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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 17,
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
7.01.
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Regulation FD
Disclosure.
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On March 17, 2009, we will provide an
update for investors presenting information relating to our financial and
operational outlook for the first quarter and full year 2009, as well as 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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March
17, 2009
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By
/s/ John D.
Rainey
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John
D. Rainey
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Vice
President – Financial Planning and Analysis
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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: March 17, 2009
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This
investor update provides information on Continental's guidance for the first
quarter and the full year 2009.
Advanced Booked Seat Factor
(Percentage of Available Seats that are Sold)
Consolidated
domestic bookings for the next six weeks are running 4 - 5 points higher as
compared to the same period as last year. Mainline Latin bookings are
running flat to up 1 point as compared to last year. Transatlantic
bookings are 5 - 6 points ahead of last year. Pacific bookings are
about flat as compared to last year.
For
the first quarter of 2009, the Company expects both its consolidated and
mainline load factors to be down
3
- - 4 points year-over-year (“yoy”).
Largely
as a result of declining business travel, the Company has experienced yoy yield
degradation, which has accelerated sequentially since January 2009 and has
become significant. As a result, yoy revenue per available seat mile
(“RASM”) on both a consolidated and mainline basis has deteriorated, and that
deterioration has accelerated sequentially since January 2009 and has become
significant as well.
Unrestricted Cash, Cash
Equivalents and Short Term Investments Balance
Continental
anticipates ending the first quarter of 2009 with an unrestricted cash, cash
equivalents and short-term investments balance of approximately $2.6
billion.
Cargo, Mail, and Other
Revenue
The
Company's Cargo, Mail, and Other Revenue for the first quarter 2009 is expected
to be between $340 and $350 million.
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2009
Estimate
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Available Seat Miles
(ASMs)
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Year-over-Year %
Change
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1st
Qtr.
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Full
Year
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Mainline
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Domestic
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(12.3)%
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(6
- 7)%
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Latin
America
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1.4%
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0
- 1 %
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Transatlantic
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(2.9)%
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(6
- 7)%
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Pacific
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(10.2)%
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7.5
- 8.5 %
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Total
Mainline
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(7.7)%
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(4
- 5)%
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Regional
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(3.9)%
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(5
- 6)%
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Consolidated
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Domestic
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(10.7)%
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(6
- 7)%
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International
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(3.0)%
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(1
- 2)%
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Total
Consolidated
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(7.3)%
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(4
- 5)%
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Load
Factor
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1st Qtr. 2009
(E)
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Full Year 2009
(E)
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Domestic
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79%
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-
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80%
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82%
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-
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83%
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Latin
America
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78%
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-
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79%
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80%
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-
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81%
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Transatlantic
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66%
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-
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67%
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75%
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-
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76%
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Pacific
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73%
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-
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74%
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74%
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-
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75%
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Total
Mainline
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75%
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-
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76%
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79%
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-
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80%
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Regional
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70%
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-
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71%
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74%
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-
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75%
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Consolidated
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74%
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-
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75%
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79%
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-
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80%
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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
Earlier
this quarter the Company contributed $50 million to its defined benefit pension
plans. Based on the status of the plans as of the beginning of the
most recent plan years, the Company expects to make approximately $75 million in
additional contributions to its defined benefit pension plans during the
remainder of calendar year 2009. However, certain factors, including asset
performance, could result in the Company making additional contributions
beyond the expected $75 million. The Company does not believe, based on
asset performance year to date, that any such additional contributions
would have a material effect on the Company's unrestricted cash
balance.
Continental
estimates that its non-cash pension expense will be approximately $250 million
for 2009. This amount excludes non-cash settlement charges related to
lump-sum distributions. Settlement charges are expected during 2009, but
the Company is not able to estimate the amount of these charges at this
time.
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CASM Mainline
Operating Statistics
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2009 Estimate
(cents)
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1st
Qtr.
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Full
Year
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CASM
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10.60
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-
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10.65
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10.53
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-
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10.58
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Special
Items per ASM
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0.00
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0.00
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CASM
Less Special Items (a)
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10.60
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-
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10.65
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10.53
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-
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10.58
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Aircraft
Fuel & Related Taxes per ASM
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(2.64)
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(2.69)
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CASM
Less Special Items and Aircraft Fuel & Related Taxes
(b)
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7.96
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-
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8.01
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7.84
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-
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7.89
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CASM Consolidated
Operating Statistics
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2009 Estimate
(cents)
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1st
Qtr.
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Full
Year
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CASM
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11.49
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-
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11.54
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11.38
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-
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11.43
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Special
Items per ASM
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0.00
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0.00
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CASM
Less Special Items (a)
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11.49
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-
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11.54
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11.38
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-
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11.43
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Aircraft
Fuel & Related Taxes per ASM
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(2.81)
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(2.88)
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CASM
Less Special Items and Aircraft Fuel & Related Taxes
(b)
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8.68
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-
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8.73
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8.50
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-
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8.55
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Variable
Compensation
In
accordance with the Company's profit sharing plan, to the extent applicable,
profit sharing accruals are accrued each quarter based on the actual cumulative
profits earned year-to-date. For more information regarding this program,
see the Company’s 2008 Form 10-K. Generally, the profit sharing
program provides for a profit sharing pool for eligible employees of 30% of the
first $250 million of annual pre-tax income, 25% of the next $250 million, and
20% thereafter (with certain adjustments to pre-tax income as defined in the
profit sharing program).
