECISION HEIGHT)
AUTOMATIC APPROACH AND LANDING - FAA
0225CH3026
EXTENDED TWIN-ENGINE OPERATIONS (ETOPS) -
NEW GENERATION 737 AIRPLANES
0252CG3037
ENGLISH UNITS FOR FLIGHT MANUAL, OPERATIONS
MANUAL, FUEL QUANTITY SYSTEM, CDS
INDICATIONS, AND FMCS WEIGHTS
0253CH3097
CHANGE BUYER FURNISHED EQUIPMENT (BFE) TO
SELLER PURCHASED EQUIPMENT (SPE) -
PASSENGER SEATS AND GALLEYS
2130CG3039
600 FPM CABIN PRESSURE ASCENT RATE
2130CG3040
350 FPM CABIN PRESSURE DESCENT RATE
2160CG3017
CABIN TEMPERATURE INDICATOR - DEGREES
CELSIUS
2210CG3197
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
GLIDE SLOPE CAPTURE INHIBIT BEFORE
LOCALIZER CAPTURE
2210CG3209
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
AUTOPILOT ENGAGE MODE CONTROL PANEL
2210CG3235
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
ACTIVATION - ALTITUDE ALERT - 300/900 FEET,
FIXED ALERT
2210CG3237
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
ACTIVATION - FLIGHT DIRECTOR TAKEOFF MODE,
WINGS LEVEL
2310CH3027
RADIO TUNING PANELS (RTP) - INSTALLATION -
BFE GABLES P/N G7404-04
2311CH3444
HF COMMUNICATIONS - PARTIAL PROVISIONS FOR
DUAL ARINC 753 DATALINK CAPABILITIES
2311CH3445
HF COMMUNICATIONS - DUAL ALLIEDSIGNAL ARINC
719/753 HF DATA RADIOS (HF DATALINK
DEACTIVATED)
2312CH3403
TRIPLE VHF COMMUNICATIONS (064-50000-0101)
WITH 8.33KHZ FREQUENCY SPACING CAPABILITY
(DEACTIVATED) - INSTALLATION - BFE
ALLIEDSIGNAL
2321CG3528
SELCAL DECODER - INSTALLATION -
BFE-MOTOROLA
2321CG3529
SELCAL CONTROL PANEL - INSTALLATION -
GABLES WITH FIVE INDIVIDUAL CHANNEL
ANNUNCIATIONS-BFE
2321MP3558
SELCAL DECODER - INSTALLATION - BFE-
COLTECH IN LIEU OF BFE - MOTOROLA
2322CH3411
COMMUNICATIONS MANAGEMENT UNIT (CMU) -
PARTIAL PROVISIONS FOR DUAL - ARINC 758
2331CH3179
PA HANDSET INSTALLATION IN FLIGHT DECK
AISLE STAND
2332CH3446
VIDEO ENTERTAINMENT SYSTEM "VIDEO ON" LIGHT
- INSTALLATION - FLIGHT COMPARTMENT
2332MP3550
VIDEO ENTERTAINMENT SYSTEM "VIDEO ON" LIGHT
- DELETE INSTALLATION - FLIGHT COMPARTMENT
2350CH3153
FLIGHT COMPARTMENT AUDIO MUTING REVISION -
ONE SIDE MUTING
2350CG3158 NC
CONTROL WHEEL INTERPHONE SWITCH - REVISION
- SPRING LOADED TO OFF
2350CH3163
DIGITAL AUDIO REMOTE ELECTRONICS UNIT
REVISION TO DELETE HEADSET AURAL ALERTS
2350CG3184
AUDIO SELECTOR PANEL - INSTALLATION - 3
VHF/2HF (P/N 10-62090-64)
2350CH3206
AUDIO SELECTOR PANEL RELOCATION FROM AFT
ELECTRONICS PANEL TO THE CAPTAIN'S AND
FIRST OFFICER'S SIDEWALL PANEL
2350CH3207
INTERPHONE - BFE MICROPHONES, BOOM
MIC/HEADSETS, AND HEADPHONES - REVISION
2370CH3183
SOLID STATE VOICE RECORDER WITH TWO HOUR
RECORDING CAPABILITY - INSTALLATION - BFE
ALLIEDSIGNAL
2370MP3203
SOLID STATE VOICE RECORDER - INSTALLATION -
LORAL FAIRCHILD IN LIEU OF BFE ALLIED SIGNAL
2433CH3150
STANDBY POWER - CAPACITY INCREASE AND LOADS
ADDITION - INCLUDING FMS - 30-MINUTE CAPABILITY
2450CH3159
PASSENGER CABIN - PARTIAL WIRING PROVISIONS
- 115VAC, 60HZ
2450MP3166
PASSENGER CABIN - DELETE PARTIAL WIRING
PROVISIONS - 115VAC, 60HZ
2520CH3816
BFE BULKHEAD DECORATIVE MURALS - TAPIS
"ULTRA LEATHER HP"
2520CH3818
INTERIOR ARRANGEMENT - 12 FIRST CLASS, 112
TOURIST CLASS
2524CH3511
FULL HEIGHT SPE CLOSET - FORWARD LEFT HAND
2528CH3212
LOCKABLE OVERHEAD STOWAGE COMPARTMENT USING
FLIGHT COMPARTMENT DOOR KEY - ADDITION
2530CH3625
GALLEY WORK DECK - COMPOSITE MATERIAL
2530CH3635
FORWARD GALLEY G1 INSTALLATION - AFT
FOOTPRINT STA 293.00
2530CH3636
FORWARD GALLEY G2 INSTALLATION - AFT
FOOTPRINT STA 366.00
2541CH3043
LIQUID SOAP DISPENSER - LAVATORY
2541CH3047
INSTALLATION OF AMENITIES TRAY IN LAVATORY
MODULE
2550CG3208
CARGO COMPARTMENT NETS WITH NYLON TYPE WEB
SUPPORTS FOR 737-700
