UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549

                            FORM 10-Q

(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

          FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

                               OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

     FOR THE TRANSITION PERIOD FROM __________ TO __________

                  Commission File Number 0-9781

                   CONTINENTAL AIRLINES, INC.
     (Exact name of registrant as specified in its charter)

          Delaware                              74-2099724
  (State or other jurisdiction               (I.R.S. Employer
of incorporation or organization)           Identification No.)

                 1600 Smith Street, Dept. HQSEO
                      Houston, Texas  77002
            (Address of principal executive offices)
                           (Zip Code)

                          713-324-2950
      (Registrant's telephone number, including area code)

     Indicate by check mark whether registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.  Yes  X   No _____

                         _______________

As of July 16, 1999, 11,406,580 shares of Class A common stock and
61,079,850 shares of Class B common stock were outstanding.


                PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.


                   CONTINENTAL AIRLINES, INC.
              CONSOLIDATED STATEMENTS OF OPERATIONS
              (In millions, except per share data)

Three Months Six Months Ended June 30, Ended June 30, 1999 1998 1999 1998 (Unaudited) (Unaudited) Operating Revenue: Passenger . . . . . . . $2,028 $1,888 $3,928 $3,602 Cargo and mail. . . . . 70 68 137 136 Other . . . . . . . . . 100 80 189 152 2,198 2,036 4,254 3,890 Operating Expenses: Wages, salaries and related costs. . . . . 622 521 1,238 1,018 Aircraft rentals. . . . 189 162 373 318 Maintenance, materials and repairs. . . . . . 155 152 298 305 Aircraft fuel . . . . . 154 183 304 373 Commissions . . . . . . 142 152 285 293 Other rentals and landing fees . . . . . 121 99 235 200 Depreciation and amortization . . . . . 88 72 173 140 Other . . . . . . . . . 471 415 932 813 1,942 1,756 3,838 3,460 Operating Income . . . . 256 280 416 430 Nonoperating Income (Expense): Interest expense. . . . (57) (44) (110) (84) Interest capitalized. . 16 15 29 28 Interest income . . . . 15 14 30 26 Other, net. . . . . . . (4) 10 9 12 (30) (5) (42) (18)
(continued on next page) CONTINENTAL AIRLINES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions of dollars, except per share data)
Three Months Six Months Ended June 30, Ended June 30, 1999 1998 1999 1998 (Unaudited) (Unaudited) Income before Income Taxes, Cumulative Effect of a Change in Accounting Principle and Extraordinary Charge. . . . . . . . . $ 226 $ 275 $ 374 $ 412 Income Tax Provision . . (89) (105) (147) (157) Distributions on Preferred Securities of Trust, Net of Applicable Income Taxes of $2 and $4, respectively. . . . . . - (3) - (7) Income before Cumulative Effect of a Change in Accounting Principle and Extraordinary Charge. . . . . . . . . 137 167 227 248 Cumulative Effect of a Change in Accounting Principle, Net of Applicable Income Taxes of $3 . . . . . . . . . - - (6) - Extraordinary Charge, Net of Applicable Income Taxes of $2. . . - (4) - (4) Net Income . . . . . . . $ 137 $ 163 $ 221 $ 244
(continued on next page) CONTINENTAL AIRLINES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions of dollars, except per share data)
Three Months Six Months Ended June 30, Ended June 30, 1999 1998 1999 1998 (Unaudited) (Unaudited) Earnings per Common Share: Income Before Cumulative Effect of Change in Accounting Principle and Extraordinary Charge. $ 1.93 $ 2.74 $ 3.25 $ 4.13 Cumulative Effect of a Change in Accounting Principle, net of tax - - (0.08) - Extraordinary Charge, net of tax. . . . . . - (0.06) - (0.05) Net Income . . . . . . $ 1.93 $ 2.68 $ 3.17 $ 4.08 Earnings per Common Share Assuming Dilution: Income Before Cumulative Effect of Change in Accounting Principle and Extraordinary Charge. $ 1.80 $ 2.11 $ 2.98 $ 3.16 Cumulative Effect of a Change in Accounting. - - (0.07) - Principle, net of tax Extraordinary Charge, net of tax. . . . . . - (0.05) - (0.04) Net Income . . . . . . $ 1.80 $ 2.06 $ 2.91 $ 3.12
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. CONTINENTAL AIRLINES, INC. CONSOLIDATED BALANCE SHEETS (In millions, except for share data)
