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UNITED STATES |
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SECURITIES AND EXCHANGE COMMISSION |
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Washington, D.C. 20549 |
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FORM 8-K |
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CURRENT REPORT PURSUANT |
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TO SECTION 13 OR 15(d) OF THE |
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SECURITIES EXCHANGE ACT OF 1934 |
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Date of Report (Date of earliest event reported): March 8, 2006 |
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CONTINENTAL AIRLINES, INC. |
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(Exact Name of Registrant as Specified in Its Charter) |
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DELAWARE |
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(State or Other Jurisdiction of Incorporation) |
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1-10323 |
74-2099724 |
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(Commission File Number) |
(IRS Employer Identification No.) |
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1600 Smith Street, Dept. HQSEO, Houston, Texas |
77002 |
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(Address of Principal Executive Offices) |
(Zip Code) |
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(713) 324-2950 |
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(Registrant's Telephone Number, Including Area Code) |
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______________________________________ |
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(Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act |
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(17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act |
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(17 CFR 240.13e-4(c)) |
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Item 7.01. Regulation FD Disclosure.
On March 8, 2006, we provided an update for investors presenting information relating to our financial and operational outlook for the first quarter and full year 2006, as well as other information. The letter is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
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99.1 |
Investor Update |
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SIGNATURE |
Pursuant to the requirements of the Securities Exchange Act of 1934, Continental Airlines, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CONTINENTAL AIRLINES, INC. |
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March 8, 2006 |
By /s/ Jennifer L. Vogel
Jennifer L. Vogel
Senior Vice President, General Counsel, Secretary and Corporate Compliance Officer
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EXHIBIT INDEX |
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99.1 |
Investor Update |
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Investor Update |
Issue Date: March 8, 2006 |
Continental has recently received two prestigious awards directly attributable to its premium product, outstanding employees, and outstanding operational integrity. In early March, the Company was again ranked the top global airline on FORTUNE magazine's annual airline industry list of Most Admired Global Companies. Continental ranked number one in eight of the nine categories measured. This is the third year that Continental has topped that list. Additionally, the Company was rated the most admired U.S. airline on FORTUNE magazine's America's Most Admired Companies airline industry list. The America's Most Admired Companies airline industry list surveys eight areas. Continental was number one in quality of management, quality of products and services, innovation, and social responsibility. These awards are a direct reflection of Continental's employees, who are truly the reason for the Company's success, despite the challenges facing the industry.
As previously announced, Continental expects to record a significant loss for the first quarter of 2006.
Advanced Bookings - Six Week Outlook
Mainline advanced bookings continue to be a bit softer than last year but the Company is comfortable that the gap will close and the mainline load factor for the first quarter will be about flat year-over-year ("yoy"). Continental is seeing many customers book closer to the date of travel, as the many advantages of booking early have been eroded by changes in competitors' fare rules and pricing actions.
Continental expects mainline Domestic first quarter load factor will be up 1.5-2.5 points yoy on 5.5% more capacity yoy, with strong yoy yield improvements.
For the first quarter, the mainline Transatlantic load factor is expected to be down about 3 points yoy on a capacity increase of about 22.5% yoy, with strong yoy yield improvements expected.
Mainline Latin load factor for the first quarter is expected to be about flat yoy on a capacity increase of 9.5%, with solid yoy yield improvements expected.
Mainline Pacific first quarter load factor is expected to be down about 1.5-2.5 points yoy on a capacity increase of about 16% yoy, with yields expected to be down slightly yoy.
Regional first quarter load factor is expected to be up 3-4 points on a capacity increase of 12.4% yoy, with strong yoy yield improvements expected.
Cargo, Mail and Other Revenue
Continental estimates cargo, mail and other revenue will be approximately $255 million for the first quarter 2006.
Debt and Capital Leases
Debt and capital lease principal payments for the first quarter 2006 are estimated to be approximately $81 million.
Fuel Hedges
Continental has recently entered into petroleum swap contracts to hedge a minimal portion of our projected 2006 fuel requirements.
Tax Sharing Agreement with ExpressJet Holdings, Inc.
Continental expects to record income of approximately $26 million for the full year 2006 (approximately $6.5 million per quarter) related to the tax sharing agreement with ExpressJet. For more information regarding this tax sharing agreement, please see our 2005 Form 10-K.
Targeted Cash Balance
Continental anticipates ending the first quarter 2006 with an unrestricted cash and short-term investments balance of between $1.9 and $2.0 billion.
Operating Statistics
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2006 Estimated |
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ASMs (Available Seat Miles) |
1st Qtr.(E) |
Full Year(E) |
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Domestic |
5.5% |
4.7% |
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2006 Estimate |
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Load Factor |
1st Qtr.(E) |
Full Year(E) |
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Continental |
77 - 78% |
80 - 81% |
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2006 Estimate (cents) |
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Mainline Operating Statistics |
1st Qtr.(E) |
Full Year(E) |
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CASM |
10.34 - 10.39 |
10.38 - 10.43 |
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2006 Estimate (cents) |
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Consolidated Operating Statistics * |
1st Qtr.(E) |
Full Year(E) |
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CASM |
11.22 - 11.27 |
11.23 - 11.28 |
*Consolidated is defined as mainline plus regional.
