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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): December 11,
2008
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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
7.01.
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Regulation FD
Disclosure.
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On December 11, 2008, we will
provide an update for investors presenting information relating to our financial
and operational outlook for the fourth quarter 2008 and other
information. The update is furnished herewith as Exhibit 99.1 and is
incorporated herein 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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Investor
Update
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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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December
10, 2008
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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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Investor
Update
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 |
Exhibit
99.1
DeAnne
Gabel
Director
- Investor Relations
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Investor
Update
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Issue
Date: December 11, 2008
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This
investor update provides information on Continental's guidance for the fourth
quarter and full year 2008.
Advanced Booked Seat
Factor
The
Company is comfortable with its advanced booked seat factor (the percentage of
available seats that are sold) levels for the next six weeks. Consolidated
domestic bookings for the next six weeks are running 2 - 3 points higher as
compared to last year. Mainline Latin bookings are running 1 - 2
points ahead of last year. Transatlantic bookings are about flat as
compared to last year. Pacific bookings are running 2 - 3 points
behind last year.
For the
fourth quarter, the Company expects both consolidated and mainline load factors
to be down about 1 point yoy.
Targeted Unrestricted Cash,
Cash Equivalents and Short Term Investments Balance
Continental
anticipates ending the fourth quarter of 2008 with an unrestricted cash, cash
equivalents and short-term investments balance of approximately $2.6
billion. This balance includes the remaining $92 million of
student-loan related auction rate securities that were classified as long-term
investments at the end of the third quarter but have since been reclassified as
unrestricted short-term investments.
Cargo, Mail, and Other
Revenue
The
Company's Cargo, Mail, and Other Revenue for the fourth quarter 2008 is expected
to be between $360 and $370 million.
Other Non-Operating
Income/(Expense), net
With
the recent decline in the value of many foreign currencies against the US
dollar, the company is expecting to record a foreign exchange loss in the fourth
quarter. Declines primarily in the euro, British pound, Canadian dollar
and Brazilian real against the US dollar have resulted in losses on
foreign-denominated cash and other receivables related to our operations in
those areas of the world. For October and November 2008, these foreign
currency losses totaled approximately $25 million. The Company could
experience additional foreign exchange losses in December if the US dollar
continues to strengthen against these and other currencies.
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Available Seat Miles
(ASMs)
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2008
Estimate
Year-over-Year %
Change
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4th Qtr.(E)
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||||
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Mainline
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||||
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Domestic
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(11.5)%
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Latin
America
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(3.8)%
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Transatlantic
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(1.5)%
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Pacific
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(11.0)%
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Total
Mainline
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(8.0)%
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Regional
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(1.0)%
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Consolidated
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||||
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Domestic
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(9.6)%
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|||
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International
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(4.1)%
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Total
Consolidated
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(7.2)%
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For the
full year 2009, Continental expects its mainline capacity to be down between 1%
to 3% yoy, with its mainline domestic capacity expected to be down 4% to 6%
yoy.
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Load
Factor
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2008
Estimate
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4th Qtr.(E)
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Domestic
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81
- 82%
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Latin
America
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78
- 79%
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Transatlantic
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74
- 75%
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Pacific
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73
- 74%
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Total
Mainline
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78
- 79%
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Regional
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74
- 75%
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Consolidated
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78
- 79%
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Continental's
month-to-date consolidated load factor is updated daily and can be found on
continental.com on the Investor Relations page under the About Continental
menu.
Pension Expense and
Contributions
Year-to-date,
the Company has contributed $102 million to its defined
benefit pension plans, satisfying the Company's minimum required contributions
during calendar year 2008. The Company does not plan to make additional
contributions this year.
Continental
estimates that its non-cash pension expense will be approximately $102 million
for 2008, which includes non-cash settlement charges related to lump sum
distributions from the pilots’ frozen defined benefit pension plan for the nine
months ending September 30, 2008. Settlement charges are also
expected for the fourth quarter 2008, but the Company is not able at this time
to estimate the amount of these charges.
Due to
the significant decline in the aggregate value of the assets held by the trust
for its defined benefit pension plans since December 2007, the Company now
estimates that its minimum funding requirements with respect to its defined
benefit pension plans will be greater than what it had previously
disclosed. Based on recent performance, the Company estimates that its
minimum funding requirements for 2009 will be approximately $110 million.
This amount represents the Company's estimate of the minimum funding
requirements as determined by government regulations and is subject to change
based on numerous assumptions, including the performance of the assets in the
plans. See "Critical Accounting Policies and Estimates" in Part II, Item 7
of the Company's 2007 Form 10-K for a discussion of its assumptions regarding
its pension plans.