June 30, December 31, ASSETS 1999 1998 (Unaudited) Current Assets: Cash and cash equivalents, including restricted cash and cash equivalents of $11 . . . . . . . . . . . . . . . . . $1,259 $1,399 Accounts receivable, net. . . . . . . . . 496 449 Spare parts and supplies, net . . . . . . 207 166 Deferred income taxes . . . . . . . . . . 234 234 Prepayments and other . . . . . . . . . . 175 106 Total current assets . . . . . . . . . . 2,371 2,354 Property and Equipment: Owned property and equipment: Flight equipment . . . . . . . . . . . . 3,181 2,459 Other. . . . . . . . . . . . . . . . . . 765 632 3,946 3,091 Less: Accumulated depreciation. . . . . 727 625 3,219 2,466 Purchase deposits for flight equipment 538 410 Capital leases: Flight equipment. . . . . . . . . . . . . 372 361 Other . . . . . . . . . . . . . . . . . . 57 56 429 417 Less: Accumulated amortization . . . . . 192 178 237 239 Total property and equipment . . . . . . 3,994 3,115 Other Assets: Routes, gates and slots, net. . . . . . . 1,156 1,181 Investments . . . . . . . . . . . . . . . 152 151 Other assets, net . . . . . . . . . . . . 270 285 Total other assets . . . . . . . . . . . 1,578 1,617 Total Assets. . . . . . . . . . . . . . $7,943 $7,086
(continued on next page) CONTINENTAL AIRLINES, INC. CONSOLIDATED BALANCE SHEETS (In millions, except for share data)
June 30, December 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 (Unaudited) Current Liabilities: Current maturities of long-term debt. . . $ 189 $ 184 Current maturities of capital leases. . . 46 47 Accounts payable. . . . . . . . . . . . . 827 843 Air traffic liability . . . . . . . . . . 1,037 854 Accrued payroll and pensions. . . . . . . 221 265 Accrued other liabilities . . . . . . . . 244 249 Total current liabilities. . . . . . . . 2,564 2,442 Long-Term Debt . . . . . . . . . . . . . . 2,630 2,267 Capital Leases . . . . . . . . . . . . . . 208 213 Deferred Credits and Other Long-Term Liabilities: Deferred income taxes . . . . . . . . . . 521 372 Accruals for aircraft retirements and excess facilities. . . . . . . . . . . . 77 95 Other . . . . . . . . . . . . . . . . . . 328 393 Total deferred credits and other long-term liabilities . . . . . . . . . 926 860 Commitments and Contingencies Continental-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Convertible Subordinated Debentures. . . . . . . . . . . . . . . . - 111
(continued on next page) CONTINENTAL AIRLINES, INC. CONSOLIDATED BALANCE SHEETS (In millions, except for share data)
June 30, December 31, 1999 1998 (Unaudited) Common Stockholders' Equity: Class A common stock - $.01 par, 50,000,000 shares authorized; 11,406,580 and 11,406,732 shares issued and outstanding in 1999 and 1998, respectively . . . . . . . . . $ - $ - Class B common stock - $.01 par, 200,000,000 shares authorized; 63,923,431 and 53,370,741 shares issued, respectively . . . . . . . . . . 1 1 Additional paid-in capital . . . . . . . 872 634 Retained earnings . . . . . . . . . . . . 880 659 Accumulated other comprehensive income. . (69) (88) Treasury stock - 1,783,413 and 399,524 Class B shares, respectively, at cost. . (69) (13) Total common stockholders' equity. . . . 1,615 1,193 Total Liabilities and Stockholders' Equity . . . . . . . . . . . . . . . . $7,943 $7,086
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. CONTINENTAL AIRLINES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
Six Months Ended June 30, 1999 1998 (Unaudited) Net cash provided by operating activities. . . . . . . . . . . . . . .$ 398 $ 549 Cash Flows from Investing Activities: Purchase deposits paid in connection with future aircraft deliveries. . . . (685) (361) Purchase deposits refunded in connection with aircraft delivered . . 522 287 Capital expenditures. . . . . . . . . . (313) (311) Proceeds from sale of investments . . . 20 9 Purchase of short-term investments. . . - (117) Investment in Partner Airlines. . . . . - (53) Other . . . . . . . . . . . . . . . . . (9) (6) Net cash used by investing activities. . . . . . . . . . . . . . (465) (552) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt, net. . . . . . . . . . . . . . . 230 395 Payments on long-term debt and capital lease obligations. . . . . . . (159) (301) Purchase of Class B common stock. . . . (171) (120) Proceeds from issuance of common stock. 19 44 Dividends paid on preferred securities of trust . . . . . . . . . . . . . . . - (11) Other . . . . . . . . . . . . . . . . . 8 39 Net cash (used) provided by financing activities. . . . . . . . . (73) 46 Net (Decrease) Increase in Cash and Cash Equivalents. . . . . . . . . . . . (140) 43 Cash and Cash Equivalents - Beginning of Period (A) . . . . . . . . . . . . . 1,388 1,010 Cash and Cash Equivalents - End of Period (A). . . . . . . . . . . . . . . $1,248 $1,053