2550CG3217
FWD AND AFT CARGO COMPARTMENT FLOOR PANELS
- ALL ALUMINUM FOR 737-700
2550CG3224
FWD AND AFT CARGO COMPARTMENT LINING -
HEAVIER GAGE FIBERGLASS FOR 737-700
2564CH3095
RETRACTABLE EMERGENCY EQUIPMENT PANEL
2611CG3020
ENGINE AND APU FIRE/OVERHEAT DETECTION
SYSTEM - WHITTAKER SAFETY SYSTEMS
2626CG3024
FIRE EXTINGUISHER - INSTALLATION
2841CG3095
FUEL QUANTITY INDICATORS ON RIGHT WING
FUELING PANEL
2844CG3040
MEASURING STICK CONVERSION TABLES - POUNDS
2910CG3093
ENGINE DRIVEN HYDRAULIC PUMP WITH VESPEL
SPLINE - ABEX
2910CG3097
AC MOTOR-DRIVEN HYDRAULIC PUMPS -
INSTALLATION - ABEX
3131CG3673
ACCELEROMETER - INSTALLATION - BFE
ALLIEDSIGNAL INC
3131CG3779
DIGITAL FLIGHT DATA ACQUISITION UNIT
(DFDAU) (P/N 2233000-85) WITH ACMS INTERFACES
AND INTERNAL OPTICAL DISKETTE DRIVE -
3131MP3734
OPTICAL QUICK ACCESS RECORDER INSTALLATION
EXISTING PARTIAL PROVISIONS - BFE PENNY AND GILES
3131MP3797
PARTIAL PROVISIONS FOR ARINC 591 QUICK
ACCESS RECORDER
3131CG3808
SOLID STATE DIGITAL FLIGHT DATA RECORDER -
INSTALLATION - BFE ALLIEDSIGNAL - 256 WPS
3131MP3847
SOLID STATE DIGITAL FLIGHT DATA RECORDER -
INSTALLATION - BFE LOCKHEED MARTIN - 256 WP
IN LIEU OF ALLIED SIGNAL
3131MP3856
ACCELEROMETER - INSTALLATION - BFE PATRIOT
AND CONTROLS CORPORATION IN LIEU OF BFE
ALLIED SIGNAL
3135CH3068
MILTOPE ARINC 744 MULTIPORT PRINTER - FULL
FORMAT - INSTALLATION - BFE
3162CG3013
EFIS/MAP DISPLAY FORMAT
3162CG3015
FLIGHT DIRECTOR COMMAND DISPLAY - SPLIT AXIS
3162CG3019
RADIO ALTITUDE DISPLAY - ROUND DIAL
3162CG3021
RADIO ALTITUDE - BELOW ADI
3162CG3022
RISING RUNWAY DISPLAY
3162CG3026
ATTITUDE COMPARATOR - STEADY
3162CG3028
SINGLE CHANNEL AUTOPILOT ANNUNCIATION (1 CH)
3162CG3029
LOCALIZER BACKCOURSE POLARITY - REVERSAL
3162CG3032
MAP MODE ORIENTATION - TRACK UP
3162CG3036
AUTOTUNED NAVAIDS - DISPLAYED
3162CG3038
MANUALLY TUNED VOR SELECTED COURSE LINES -
DISPLAYED
3162CG3040
ADF POINTER(S) IN MAP MODE - FULL TIME
DISPLAY
3162CG3042
POSITION DIFFERENCE - AUTOMATIC DISPLAY
3162CG3044
WEATHER RADAR RANGE INDICATORS - RANGE ARCS
3162CG3052
TCAS RESOLUTION ADVISORY ON ADI
3162CG3056
ANALOG FAILURE FLAGS - NOT DISPLAYED
3162CG3104
ENGINE INSTRUMENTS DISPLAY - SIDE BY SIDE
PRESENTATION ON UPPER DISPLAY UNIT
3162CH3135
ADDITIONAL TAKEOFF BUG - NOT DISPLAYED
3240CG3235
NOSE AND MAIN LANDING GEAR STANDARD
CAPACITY BRAKES AND HIGH GROSS WEIGHT
WHEELS - INSTALLATION - ALLIEDSIGNAL INC
FOR 737-600, -700
3244CG3007
PARKING BRAKE WARNING LIGHT INSTALLATION ON
EXTERNAL POWER CONNECTOR PANEL
3245CG3031
MAIN LANDING GEAR TIRES - INSTALLATION - SFE
- H44.5"X16.5"-21" -28 PLY FOR 737-600, 737-700
3310CH3020
KEEP OUT OF FLIGHT COMPARTMENT WARNING
LIGHT INSTALLATION
3320MP3039
INTERIOR LIGHTING - REVISION - COOL-WHITE
FLOURESCENT LAMPS IN LIEU OF WARM WHITE LAMPS
3342CG3024
NOSE GEAR TAXI LIGHT - INSTALLATION -
250-WATT
3343MP3044
EXTERNAL POSITION LIGHT SWITCH INSTALLATION
- FLIGHT DECK SWITCH CONVENTION
3351CH3030
FLOOR PROXIMITY EMERGENCY ESCAPE PATH
MARKING SYSTEM, SEAT MOUNTED - INSTALLATION
- BRUCE INDUSTRIES - SEATS AND GALLEYS ONLY
3412CG3078
AIR DATA COMPUTING - DUAL TAT PROBE
3430MP3054
MULTI-MODE RECEIVER (MMR) - PARTIAL
PROVISIONS FOR GLOBAL POSITIONING SYSTEM
INSTALLATION IN MMR
3430MP3060
MULTI-MODE RECEIVER (MMR) - INSTALLATION OF
ILS/GPS - BFE ROCKWELL INTERNATIONAL CORP
3433MP3070
LOW RANGE RADIO ALTIMETER (LRRA) -
INSTALLATION - BFE THOMSON -CSF
3443CH3165
ARINC 708 WEATHER RADAR SYSTEM - INSTALLATION
- BFE ROCKWELL INTERNATIONAL CORP (WITH DEACTIVATED
PREDICTIVE WINDSHEAR FEATURE)
3443CH3189
WEATHER RADAR SYSTEM - PARTIAL PROVISIONS
FOR PREDICTIVE WINDSHEAR FEATURE OF AN