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
$10.02 on February 27, 2009 was used in estimating the expense impact of the
awards for the Company's 2009 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
February 27, 2009 will result in an increase or decrease of approximately $2
million in Wages, Salaries, and Related Costs attributable to the awards to be
recognized in the first quarter 2009. For more information regarding
these awards, including performance periods and how the Company accrues for the
awards, see the Company's 2008 Form 10-K.
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Fuel
Requirements (Gallons)
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2009
Estimate
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1st
Qtr.
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Full
Year
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Mainline
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333
million
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1400
million
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Regional
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71
million
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292
million
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Mainline
Fuel Price per Gallon (including
fuel taxes and impact of hedges)
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$1.85
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$1.89
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Fuel Hedges - As of March
13, 2009
As
of March 13, 2009, the Company's projected consolidated fuel requirements were
hedged as follows, excluding recently terminated contracts with Lehman
Brothers:
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Maximum
Price
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Minimum
Price
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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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First Quarter
2009
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WTI
crude oil call options
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26%
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$2.54
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N/A
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N/A
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WTI
crude oil
swaps
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20%
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1.09
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20%
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$1.09
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WTI
crude oil
collars
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11%
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3.32
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11%
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2.39
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Total
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57%
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31%
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Second Quarter
2009
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WTI
crude oil
collars
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34%
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$3.48
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34%
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$2.61
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Total
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34%
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34%
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||||||
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Third Quarter
2009
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WTI
crude oil
swaps
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5%
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$1.31
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5%
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$1.31
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WTI
crude oil
collars
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10%
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3.21
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10%
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2.40
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Total
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15%
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15%
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Fourth Quarter
2009
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||||||||
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WTI
crude oil
swaps
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5%
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$1.36
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5%
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$1.36
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||||
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Total
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5%
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5%
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||||||
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Full Year
2009
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||||||||
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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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||||
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WTI
crude oil
swaps
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7%
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1.17
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7%
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$1.17
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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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Total
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27%
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21%
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Based
on the forward curve for WTI as of March 13, 2009, the Company estimates that
all of its fuel hedges (including the impact of residual unrecognized loss on
the fuel hedges with Lehman Brothers) would result in a net increase in fuel
expense of $0.36 per gallon in the first quarter 2009 and $0.27 per gallon for
the full year 2009. For the un-hedged portion of its consolidated fuel
requirements, the Company is assuming an average cost of jet fuel (including
fuel taxes) of $1.49 for the first quarter and $1.62 for the full year
2009.
The
Company has no fuel hedge contracts beyond 2009.
As
of March 13, 2009 the Company had $177 million posted with its fuel hedge
counterparties in the form of cash and an additional $63 million
secured by one 777-200 aircraft and one 757-200 aircraft.
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Selected Expense
Amounts
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2009 Estimated Amounts
($Millions)
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1st
Qtr.
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Full
Year
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Aircraft
Rent
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$236
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$928
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Depreciation
& Amortization
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$111
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$480
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Net
Interest Expense*
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$81
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$337
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*Net
Interest Expense includes interest expense, capitalized interest and
interest income.
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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. The Company previously recorded the maximum
available deferred tax benefit permitted by its prior net deferred tax liability
position. Subsequent losses will generally not be benefitted until the
Company re-establishes a net deferred tax liability. Subsequent pretax
income, when considered along with subsequent other comprehensive income, will
generally not carry tax expense until the Company exhausts its beginning
unbenefitted net deferred tax assets via release of valuation
allowance.
Debt and Capital
Leases
As
of March 17, 2009, scheduled debt and capital lease payments for the full year
2009 are estimated to total $536 million, with approximately $94 million, $44
million, $339 million and $59 million to be paid in the first, second, third and
fourth quarters of 2009, respectively.
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Cash Capital
Expenditures ($Millions)
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2009
Estimate
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Fleet
Related
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$210
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Non-Fleet
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210
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Rotable
Parts & Capitalized Interest
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55
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Total
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$475
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Net
Purchase Deposits Paid/(Refunded)
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13
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Total
Cash Capital Expenditures
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$488
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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:
First
Quarter 2009 (Millions)
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Quarterly
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Number
of Shares
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Interest addback (net
of applicable profit
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Earnings
Level
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Basic
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Diluted
|
sharing and income
taxes impact)
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Over
$78
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123
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136
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$6
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Between
$49 - $78
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123
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132
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$3
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Under
$49
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123
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123
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--
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Net
Loss
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123
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123
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--
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Full
Year 2009 (Millions)
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Year-to-date
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Number
of Shares
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Interest addback (net
of applicable profit
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|
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Earnings
Level
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Basic
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Diluted
|
sharing and income
taxes impact)
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Over
$243
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124
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137
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$19
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Between
$157 - $243
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124
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133
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$11
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Under
$157
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124
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124
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--
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Net
Loss
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124
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124
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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 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 2008 Form 10-K and its other securities
filings, including any amendments thereto, which identify important matters such
as the significant volatility in the cost of aircraft fuel, its transition to a
new global alliance, the consequences of its high leverage and other significant
capital commitments, its high labor and pension costs, delays in scheduled
aircraft deliveries, 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 recession in the U.S.
and global economies, the airline pricing environment, terrorist attacks,
regulatory matters, excessive taxation, industry consolidation, the availability
and cost of insurance, public health threats 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.