(continued on next page) CONTINENTAL AIRLINES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
Six Months Ended June 30, 1999 1998 (Unaudited) Supplemental Cash Flow Information: Interest paid . . . . . . . . . . . . . $ 101 $ 72 Income taxes paid . . . . . . . . . . . $ 8 $ 4 Investing and Financing Activities Not Affecting Cash: Property and equipment acquired through the issuance of debt . . . . . $ 501 $ 263 Capital lease obligations incurred. . . $ 21 $ 109 Conversion of trust originated preferred securities . . . . . . . . . $ 111 $ - Conversion of 6-3/4% Convertible Subordinated Notes . . . . . . . . . . $ 230 $ -
(A) Excludes restricted cash of $11 million and $15 million at January 1, 1999 and 1998, respectively, and $11 million and $14 million at June 30, 1999 and 1998, respectively. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. CONTINENTAL AIRLINES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Such adjustments are of a normal, recurring nature. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in the Annual Report of Continental Airlines, Inc. (the "Company" or "Continental") on Form 10-K for the year ended December 31, 1998 (the "1998 10-K"). Certain reclassifications have been made in the prior year's financial statements to conform to the current year presentation. NOTE 1 - EARNINGS PER SHARE The following table sets forth the computations of basic and diluted earnings per share (in millions):
Three Months Six Months Ended June 30, Ended June 30, 1999 1998 1999 1998 Numerator: Income before cumulative effect of change in accounting principle and extraordinary charge . . . . . . . . . . . . $137 $167 $227 $248 Cumulative effect of change in accounting principle, net of applicable income taxes. . . . - - (6) - Extraordinary charge, net of applicable income taxes. . . . - (4) - (4) Numerator for basic earnings per share - net income . . . . 137 163 221 244 Effect of dilutive securities: Preferred Securities of Trust . - 3 - 7 6-3/4% convertible subordinated notes. . . . . . . . . . . . . 1 2 3 4 1 5 3 11 Numerator for diluted earnings per share - net income after assumed conversions. . . . . . $138 $168 $224 $254 Denominator: Denominator for basic earnings per share - weighted-average shares . . . . . . . . . . . . 70.9 60.7 69.7 59.9 Effect of dilutive securities: Employee stock options . . . . 1.7 2.0 1.5 2.0 Warrants . . . . . . . . . . . - 0.7 - 1.7 Preferred Securities of Trust. - 10.3 0.1 10.3 6-3/4% convertible subordinated notes . . . . . . . . . . . . 4.2 7.6 5.9 7.6 Dilutive potential common shares. . . . . . . . . . . . 5.9 20.6 7.5 21.6 Denominator for diluted earnings per share - adjusted weighted-average and assumed conversions. . . . . . . . . . 76.8 81.3 77.2 81.5
NOTE 2 - INCOME TAXES Income taxes for the three and six months ended June 30, 1999 and 1998 were provided at the estimated annual effective tax rate. Such rate differs from the federal statutory rate of 35%, primarily due to state income taxes and the effect of certain expenses that are not deductible for income tax purposes. At December 31, 1998, the Company had estimated net operating losses ("NOLs") of $1.1 billion for federal income tax purposes that will expire through 2009 and federal investment tax credit carryforwards of $45 million that will expire through 2001. As a result of a change in ownership of the Company on April 27, 1993, the ultimate utilization of the Company's NOLs and investment tax credits may be limited. Reflecting this limitation, the Company recorded a valuation allowance of $263 million as of December 31, 1998. To the extent the Company were to determine in the future that additional NOLs of the Company's predecessor could be recognized in the accompanying consolidated financial statements, such benefit would reduce routes, gates and slots. NOTE 3 - COMPREHENSIVE INCOME The Company includes unrealized gains and losses on available-for- sale securities, changes in minimum pension liabilities and changes in the fair value of derivative financial instruments which qualify for hedge accounting in other comprehensive income. During the second quarter of 1999 and 1998, total comprehensive income amounted to $128 and $158 million, respectively. For the six months ended 1999 and 1998, total comprehensive income amounted to $240 million and $243 million, respectively. The significant difference between net income