ARINC 708A SINGLE WEATHER RADAR SYSTEM
3443MP3219
ARINC 708A WEATHER RADAR SYSTEM - INSTALLATION
BFE ALLIED SIGNALINC IN LIEU OF ROCKWELL (WITH
DEACTIVATED PREDICTIVE WINDSHEAR FEATURE R/T RDR-4B
3445CG3165
TCAS II - INSTALLATION - BFE HONEYWELL
INC/GABLES ENGINEERING INC
3446CH3127
GPWS RADIO ALTITUDE VOICE CALLOUTS - (100,
50, 30, 20, 10)
3446CH3128
GPWS FLAPS WARNING INHIBIT ONLY IN LIEU OF
SEPARATE SWITCHES FOR FLAPS INHIBIT AND
LANDING GEAR INHIBIT
3446MP3172
GPWS VOICE CALLOUT REVISION - "HALF" VOLUME
IN LIEU OF "FULL" VOLUME
3450MP3006
NAVIGATION SYSTEM - REVISION - ADF REMOVAL
3451CG3005
VOR/MARKER BEACON - INSTALLATION - BFE
ALLIEDSIGNAL INC
3455CG3119
DISTANCE MEASURING EQUIPMENT (DME) -
INSTALLATION - BFE ROCKWELL INTERNATIONAL
CORP (SCANNING)
3457CG3106
AUTOMATIC DIRECTION FINDER (ADF) - INSTALLATION
- BFE ROCKWELL INTERNATIONAL CORP
3457CG3135
AUTOMATIC DIRECTION FINDER (ADF) CONTROL
PANEL - INSTALLATION - BFE GABLES
ENGINEERING INC
3461CG3403
BUYER FURNISHED NAVIGATION DATA BASE
3461CG3424
FMC FLIGHT NUMBER ENTRY
3461CG3429
FMC POSITION UPDATE AND RUNWAY OFFSET UPON
TO/GA ACTIVATION (IN FEET)
3461CG3432
THRUST REDUCTION ALTITUDE - TAKEOFF PROFILE
3461CG3433
FMS BUILT-IN TEST EQUIPMENT PRINTER
RECEPTACLE
3461CG3465
MULTIPURPOSE CDU WITH FMC, ACARS, AND
FLIGHT DATA ACQUISITION UNIT INTERFACE
3461CG3496
FMC -INSTALLATION OF A SECOND 4 MCU, UPDATE
10 FMC WITH 256K NAVIGATION DATA BASE INTO
EXISTING PARTIAL PROVISIONS
3461CG3498
FMC - ACTIVATION - 1 MEG NAVIGATION DATA BASE
3461CG3521
PORTABLE DATA LOADER CONNECTOR PANEL -
INSTALLATION
3461CH3562
FMC - ACTIVATION - RETENTION OF WAYPOINTS
AFTER DIRECT TO
3461CH3565
FMC - ACTIVATION - ACARS ARINC 724B
INTERFACE
3500CG3018
OXYGEN SYSTEM - ALL TUBING AND FITTINGS -
STAINLESS STEEL
3510CG3098
CREW OXYGEN CYLINDER - 114 CUBIC FEET
3510CG3102
CREW OXYGEN SYSTEM - CAPTAIN, FIRST
OFFICER, AND FIRST OBSERVER - BFE OXYGEN
MASK AND BFE SMOKE GOGGLES
3920CH3111
AUXILIARY E/E EQUIPMENT (E8) RACK
INSTALLATION
5200CG3021
HOLD OPEN LOCK INSTALLATION - ENTRY AND
SERVICE DOORS - DOWN TO RELEASE
5320CG3026
FIVE POUND ALUMINUM UNDERSEAT FLOOR PANELS
FOR 737-700
5352CH3008
RADOME REVISION - INSTALL BFE NORTON QUARTZ
RADOME IN LIEU OF STANDARD SFE RADOME VIA
SUPPLIER STC
7200CG3255
AIRPLANE PERFORMANCE: CFM56-7 ENGINES WITH
OPERATIONAL THRUST OF 24,000 LBS. FOR
737-700, -800
7200CG3281
SINGLE ANNULAR COMBUSTOR - CFM56-7 SERIES
ENGINES
7731CG3038
ENGINE VIBRATION MONITORING (EVM) SYSTEM
WITH ON-BOARD ENGINE TRIM BALANCE
7900CG3028
LUBRICATING OIL - MOBIL JET II
TOTAL
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
AIRCRAFT CONFIGURATION
Dated March 5, 1997
relating to
BOEING MODEL 737-824 AIRCRAFT
Exhibit A-2
The Detail Specification is Boeing Detail Specification
D6-38808-43 dated January 6, 1997. Such Detail Specification
will be comprised of Boeing Configuration Specification D6-38808
Revision F dated March 8, 1996 as amended to incorporate the
applicable specification language to reflect the effect of the
changes set forth in the Change Requests listed below, including
the effects of such changes on Manufacturer's Empty Weight (MEW)
and Operating Empty Weight (OEW). Such Change Requests are set
forth in Boeing Document D6-39050. As soon as practicable,
Boeing will furnish to Buyer copies of the Detail Specification,
which copies will reflect the effect of such changes. The
Aircraft Basic Price will reflect and include all effects of such
changes on price, except such Aircraft Basic Price will not
include the price effect of changing Buyer Furnished Equipment to
Seller Purchased Equipment.
