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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): January 21,
2009
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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
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74-2099724
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(Commission
File Number)
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(IRS
Employer Identification No.)
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1600
Smith Street, Dept. HQSEO, Houston, Texas
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77002
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(Address
of Principal Executive Offices)
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(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)
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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
2.02.
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Results of Operations
and Financial
Condition.
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On January 21, 2009, the Company issued
a press release detailing certain fourth quarter and full year 2008 special
items. This press release is furnished herewith as Exhibit 99.1 and
incorporated in this Item 2.02 by reference.
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Item
9.01.
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Financial Statements
and Exhibits.
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(d)
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Exhibits
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99.1
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Press
Release
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SIGNATURE
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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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January
21, 2009
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By
/s/ Lori A.
Gobillot
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Lori
A. Gobillot
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Staff
Vice President and Assistant General
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Counsel
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EXHIBIT
INDEX
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99.1
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Press
Release
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News
Release
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Exhibit
99.1
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Contact:
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Corporate
Communications
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Houston:
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713.324.5080
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Email:
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corpcomm@coair.com
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News
archive:
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continental.com/company/news/
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Address:
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P.O.
Box 4607, Houston,
TX 77210-4607
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CONTINENTAL AIRLINES SUMMARIZES SPECIAL
CHARGES FOR THE
FOURTH QUARTER AND FULL YEAR 2008
HOUSTON,
Jan. 21, 2009 -- Continental Airlines (NYSE: CAL) expects to record several
special items during the fourth quarter of 2008 totaling $170 million of expense
($234 million of expense for the full year 2008). Special gains
(charges) for the three months ending Dec. 31, 2008, and for full year 2008, are
as follows (in millions):
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Three
Months Ended
Dec. 31, 2008
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Year Ended
Dec. 31, 2008
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Pension
plan settlement charges
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$ (44)
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$ (52)
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Aircraft
related charges, net of gains on sales
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5
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(40)
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Severance
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(1)
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(34)
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Route
impairment and other
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-
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(55)
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Subtotal
operating special charges
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$ (40)
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$(181)
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Loss
on fuel contract with bankrupt counterparty
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$(125)
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$(125)
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Gain
on sale of COPA Holdings
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-
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78
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Write-down
in value of auction rate securities, net
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(5)
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(34)
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Subtotal
non-operating special items
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$(130)
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$ (81)
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Income
tax credit
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-
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28
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Total
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$(170)
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$(234)
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Pension plan settlement
charges. The pension plan settlement charges relate to lump-sum
distributions from Continental’s pilot-only frozen defined benefit plan as a
result of a number of retirements from the capacity reductions in 2008.
Statement of Financial Accounting Standards No. 88, “Employer’s Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits,” requires the use of settlement accounting if, for a given
year, lump sum distributions exceed the total of the service cost and interest
cost components of current year’s pension expense for the plan. Under settlement
accounting, unrecognized plan gains or losses must be recognized in the current
period in proportion to the percentage reduction of the plan’s projected benefit
obligation from these lump sum distributions. Continental recognized $44 million
and $52 million of unrecognized plan losses for the fourth quarter and full year
2008, respectively.
Aircraft related charges,
net of gains on sales. Continental announced a decision in
June 2008 to retire all of its Boeing 737-300 aircraft and a significant portion
of its Boeing 737-500 aircraft by the end of 2009. During the fourth
quarter, the company sold two owned 737-500 aircraft and arranged for the sale
of three other 737-500 leased aircraft for a net gain of $7
million. This gain was partially offset by a $2 million charge for
future lease costs associated with one 737-300 leased aircraft that was
permanently grounded in the fourth quarter, as well as other settlements on
grounded aircraft, which resulted in a net special gain of $5 million for the
quarter. For the full year 2008, the net special charge consists of
$37 million of impairment of owned 737-300 and 737-500 aircraft and related
assets, a non-cash charge of $14 million to write down spare parts and supplies
for the related fleets to the lower of cost or net realizable value, and $14
million of charges for future lease costs on permanently grounded 737-300
aircraft, partially offset by $25 million of gains on the sale of ten 737-500
aircraft.
Severance. In
conjunction with the company’s capacity reductions announced in June 2008,
Continental incurred $34 million in costs for severance and continuing medical
coverage benefits for employees accepting early retirement packages or
company-offered leaves of absence during 2008 ($1 million of which was recorded
during the fourth quarter of 2008). Approximately 3,000 positions
were eliminated as a result of the capacity reductions, the majority of which
were implemented in September 2008.
Impairment and
other. During the full year 2008, the company also recorded
$55 million of special charges, which included an $18 million non-cash charge to
write off an intangible route asset as a result of its decision to move its
London-Newark Liberty flights from London Gatwick Airport to London Heathrow
Airport, $14 million of charges related to future rents for leased space at
locations that are no longer expected to be used or subleased, a $9 million
charge for reimbursements to ExpressJet of certain costs related to capacity
reductions, and $14 million of other one-time costs.
Loss on fuel contracts with
bankrupt counterparty. The parent company of one of the
counterparties to several of the company’s fuel derivative contracts declared
bankruptcy on Sept. 15, 2008 (and the counterparty subsequently declared
bankruptcy on Oct. 3,
2008). The derivative contracts with this counterparty largely
consisted of crude oil collars (comprised of option contracts with both call and
put options) that extended through March 2009. The company determined
that its fuel derivative contracts with this counterparty were no longer
considered highly-effective hedges and has recorded subsequent changes in the
fair value of the contracts since that determination date (of Sept. 15, 2008) as
part of nonoperating income (expense). The total amount of the loss
recorded during the fourth quarter as a result of changes to the fair value of
the contracts was $125 million. In January of 2009, Continental
terminated all the derivative contracts with this bankrupt
counterparty.
Gain on sale of COPA
Holdings. Continental sold all of its remaining interest in
Copa Holdings, S.A. in May 2008 for net proceeds of $149 million and recognized
a gain of $78 million.
Write-down in value of
auction rate securities, net. Continental recorded a loss of
$60 million during 2008 ($31 million during the fourth quarter) to reflect an
other-than-temporary decline in the value of company-held student loan related
auction rate securities. Separately, during the fourth quarter, one
institution granted Continental a put right permitting the company to sell its
auction rate securities with a par value of $125 million in 2010 at their full
par value. The company recorded a gain of $26 million during the
fourth quarter for this put right. The write-down, net of the gain on
the put right, was $5 million during the fourth quarter and $34 million for the
full year 2008.
Income tax
credit. During the three months ended June 30, 2008,
Continental recorded a non-cash income tax credit of $28 million resulting from
the higher utilization of net operating loss carryforwards than had previously
been anticipated.
Continental
will conduct a quarterly telephone briefing to discuss the fourth quarter and
full year 2008 results and the company’s financial and operating outlook with
the financial community and news media on Jan. 29, 2008, at 9:30 a.m. CT/ 10:30
a.m. ET.
Corporate
Background
Continental
Airlines is the world’s fifth largest airline. Continental, together with
Continental Express and Continental Connection, has more than 2,800 daily
departures throughout the Americas, Europe and Asia, serving 135 domestic and
132 international destinations. More than 675 additional points are served via
alliance partners. With more than 42,000 employees, Continental has hubs serving
New York, Houston, Cleveland and Guam, and together with Continental Express,
carries approximately 67 million passengers per year. Continental consistently
earns awards and critical acclaim for both its operation and its corporate
culture. For more company information, visit continental.com.
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