and total comprehensive income during the first half of 1999 was attributable to the $17 million net increase in fair value (net of applicable income taxes and hedge ineffectiveness) related to petroleum swap contracts and call options held by the Company as of June 30, 1999 to hedge a portion of anticipated jet fuel purchases through October 1999. NOTE 4 - CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE Continental adopted Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities ("SOP 98-5)") in the first quarter of 1999. SOP 98-5 amended Statement of Position 88-1, "Accounting for Developmental and Preoperating Costs, Purchases and Exchanges of Take-Off and Landing Slots, and Airframe Modifications" by requiring preoperating costs related to the integration of new types of aircraft to be expensed as incurred and requiring all unamortized start-up costs (e.g., pilot training costs related to induction of new aircraft) to be expensed upon adoption. This resulted in the Company recording a $6 million cumulative effect of a change in accounting principle, net of tax, in the first quarter of 1999. NOTE 5 - PREFERRED SECURITIES OF TRUST In December 1998, the Company called for redemption its remaining 8-1/2% Convertible Trust Originated Preferred Securities ("TOPrS") then outstanding. As a result, the remaining 2,298,327 TOPrS were converted into 4,752,522 shares of Class B common stock during January 1999. NOTE 6 - 6-3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2006 On April 15, 1999, the Company exercised its right and called for redemption on May 25, 1999, all $230 million of its 6-3/4% Convertible Subordinated Notes due 2006. The notes were converted into 7,617,120 shares of Class B common stock during May 1999. NOTE 7 - REGULATORY MATTERS The Company recently received approval from the Port Authority of New York and New Jersey for a major facility expansion at Newark International Airport ("Newark"). Major construction is scheduled to begin in August 1999 and to be completed in 2002. As more fully described in the Risk Factors section of the Company's 1998 10-K, airlines are subject to extensive regulatory and legal compliance requirements that engender significant costs and in some cases reduce revenue. For instance, "passenger bill of rights" legislation has been introduced in Congress that would, among other things, require the payment of compensation to passengers as a result of certain delays, and limit the ability of carriers to prohibit or restrict usage of certain tickets in manners currently prohibited or restricted. The Department of Transportation (the "DOT") has proposed rules that would significantly limit major carriers' ability to compete with new entrant carriers. If adopted, these measures could have the effect of raising ticket prices, reducing revenue and increasing costs. The Federal Aviation Administration has designated John F. Kennedy International Airport ("John F. Kennedy"), New York LaGuardia Airport ("LaGuardia"), Chicago O'Hare International Airport ("O'Hare") and Ronald Reagan Washington National Airport in Washington, D.C. ("Reagan National") as "high density traffic airports" and has limited the number of departure and arrival slots at those airports. Currently, such slots may be voluntarily sold or transferred between carriers. The DOT has in the past reallocated slots to other carriers and reserves the right to withdraw slots. Various amendments to the slot system proposed from time to time could, if adopted, significantly affect operations at high density traffic airports, significantly change the value of the slots, grant slots to other carriers or for route or aircraft specific usage, expand slots to other airports or eliminate slots entirely. The DOT has proposed the elimination of slot restrictions at high density airports other than Reagan National. Legislation containing a similar proposal which could eliminate slots as early as 2002 at O'Hare and 2007 at LaGuardia and John F. Kennedy, and which doubles the maximum passenger facilities charges permitted to be charged by airport authorities, has passed the full House of Representatives. The Company cannot predict whether any of these proposals will be adopted. However, if legislation or regulation eliminating slots is adopted, the value of such slots could be deemed to be permanently impaired, resulting in a loss being charged to earnings for the relevant period. Moreover, the elimination of slots could have an adverse effect upon future results of operations of the Company. NOTE 