[CONFIDENTIAL
MATERIAL
OMITTED AND
FILED
SEPARATELY WITH
THE SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT.]
0110CG3022
MODEL 737-800 AIRPLANE
0221CG3017
CATEGORY IIIA (50 FOOT DECISION HEIGHT)
AUTOMATIC APPROACH AND LANDING - FAA
0225CH3026
EXTENDED TWIN-ENGINE OPERATIONS (ETOPS) -
NEW GENERATION 737 AIRPLANES
0252CG3030
CARGO COMPARTMENT PLACARDS - POUNDS AND
KILOGRAMS PER SQUARE FOOT
0252CG3037
ENGLISH UNITS FOR FLIGHT MANUAL, OPERATIONS
MANUAL, FUEL QUANTITY SYSTEM, CDS
INDICATIONS, AND FMCS WEIGHTS
0253CH3097
CHANGE BUYER FURNISHED EQUIPMENT (BFE) TO
SELLER PURCHASED EQUIPMENT (SPE) -
PASSENGER SEATS AND GALLEYS
2130CG3039
600 FPM CABIN PRESSURE ASCENT RATE
2130CG3040
350 FPM CABIN PRESSURE DESCENT RATE
2160CG3017
CABIN TEMPERATURE INDICATOR - DEGREES
CELSIUS
2210CG3197
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
GLIDE SLOPE CAPTURE INHIBIT BEFORE
LOCALIZER CAPTURE
2210CG3209
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
AUTOPILOT ENGAGE MODE CONTROL PANEL
2210CG3235
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
ACTIVATION - ALTITUDE ALERT - 300/900 FEET,
FIXED ALERT
2210CG3237
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
ACTIVATION - FLIGHT DIRECTOR TAKEOFF MODE,
WINGS LEVEL
2310CH3027
RADIO TUNING PANELS (RTP) - INSTALLATION -
BFE GABLES P/N G7404-04
2311CH3444
HF COMMUNICATIONS - PARTIAL PROVISIONS FOR
DUAL ARINC 753 DATALINK CAPABILITIES
2311CH3446
HF COMMUNICATIONS - DUAL ROCKWELL ARINC
719/753 SYSTEM WITH HFS-900D DATA RADIOS
(HF DATALINK DEACTIVATED)
2312CH3400
TRIPLE VHF COMMUNICATIONS (822-1047-002)
WITH 8.33KHZ FREQUENCY SPACING CAPABILITY
(DEACTIVATED) - INSTALLATION - BFE ROCKWELL
2321CG3527
SELCAL DECODER - INSTALLATION -
BFE COLTECH INC
2321CG3529
SELCAL CONTROL PANEL - INSTALLATION -
GABLES WITH FIVE INDIVIDUAL CHANNEL
ANNUNCIATIONS-BFE
2322CH3411
COMMUNICATIONS MANAGEMENT UNIT (CMU) -
PARTIAL PROVISIONS FOR DUAL - ARINC 758
2331CH3179
PA HANDSET INSTALLATION IN FLIGHT DECK
AISLESTAND
2350CH3153
FLIGHT COMPARTMENT AUDIO MUTING REVISION -
ONE SIDE MUTING
2350CG3158
CONTROL WHEEL INTERPHONE SWITCH - REVISION
- SPRING LOADED TO OFF
2350CH3163
DIGITAL AUDIO REMOTE ELECTRONICS UNIT
REVISION TO DELETE HEADSET AURAL ALERTS
2350CG3184
AUDIO SELECTOR PANEL - INSTALLATION - 3
VHF/2HF (P/N 10-62090-64)
2350CH3206
AUDIO SELECTOR PANEL RELOCATION FROM AFT
ELECTRONICS PANEL TO THE CAPTAIN'S AND
FIRST OFFICER'S SIDEWALL PANEL
2350CH3207
INTERPHONE - BFE MICROPHONES, BOOM
MIC/HEADSETS, AND HEADPHONES - REVISION
2370CH3180
SOLID STATE VOICE RECORDER - INSTALLATION -
BFE LORAL FAIRCHILD
2433CH3150
STANDBY POWER - CAPACITY INCREASE AND LOADS
ADDITION - INCLUDING FMS - 30-MINUTE
CAPABILITY
2520CH3816
BFE BULKHEAD DECORATIVE MURALS - TAPIS
"ULTRA LEATHER HP"
2520CH3825
ALTERNATE INTERIOR ARRANGEMENT - 8 FIRST
CLASS, 153 TOURIST CLASS
2520CH3949
INTERIOR ARRANGEMENT - 14 FIRST CLASS, 141
TOURIST CLASS
2524CH3512
UNDERBIN SPE CLOSET - FORWARD LEFT HAND
2528CH3212
LOCKABLE OVERHEAD STOWAGE COMPARTMENT USING
FLIGHT COMPARTMENT DOOR KEY - ADDITION
2530CH3635
FORWARD GALLEY G1 INSTALLATION - AFT
FOOTPRINT STA 293.00
2530CH3636
FORWARD GALLEY G2 INSTALLATION - AFT
FOOTPRINT STA 366.00
2530CH3639
FORWARD GALLEY G7 INSTALLATION - AFT
FOOTPRINT STA 379.00
2541CH3043
LIQUID SOAP DISPENSER - LAVATORY
2541CH3047
INSTALLATION OF AMENITIES TRAY IN LAVATORY
MODULE
2550CG3210