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Mainline Operating
Statistics
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2008 Estimate
(cents)
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4th Qtr.(E)
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CASM
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12.19
- 12.24
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Special
Items per ASM
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-
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CASM
Less Special Items (a)
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12.19
- 12.24
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Aircraft
Fuel & Related Taxes per ASM
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(4.34)
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CASM
Less Special Items and Aircraft Fuel & Related Taxes
(b)
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7.85
- 7.90
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Consolidated Operating
Statistics
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2008 Estimate
(cents)
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4th Qtr.(E)
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CASM
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13.17
- 13.22
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Special
Items per ASM
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-
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CASM
Less Special Items (a)
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13.17
- 13.22
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Aircraft
Fuel & Related Taxes per ASM
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(4.66)
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CASM
Less Special Items and Aircraft Fuel & Related Taxes
(b)
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8.51
- 8.56
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The
Company anticipates that it will record additional special charges in the fourth
quarter of 2008 and beyond in conjunction with the previously announced capacity
reductions for future costs, including future lease costs on aircraft that may
be permanently grounded. The Company is not able at this time to
estimate the amount and timing of these charges.
Variable
Compensation
Continental
has granted profit based restricted stock unit ("RSU") awards pursuant to its
Long-Term Incentive and RSU Program. Expense for these awards is
recognized ratably over the required service period, with changes in the price
of the Company's common stock and the payment percentage (which is tied to
varying levels of cumulative profit sharing), resulting in a corresponding
increase or decrease in "Wages, Salaries, and Related Costs" in the Company's
consolidated statements of operations. The closing stock price of
$14.68 on November 28, 2008 was used in estimating the expense impact of the
awards for the Company's 2008 cost estimates included herein. Based on the
Company's current assumptions regarding payment percentages and the cumulative
profit sharing targets to be achieved pursuant to the awards, the Company
estimates that a $1 increase or decrease in the price of its common stock from
November 28, 2008 will result in an increase or decrease of approximately $3
million in Wages, Salaries, and Related Costs attributable to the awards to be
recognized in the fourth quarter 2008. For more information regarding
these awards, including performance periods and how the Company accrues for the
awards, please see the Company's 2007 Form 10-K.
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Fuel Gallons
Consumed
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2008
Estimate
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4th Qtr.(E)
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Mainline
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339
Million
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Regional
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73
Million
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Mainline
Fuel Price per Gallon (including
fuel taxes and impact of hedges)
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$3.00
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Fuel Hedges - As of December
11, 2008
As of
December 11, 2008, the Company's projected consolidated fuel requirements were
hedged as follows, excluding contracts with a bankrupt
counterparty:
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Maximum
Price
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Minimum
Price
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|||||||
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%
of
Expected
Consumption
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Weighted
Average Price (per gallon)
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%
of
Expected
Consumption
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Weighted
Average
Price
(per
gallon)
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|||||
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Fourth Quarter
2008
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||||||||
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WTI
crude oil
collars
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31%
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$3.44
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31%
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$2.82
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WTI
crude oil call options
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23
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3.21
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N/A
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N/A
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Heating
oil
collars
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4
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3.96
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4
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3.62
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Total
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58%
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35%
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||||||
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2009
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||||||||
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WTI
crude oil
collars
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14%
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$3.40
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14%
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$2.53
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WTI
crude oil call options
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6
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2.54
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N/A
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N/A
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WTI
swaps
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2
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1.33
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N/A
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N/A
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Total
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22%
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14%
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||||||
For the
un-hedged portion of its consolidated fuel requirements for 2008, the Company is
assuming an average cost of jet fuel (including fuel taxes) of $2.01 for the
fourth quarter.
As of
December 9, 2008 the Company had $154 million of cash collateral posted with its
fuel hedge counterparties.
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Selected Expense
Amounts
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2008 Estimated Amounts
($Millions)
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4th Qtr.(E)
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Aircraft
Rent
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$240
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Depreciation
& Amortization
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$111
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Net
Interest Expense*
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$80
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*Net
Interest Expense includes interest expense, capitalized interest and interest
income.
Continental Airlines, Inc.
Tax Computation
The
Company's ability to record a tax benefit on net losses is limited by its net
deferred tax position. During the first three quarters of 2008, the
Company recorded the maximum available deferred tax benefit permitted by its
opening net deferred tax liability position. Subsequent losses will
generally not be benefitted until the Company re-establishes a net deferred tax
liability.
Debt and Capital
Leases
The
Company estimates that its scheduled debt and capital lease principal payments
for the full year 2008 will be $700 million, with approximately $304 million to
be paid in the fourth quarter of 2008.