8 - OTHER On January 5, 1999, the Company's mechanics ratified an initial three-year collective bargaining agreement between the Company and the International Brotherhood of Teamsters ("IBT"). The contract becomes amendable in January 2002. In February 1999, the Company completed an offering of $806 million of pass-through certificates to be used to finance (either through leveraged leases or secured debt financings) the debt portion of the acquisition cost of 22 aircraft scheduled to be delivered from March 1999 through September 1999. The Company holds a membership interest in The SITA Foundation ("SITA"), an organization providing data communication services to the airline industry. SITA's primary asset is an ownership interest in Equant N.V. ("Equant"). In February 1999, SITA sold a portion of its Equant interest in a secondary public offering and distributed the pro rata proceeds to certain of its members (including Continental) that elected to participate in the offering. Continental recorded a gain of $20 million ($12 million after tax) related to this transaction. The gain is included in other nonoperating income (expense) in the accompanying consolidated statement of operations. In March 1999, the Company obtained a $160 million Credit Facility, with a maturity date of March 2001, to finance pre-delivery deposits for certain new Boeing aircraft to be delivered between March 1999 and March 2002. On April 15, 1999, the Company announced a $500 million increase in the size of its common stock repurchase program, bringing the total size of the program to $800 million. As of July 16, 1999, the Company had repurchased 9,812,200 shares of Class B common stock for $437 million. In May 1999, the Company completed an offering of $742 million of pass-through certificates to be used to finance (through either leveraged leases or secured debt financings) the debt portion of the acquisition cost of 21 new Boeing aircraft scheduled for delivery from July 1999 to December 1999. In July 1999, a tentative initial agreement was reached between Continental Express, Inc. ("Express"), a wholly owned subsidiary of the Company, and the IBT, which represents Express's mechanics. The IBT will now present the tentative agreement to the covered employees for ratification, a process that is expected to be completed by mid-August 1999. If ratified, the agreement will become amendable in January 2003. During the three months ended June 30, 1999, the Company recognized approximately a $36 million gain on its fuel hedging program. The gain is included in fuel expense in the accompanying consolidated statement of operations. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion may contain forward-looking statements. In connection therewith, please see the risk factors set forth in the Company's 1998 10-K which identify important factors such as the Company's leverage and its liquidity, its history of operating losses, the cost of aircraft fuel, labor matters, certain tax matters, regional and global economic downturns, the significant ownership interest of Northwest Airlines in the Company and risks relating to the Company's strategic alliance with Northwest Airlines, year 2000 computer risk, competition and industry conditions, regulatory matters and the seasonal nature of the airline business, that could cause actual results to differ materially from those in the forward-looking statements. Continental's results of operations are impacted by seasonality (the second and third quarters are generally stronger than the first and fourth quarters) as well as numerous other factors that are not necessarily seasonal, including the extent and nature of competition from other airlines, employee job actions (including at other airlines), fare sale activities, excise and similar taxes, changing levels of operations, fuel prices, foreign currency exchange rates, changes in regulations and aviation treaties and general economic conditions. Although the results in Asia of Continental Micronesia, Inc. ("CMI"), a wholly owned subsidiary of the Company, have declined in recent years, the Company successfully redeployed CMI capacity into the stronger U.S. domestic markets and CMI's recent results have improved. In addition, management believes the Company is well positioned to respond to market conditions in the event of a sustained economic downturn for the following reasons: underdeveloped hubs with strong local traffic; a flexible fleet plan; a strong cash balance, a $225 million unused revolving credit facility and