CARGO COMPARTMENT NETS WITH NYLON TYPE WEB
SUPPORTS FOR 737-800
2550CG3220
FWD AND AFT CARGO COMPARTMENT FLOOR PANELS
- ALL ALUMINUM FOR 737-800
2550CG3226
FWD AND AFT CARGO COMPARTMENT LINING -
HEAVIER GAGE FIBERGLASS FOR 737-800
2564CH3095
RETRACTABLE EMERGENCY EQUIPMENT PANEL
2611CG3020
ENGINE AND APU FIRE/OVERHEAT DETECTION
SYSTEM - WHITTAKER SAFETY SYSTEMS
2626CG3024
FIRE EXTINGUISHER - INSTALLATION
2841CG3095
FUEL QUANTITY INDICATORS ON RIGHT WING
FUELING PANEL
2844CG3040
MEASURING STICK CONVERSION TABLES - POUNDS
2910CG3093
ENGINE DRIVEN HYDRAULIC PUMP WITH VESPEL
SPLINE - ABEX
2910CG3097
AC MOTOR-DRIVEN HYDRAULIC PUMPS -
INSTALLATION - ABEX
3131CH3734
OPTICAL QUICK ACCESS RECORDER INSTALLATION
INTO EXISTING PARTIAL PROVISIONS - BFE
PENNY AND GILES
3131CG3765
ACCELEROMETER - INSTALLATION - BFE PATRIOT
SENSORS AND CONTROLS CORPORATION
3131CG3777
DIGITAL FLIGHT DATA ACQUISITION UNIT
(DFDAU) (P/N 2233000-82) WITH ACMS
INTERFACES - INSTALLATION - BFE-TELEDYNE
CONTROLS
3131CH3797
PARTIAL PROVISIONS FOR ARINC 591 QUICK
ACCESS RECORDER
3135CH3068
$6,800
MILTOPE ARINC 744 MULTIPORT PRINTER - FULL
FORMAT - INSTALLATION - BFE
3162CG3013
EFIS/MAP DISPLAY FORMAT
3162CG3015
FLIGHT DIRECTOR COMMAND DISPLAY - SPLIT
AXIS
3162CG3019
RADIO ALTITUDE DISPLAY - ROUND DIAL
3162CG3021
RADIO ALTITUDE - BELOW ADI
3162CG3022
RISING RUNWAY DISPLAY
3162CG3026
ATTITUDE COMPARATOR - STEADY
3162CG3028
SINGLE CHANNEL AUTOPILOT ANNUNCIATION (1
CH)
3162CG3029
LOCALIZER BACKCOURSE POLARITY - REVERSAL
3162CG3032
MAP MODE ORIENTATION - TRACK UP
3162CG3036
AUTOTUNED NAVAIDS - DISPLAYED
3162CG3038
MANUALLY TUNED VOR SELECTED COURSE LINES -
DISPLAYED
3162CG3040
ADF POINTER(S) IN MAP MODE - FULL TIME
DISPLAY
3162CG3042
POSITION DIFFERENCE - AUTOMATIC DISPLAY
3162CG3044
WEATHER RADAR RANGE INDICATORS - RANGE ARCS
3162CG3052
TCAS RESOLUTION ADVISORY ON ADI
3162CG3056
ANALOG FAILURE FLAGS - NOT DISPLAYED
3162CG3104
ENGINE INSTRUMENTS DISPLAY - SIDE BY SIDE
PRESENTATION ON UPPER DISPLAY UNIT
3162CH3135
ADDITIONAL TAKEOFF BUG - NOT DISPLAYED
3240CG3228
NOSE AND MAIN LANDING GEAR WHEELS AND
BRAKES - INSTALLATION - ALLIEDSIGNAL INC
FOR 737-800
3244CG3007
PARKING BRAKE WARNING LIGHT INSTALLATION ON
EXTERNAL POWER CONNECTOR PANEL
3245CG3040
BIAS NOSE LANDING GEAR TIRES - 27X7.75-15 -
INSTALLATION - SFE
3310CH3020
KEEP OUT OF FLIGHT COMPARTMENT WARNING
LIGHT INSTALLATION
3342CG3024
NOSE GEAR TAXI LIGHT - INSTALLATION -
250-WATT
3343CH3043
EXTERNAL POSITION LIGHT SWITCH INSTALLATION
- FLIGHT DECK SWITCH CONVENTION
3351CH3030
FLOOR PROXIMITY EMERGENCY ESCAPE PATH
MARKING SYSTEM, SEAT MOUNTED - INSTALLATION
- BRUCE INDUSTRIES - SEATS AND GALLEYS ONLY
3412CG3078
AIR DATA COMPUTING - DUAL TAT PROBE
3430CG3054
MULTI-MODE RECEIVER (MMR) - PARTIAL
PROVISIONS FOR GLOBAL POSITIONING SYSTEM
INSTALLATION IN MMR
3430CG3060
MULTI-MODE RECEIVER (MMR) - INSTALLATION OF
ILS/GPS - BFE ROCKWELL INTERNATIONAL CORP
3433CG3056
LOW RANGE RADIO ALTIMETER (LRRA) -
INSTALLATION - BFE THOMSON -CSF
3443CH3154
ARINC 708 WEATHER RADAR SYSTEM -
INSTALLATION - BFE ALLIEDSIGNAL INC (WITH
DEACTIVATED PREDICTIVE WINDSHEAR FEATURE
R/T RDR-4B)
3443CH3189
WEATHER RADAR SYSTEM - PARTIAL PROVISIONS
FOR PREDICTIVE WINDSHEAR FEATURE OF AN
ARINC 708A SINGLE WEATHER RADAR SYSTEM
3445CG3167
TCAS II - INSTALLATION - BFE ALLIEDSIGNAL
INC
3446CH3127
GPWS RADIO ALTITUDE VOICE CALLOUTS - (100,