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2006 Estimate |
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Fuel Gallons Consumed |
1st Qtr.(E) |
Full Year(E) |
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Mainline |
346 Million |
1,452 Million |
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2006 Estimated Amounts ($Millions) |
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Selected Expense Amounts |
1st Qtr.(E) |
Full Year(E) |
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Aircraft Rent |
$245 |
$996 |
Due to accumulated losses, Continental has stopped recording income tax benefit on current and future book losses.
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2006 Estimate |
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Fleet Related* |
$155 |
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*The $72 million increase from the Investor Update release January 17, 2006, in Fleet Related Cash Capital Expenditures is primarily related to acceleration of winglet instillations.
EPS Estimated Share Count
Share count estimates for calculating basic and diluted earnings per share at different income levels are as follows:
First Quarter 2006 (Millions)
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Quarterly |
Number of Shares |
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Earnings Level |
Basic |
Diluted |
Interest Addback |
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Over $93 |
86.6 |
111.3 |
$8.5 |
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Year-to-Date |
Number of Shares |
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Earnings Level |
Basic |
Diluted |
Interest Addback |
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Over $249 |
87.9 |
110.2 |
$23.0 |
This update contains forward-looking statements that are not limited to historical facts, but reflect the company's current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in the company's 2005 10-K and its other securities filings, including any amendments thereto, which identify important matters such as the consequences of its significant financial losses and high leverage, terrorist attacks, domestic and international economic conditions, the significant cost of aircraft fuel, labor costs, competition, and industry conditions, including the demand for air travel, the airline pricing environment and industry capacity decisions, regulatory matters and the seasonal nature of the airline business. The company undertak es no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this update.
[tables attached]
Reconciliation of GAAP to Non-GAAP Financial Information
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Mainline |
1st Qtr. Range(E) |
Full Year Range(E) |
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Operating Expenses - GAAP |
$ 2,377 |
$ 2,389 |
$ 10,059 |
$ 10,108 |
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Special Items |
- |
- |
- |
- |
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Operating Expenses Excluding Special |
$ 2,377 |
$ 2,389 |
$ 10,059 |
$ 10,108 |
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Aircraft Fuel & Related Taxes |
(657) |
(657) |
(2,948) |
(2,948) |
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Operating Expenses Excluding Special Items and Aircraft Fuel & Related Taxes - Non-GAAP (a) |
$ 1,720 |
$ 1,732 |
$ 7,111 |
$ 7,160 |
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ASMs (millions) |
22,992 |
22,992 |
96,910 |
96,910 |
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Mainline CASM (cents) |
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CASM-GAAP |
10.34 |
10.39 |
10.38 |
10.43 |
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Special Items |
- |
- |
- |
- |
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CASM Excluding Special Items - |
10.34 |
10.39 |
10.38 |
10.43 |
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Aircraft Fuel & Related Taxes per ASM |
2.86 |
2.86 |
3.04 |
3.04 |
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CASM Excluding Special Items and Aircraft Fuel & Related Taxes - Non-GAAP (a) |
7.48 |
7.53 |
7.34 |
7.39 |
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Consolidated (Mainline plus Regional) |
1st Qtr. Range(E) |
Full Year Range(E) |
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Operating Expenses - GAAP |
$ 2,925 |
$ 2,938 |
$ 12,381 |
$ 12,436 |
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Special Items |
- |
- |
- |
- |
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Operating Expenses Excluding Special |
$ 2,925 |
$ 2,938 |
$ 12,381 |
$ 12,436 |
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Aircraft Fuel & Related Taxes |
(800) |
(800) |
(3,615) |
(3,615) |
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Operating Expenses Excluding Special Items and Aircraft Fuel & Related Taxes - Non-GAAP (a) |
$ 2,125 |
$ 2,138 |
$ 8,766 |
$ 8,821 |
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ASMs (millions) |
26,072 |
26,072 |
110,250 |
110,250 |
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Consolidated CASM (cents) |
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CASM-GAAP |
11.22 |
11.27 |
11.23 |
11.28 |
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Special Items |
- |
- |
- |
- |
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CASM Excluding Special Items - |
11.22 |
11.27 |
11.23 |
11.28 |
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Aircraft Fuel & Related Taxes per ASM |
3.07 |
3.07 |
3.28 |
3.28 |
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CASM Excluding Special Items and Aircraft Fuel & Related Taxes - Non-GAAP (a) |
8.15 |
8.20 |
7.95 |
8.00 |
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(a) Cost per available seat mile excluding fuel, related taxes and special items is computed by multiplying fuel price per gallon, including fuel taxes, by fuel gallons consumed and subtracting that amount from operating expenses then dividing by available seat miles. This statistic provides management and investors the ability to measure and monitor Continental's cost performance absent special items and fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors and therefore are beyond our control.