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Cash Capital
Expenditures (in millions)
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2008
Estimate
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Fleet
Related
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$187
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Non-Fleet
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270
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Rotable
Parts & Capitalized Interest
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61
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Total
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$518
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Net
Purchase Deposits Paid/(Refunded)
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(99)
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Total
Cash Capital Expenditures
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$419
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EPS Estimated Share
Count
Share
count estimates for calculating basic and diluted earnings per share at
different income levels are as follows:
Fourth
Quarter 2008 (Millions)
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Quarterly
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Number
of Shares
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Earnings Level
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Basic
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Diluted
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Interest addback (net of applicable profit sharing
and income taxes impact)
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Over
$112
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113
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127
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$6
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Between
$30 - $112
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113
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123
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$2
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Under
$30
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113
|
115
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--
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Net
Loss
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113
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113
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--
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Full
Year 2008 (Millions)
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Year-to-date
|
Number
of Shares
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||
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Earnings Level
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Basic
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Diluted
|
Interest addback (net of applicable profit sharing
and income taxes impact)
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Over
$315
|
105
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120
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$18
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Between
$84 - $315
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105
|
116
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$7
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Under
$84
|
105
|
107
|
--
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Net
Loss
|
105
|
105
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--
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These
share count charts are based upon several assumptions including market stock
price and number of shares outstanding. The number of shares used in
the actual EPS calculation will likely be different than those set forth
above.
(a)
These financial measures provide management and investors the ability to measure
and monitor Continental's performance on a consistent basis.
(b) Cost
per available seat mile excluding special items, fuel, and related taxes is
computed by multiplying fuel price per gallon, including fuel taxes, by fuel
gallons consumed and subtracting that amount from operating expenses excluding
special items 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 Continental's
control.
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 2007 Form 10-K and its
other securities filings, including any amendments thereto, which identify
important matters such as the consequences of the Company's high leverage, the
significant volatility in the cost of aircraft fuel, its transition to a new
global alliance, delays in scheduled aircraft deliveries, its high labor and
pension costs, service interruptions at one of its hub airports, disruptions to
the operations of its regional operators, disruptions in its computer systems,
and industry conditions, including the airline pricing environment, industry
capacity decisions, industry consolidation, terrorist attacks, regulatory
matters, excessive taxation, the availability and cost of insurance, public
health threats, an economic downturn in the U.S. and global economies and the
seasonal nature of the airline business. The Company undertakes 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, except as required
by applicable law.
Fleet
News
Continental
Airlines Fleet Plan
Includes
Aircraft Operated by the Company or Operated on the
Company's
Behalf Under a Capacity Purchase Agreement
December
11, 2008
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Net
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Net
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Net
|
|||||
|
Total
@
|
Changes
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Total
@
|
Changes
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Total
@
|
Changes
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Total
@
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9/30/08
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4Q08E
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YE
2008E
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2009E
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YE
2009E
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2010E
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YE
2010E
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Mainline Jets
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|||||||
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777-200ER*
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20
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-
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20
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-
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20
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2
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22
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787-8
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-
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-
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-
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-
|
-
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-
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-
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767-400ER
|
16
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-
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16
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-
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16
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-
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16
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767-200ER
|
10
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-
|
10
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-
|
10
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-
|
10
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757-300
|
17
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-
|
17
|
1
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18
|
3
|
21
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757-200
|
41
|
-
|
41
|
-
|
41
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-
|
41
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737-900ER*
|
15
|
2
|
17
|
13
|
30
|
12
|
42
|
|
737-900
|
12
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-
|
12
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-
|
12
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-
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12
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737-800*
|
115
|
1
|
116
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1
|
117
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-
|
117
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737-700
|
36
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-
|
36
|
-
|
36
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-
|
36
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737-300**
|
26
|
(3)
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23
|
(23)
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-
|
-
|
-
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|
737-500**
|
43
|
-
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43
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(8)
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35
|
-
|
35
|
|
Total
Mainline
|
351
|
-
|
351
|
(16)
|
335
|
17
|
352
|
|
Regional
|
|||||||
|
ERJ-145
|
224
|
10
|
234
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-
|
234
|
(10)
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224
|
|
CRJ200LR
|
24
|
(7)
|
17
|
(10)
|
7
|
(7)
|
-
|
|
Q400
|
15
|
-
|
15
|
-
|
15
|
-
|
15
|
|
Q200
|
16
|
-
|
16
|
-
|
16
|
-
|
16
|
|
Total
Regional
|
279
|
3
|
282
|
(10)
|
272
|
(17)
|
255
|
|
Total
Count
|
630
|
3
|
633
|
(26)
|
607
|
-
|
607
|
|
*Final
mix of new 737-800/-900ERs is subject to change.
|
|||||||
|
**Final
mix and quantity of 737-300 / 737-500 exits are subject to
change.
|
|||||||