50, 30, 20, 10)
3446CH3128
GPWS FLAPS WARNING INHIBIT ONLY IN LIEU OF
SEPARATE SWITCHES FOR FLAPS INHIBIT AND
LANDING GEAR INHIBIT
3446CH3129
GPWS VOICE CALLOUT REVISION - "HALF" VOLUME
IN LIEU OF "FULL" VOLUME
3451CG3006
VOR/MARKER BEACON - INSTALLATION - BFE
ROCKWELL INTERNATIONAL CORP
3455CG3119
DISTANCE MEASURING EQUIPMENT (DME) -
INSTALLATION - BFE ROCKWELL INTERNATIONAL
CORP (SCANNING)
3457CH3152
NAVIGATION SYSTEM - ADF REMOVAL
3461CG3403
BUYER FURNISHED NAVIGATION DATA BASE
3461CG3424
FMC FLIGHT NUMBER ENTRY
3461CG3425
FMC TEMPERATURE SELECTION - DEGREES F
DEFAULT
3461CG3429
FMC POSITION UPDATE AND RUNWAY OFFSET UPON
TO/GA ACTIVATION (IN FEET)
3461CG3432
THRUST REDUCTION ALTITUDE - TAKEOFF PROFILE
3461CG3433
FMS BUILT-IN TEST EQUIPMENT PRINTER
RECEPTACLE
3461CG3465
MULTIPURPOSE CDU WITH FMC, ACARS, AND
FLIGHT DATA ACQUISITION UNIT INTERFACE
3461CG3496
FMC -INSTALLATION OF A SECOND 4 MCU, UPDATE
10 FMC WITH 256K NAVIGATION DATA BASE INTO
EXISTING PARTIAL PROVISIONS
3461CG3498
FMC - ACTIVATION - 1 MEG NAVIGATION DATA
BASE
3461CG3521
PORTABLE DATA LOADER CONNECTOR PANEL -
INSTALLATION
3461CH3562
FMC - ACTIVATION - RETENTION OF WAYPOINTS
AFTER DIRECT TO
3461CH3565
FMC - ACTIVATION - ACARS ARINC 724B
INTERFACE
3500CG3018
OXYGEN SYSTEM - ALL TUBING AND FITTINGS -
STAINLESS STEEL
3510CG3098
CREW OXYGEN CYLINDER - 114 CUBIC FEET
3510CG3102
CREW OXYGEN SYSTEM - CAPTAIN, FIRST
OFFICER, AND FIRST OBSERVER - BFE OXYGEN
MASK AND BFE SMOKE GOGGLES
3920CH3111
AUXILIARY E/E EQUIPMENT (E8) RACK
INSTALLATION
5200CG3021
HOLD OPEN LOCK INSTALLATION - ENTRY AND
SERVICE DOORS - DOWN TO RELEASE
5320CG3027
FIVE POUND ALUMINUM UNDERSEAT FLOOR PANELS
FOR 737-800
7200CG3246
AIRPLANE PERFORMANCE: CFM56-7 ENGINES WITH
OPERATIONAL THRUST OF 26,400 LBS. FOR
737-800
7200CG3281
SINGLE ANNULAR COMBUSTOR - CFM56-7 SERIES
ENGINES
7731CG3038
ENGINE VIBRATION MONITORING (EVM) SYSTEM
WITH ON-BOARD ENGINE TRIM BALANCE
7900CG3028
LUBRICATING OIL - MOBIL JET II
TOTAL AMOUNT FOR SPECIAL FEATURES
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1951-2R2
March 5,1997
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 1951-2R2 to
Purchase Agreement No. 1951 -
Seller Purchased Equipment
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-2R1 dated October
10, 1996.
For purposes of this Letter Agreement the following definitions
apply:
Seller Purchased Equipment (SPE) is Buyer Furnished Equipment
(BFE) that Boeing purchases for Buyer.
Developmental Buyer Furnished Equipment (DBFE) is all BFE not
previously certified for installation on the Aircraft.
This Letter Agreement does not include developmental avionics.
Developmental avionics are avionics that have not been previously
certified for installation on the Aircraft.
All other terms used herein and in the Agreement, and not defined
above, will have the same meaning as in the Agreement.
Buyer has requested and Boeing hereby agrees that Boeing will
purchase as SPE certain BFE identified by Buyer pursuant to
Change Requests. Accordingly, Boeing and Buyer agree with
respect to such SPE as follows:
1. Price.
Advance Payments. An estimated SPE price will be included
in the Aircraft Advance Payment Base Price for the purpose of
establishing the advance payments for each Aircraft. The
estimated price of this SPE for each Aircraft, expressed in 1995
U.S. dollars, is listed below.
Model Estimated Price
for SPE (1995$)
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
Aircraft Price. The Aircraft Price will be adjusted to
reflect (i) the actual costs charged Boeing by the SPE suppliers,
(ii) a handling fee of 10% of such costs and (iii) transportation
charges. If all DBFE, except for developmental avionics, is
converted to SPE, Boeing will waive the handling fee for all SPE.
2. Responsibilities.
2.1 With respect to SPE, Buyer is responsible for:
(i) selecting the supplier and advising Boeing
as to the price negotiated between Buyer and supplier on or
before:
Model Model Model Model
737-524 737-624 737-724 737-824
galleys n/a 7/1/97 10/6/96 2/12/97
seats n/a 2/7/97 9/3/96 9/3/96
(ii) selecting a FAA certifiable part; and
(iii) providing to Boeing the SPE part
specification/Buyer requirements.
2.2. With respect to SPE, Boeing is responsible for:
(i) placing and managing the purchase order with
the supplier;
(ii) coordinating with the suppliers on technical
issues;
(iii) ensuring that the delivered SPE complies
with the part specification;
(iv) obtaining certification of the Aircraft with
the SPE installed; and
(v) obtaining for Buyer the supplier's standard
warranty for the SPE. SPE is deemed to be BFE for purposes of
Exhibit B, the Product Assurance Document, of the Agreement.
3. Supplier Selection For SPE Galleys and Seats.
In addition to those responsibilities described above, for
SPE galleys and seats the following provisions apply with respect
to Buyer's selection of suppliers:
Galley Requirements. Buyer will provide Boeing not later
than August 7, 1996 the definitive galley configuration
requirements for the Model 737-724. Buyer will provide Boeing
not later than November 27, 1996 the definitive galley
configuration requirements for the Model 737-824. Buyer will
provide Boeing not later than May 1, 1997 the definitive galley
configuration requirements for the Model 737-624.
Bidder's List. Boeing has submitted to Buyer, for
information purposes, a bidder's list of existing suppliers of
seats and galleys.
Request for Quotation (RFQ). Boeing has issued its RFQ
inviting such potential bidders to submit bids for the galleys
and seats by July 15, 1996 for the Model 737-724 and -824
Aircraft. Boeing will advise such date for the Model 737-624
Aircraft.
Recommended Bidders. Boeing has submitted to Buyer a list
of recommended bidders from which to choose a supplier for the
galleys and seats. The recommendation is based on an evaluation
of the bids submitted using price, weight, warranty and schedule
as the criteria.
Supplier Selection. If Buyer selects a seat or galley
supplier that is not on the Boeing recommended list, such seat or
galley will become BFE and the provisions of Exhibit E, Buyer
Furnished Equipment Provisions Document, of the Agreement will
apply.
4. Changes.
After this Letter Agreement is signed, changes to SPE may
only be made by and between Boeing and the suppliers. Buyer's
contacts with SPE suppliers relating to design (including
selection of materials and colors), weights, prices (except for
price negotiation prior to the supplier selection date) or
schedules are for informational purposes only. If Buyer wants
changes made to any of the above, requests must be made directly
to Boeing for negotiating with the supplier.
5. Proprietary Rights.
Boeing's obligation to purchase SPE will not impose upon
Boeing any obligation to compensate Buyer or any supplier for any
proprietary rights Buyer may have in the design of the SPE.
6. Remedies.
If Buyer does not comply with the obligations above,
Boeing may:
(i) delay delivery of the Aircraft for the period of
non-compliance;
(ii) deliver the Aircraft without installing the SPE;
(iii) substitute a comparable part and invoice Buyer for
the cost; and/or
(iv) increase the Aircraft Price by the amount of
Boeing's additional costs attributable to such noncompliance.
7. Buyer Participation in Price Negotiations for SPE.
Subject to the following conditions, Boeing agrees that Buyer may
negotiate the price with vendors for certain items of BFE which
have been changed to SPE pursuant to this Letter Agreement.
a. Number of Items. Boeing and Buyer have mutually
agreed on a list of specific equipment (the SPE Item) for which
Buyer shall negotiate directly with the vendors to establish the
price for each SPE Item. The SPE Item list includes seats,
galleys, and interior furnishings. Buyer shall provide the price
of the SPE Item when Buyer notifies Boeing of the SPE Item
vendor.
b. Required Dates. Boeing's agreement to permit Buyer to
negotiate prices with vendors for SPE Items is subject to Buyer's
agreement to meet all of Boeing's required dates with respect to
each SPE Item.
c. Right to Approve Selected Vendors. Boeing shall
retain the right to reasonably approve the list of vendors for
each SPE Item.
8. Buyer's Indemnification of Boeing.
Buyer will indemnify and hold harmless Boeing from and
against all claims and liabilities, including costs and expenses
(including attorneys' fees) incident thereto or incident to
successfully establishing the right to indemnification, for
injury to or death of any person or persons, including employees
of Buyer but not employees of Boeing, or for loss of or damage to
any property, including Aircraft, arising out of or in any way
connected with any nonconformance or defect in any SPE and
whether or not arising in tort or occasioned in whole or in part
by the negligence of Boeing, whether active, passive or imputed.
This indemnity will not apply with respect to any nonconformance
or defect caused solely by Boeing's installation of the SPE.
Very truly yours,
THE BOEING COMPANY
By Gunar Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO as of this
Date: March 5, 1997.
CONTINENTAL AIRLINES, INC.
By Brian Davis
Its Vice President
6-1162-GOC-015
March 5, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-GOC-015 to
Purchase Agreement No. 1951 -
Category III A Landing Feature
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737
aircraft (the Aircraft).
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
Special Consideration for Cat III A Landing Feature
In the event that Buyer elects to have the Category III A
landing capability (Change Request 0221CG3017) installed on an
Aircraft at time of delivery, [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURIITES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
In the event that Buyer elects to install the Category III
A landing feature as a post delivery modification, [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURIITES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Confidential Treatment.
Boeing and Buyer understand that certain commercial and
financial information contained in this Letter Agreement,
including any attachments hereto, are considered by both parties
to be confidential. Boeing and Buyer further agree that each
party will treat this Letter Agreement and the information
contained herein as confidential and will not, without the other
party's prior written consent, disclose this Letter Agreement or
any information contained herein to any other person or entity
except as provided in Letter Agreement
6-1162-MMF-308R1.
Very truly yours,
THE BOEING COMPANY
By Gunar Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 5, 1997
CONTINENTAL AIRLINES, INC.
By Brian Davis
Its Vice President
6-1162-MMF-379R1
March 5, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-MMF-379R1 to
Purchase Agreement No. 1951 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURIITES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between THE BOEING COMPANY (Boeing)
and CONTINENTAL AIRLINES, INC. (Buyer) relating to Model 737-624
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 6-1162-MMF-379 dated
October 10, 1996.
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Confidential Treatment. Buyer understands that certain
commercial and financial information contained in this Letter
Agreement including any attachments hereto is considered by
Boeing as confidential. Buyer agrees that it will treat this
Letter Agreement and the information contained herein as
confidential and will not, without the prior written consent of
Boeing, disclose this Letter Agreement or any information
contained herein to any other person or entity except as provided
in Letter Agreement 6-1162-MMF-308R1.
Very truly yours,
THE BOEING COMPANY
By Gunar Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 5, 1997
CONTINENTAL AIRLINES, INC.
By Brian Davis
Its Vice President
Attachment
Attachment A to Letter Agreement
No. 6-1162-MMF-379R1
CFM56-7B18 Engines
Page 1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURIITES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Exhibit 10.4
6-1162-GOC-044
March 21, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-GOC-044 to
Purchase Agreement No. 1783 -
Application of Advance Payments
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1783 dated
March 18, 1993 (the Agreement) between THE BOEING COMPANY (Boeing)
and CONTINENTAL AIRLINES, INC. (Buyer) relating to Model 757-224
aircraft.
All terms used herein and in the Agreement, and not defined herein,
will have the same meaning as in the Agreement.
If the foregoing accurately reflects your understanding of the
matters treated herein, please indicate your acceptance by signing
below.
Boeing has received and is holding advance payments for Model 737
aircraft to be delivered to Buyer under Purchase Agreement No. 1951
(Advance Payments). In order to complete the delivery of Model 757
aircraft designated as Tab Block ND318, Manufacturer's serial
number 27560, on March 21, 1997, (Aircraft ND318) and in
consideration of Buyer's commitment to pay the balance due at the
time of delivery, Boeing may apply [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.] of the Advance
Payments against the balance due on Aircraft ND318.
Buyer agrees to reimburse Boeing on March 24, 1997, the amount of
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.] plus interest on that amount for the
period between March 21 and March 24, 1997, with the interest to be
calculated as described in paragraph 5 of Letter Agreement 6-1162-
WLJ-375R4.
Very truly yours,
THE BOEING COMPANY
Original signed by:
By Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 21, 1997
CONTINENTAL AIRLINES, INC.
Original signed by:
By Jeffery M. Smisek
Its Executive Vice President and
General Counsel
Exhibit 11.1
Page 1 of 2
CONTINENTAL AIRLINES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months
Ended March 31,
1997 1996
(Unaudited)
Primary:
Weighted average shares outstanding. 56,762,718 52,973,838
Dilutive effect of outstanding
stock options, warrants and
restricted stock grants (as
determined by the application
of the treasury stock method) . . . 7,593,458 11,095,314
Weighted average number of common
shares outstanding, as adjusted . . 64,356,176 64,069,152
Income applicable to common
shares (in millions). . . . . . . . $ 73 $ 87
Per share amount . . . . . . . . . . $ 1.13 $ 1.35
Exhibit 11.1
Page 2 of 2
CONTINENTAL AIRLINES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months
Ended March 31,
1997 1996
(Unaudited)
Fully diluted:
Weighted average shares outstanding. 56,762,718 52,973,838
Dilutive effect of outstanding
stock options, warrants and
restricted stock grants (as
determined by the application
of the treasury stock method) . . . 8,074,494 12,242,754
Dilutive effect of convertible
debentures. . . . . . . . . . . . . - 2,575,330
Dilutive effect of 8-1/2%
convertible trust originated
preferred securities. . . . . . . . 10,332,920 10,332,920
Dilutive effect of 6-3/4%
convertible subordinated notes. . . 7,617,155 502,230
Weighted average number of common
shares outstanding, as adjusted . . 82,787,287 78,627,072
Income applicable to common
shares (in millions). . . . . . . . $ 73 $ 87
Add interest expense associated
with the assumed conversion of
8-1/2% convertible trust
originated preferred securities,
net of federal income tax effect
(in millions) . . . . . . . . . . . 3 6
Add interest expense associated
with the assumed conversion of
6-3/4% convertible subordinated
notes, net of federal income
tax effect (in millions). . . . . . 3 -
Income, as adjusted (in millions). . $ 79 $ 93
Per share amount . . . . . . . . . . $ 0.95 $ 1.18
5
3-MOS
MAR-31-1997
MAR-31-1997
927
0
407
0
118
1574
1754
547
5301
2160
0
47
0
0
659
5301
1698
1698
0
0
1552
0
42
124
46
74
0
0
0
74
1.13
0.95