a well developed alliance network. RESULTS OF OPERATIONS The following discussion provides an analysis of the Company's results of operations and reasons for material changes therein for the three and six months ended June 30, 1999 as compared to the corresponding periods ended June 30, 1998. Comparison of Three Months Ended June 30, 1999 to Three Months Ended June 30, 1998 The Company recorded consolidated net income of $137 million for the three months ended June 30, 1999 as compared to consolidated net income of $163 million for the three months ended June 30, 1998. Passenger revenue increased 7.4%, $140 million, during the quarter ended June 30, 1999 as compared to the same period in 1998, which was principally due to a 9.1% increase in revenue passenger miles, partially offset by a 2.4% decrease in yield. The decrease in yield was due to lower industry-wide fare levels and a 6.4% increase in average stage length. Other operating revenue increased 25.0%, $20 million, in the three months ended June 30, 1999 as compared to the same period in the prior year, primarily due to an increase in revenue related to the Company's frequent flyer program ("OnePass"). Wages, salaries and related costs increased 19.4%, $101 million, during the quarter ended June 30, 1999 as compared to the same period in 1998, primarily due to a 7.2% increase in average full- time equivalent employees to support increased flying and higher wage rates resulting from the Company's decision to increase employee wages to industry standards by the year 2000. Aircraft rentals increased 16.7%, $27 million, in the second quarter of 1999 compared to the second quarter of 1998, due to the delivery of new aircraft. Aircraft fuel expense decreased 15.8%, $29 million, in the three months ended June 30, 1999 as compared to the same period in the prior year. The average price per gallon decreased 18.8% from 46.96 cents in the second quarter of 1998 to 38.13 cents in the second quarter of 1999. This reduction was partially offset by a 2.4% increase in the quantity of jet fuel used, principally reflecting increased capacity. In addition, during the second quarter of 1999, the Company recognized approximately a $36 million gain related to its fuel hedging program. See "Fuel Hedging" below. Commissions expense decreased 6.6%, $10 million, in the second quarter of 1999 compared to the second quarter of 1998 due to a lower volume of commissionable sales and lower rates as a result of the international commission cap, partially offset by increased passenger revenue. Other rentals and landing fees increased 22.2%, $22 million, in the three months ended June 30, 1999 as compared to the same period in the prior year primarily due to higher facilities rent due to increased rates and space, and higher landing fees resulting from increased operations. Depreciation and amortization expense increased 22.2%, $16 million, in the second quarter of 1999 compared to the second quarter of 1998 due principally to the addition of new aircraft and related spare parts. These increases were partially offset by approximately a $2 million reduction in the amortization of routes, gates and slots resulting from the recognition of previously unbenefitted NOLs during 1998. Other operating expense increased 13.5%, $56 million, in the three months ended June 30, 1999 as compared to the same period in the prior year, as a result of increases in reservations and sales expense, passenger services expense, aircraft servicing expense and other miscellaneous expense, resulting primarily from an increase in enplanements and revenue passenger miles. Interest expense increased 29.5%, $13 million, due to an increase in long-term debt resulting from the purchase of new aircraft and $200 million of 8% unsecured senior notes issued in December 1998, offset by interest savings of $1.7 million due to the conversion of the Company's 6-3/4% Convertible Subordinated Notes. The Company's other nonoperating income (expense) in the three months ended June 1999 includes foreign currency losses of $4.1 million. Other nonoperating income (expense) in the three months ended June 30, 1998 included a $6 million gain on the sale of certain stock of America West Holdings Corporation ("America West"). Comparison of Six Months Ended June 30, 1999 to Six Months Ended June 30, 1998 The Company recorded consolidated net income of $221 million and $244 million for the six months ended June 30, 1999 and 1998, respectively. Net income for the first quarter of 1999 included the cumulative effect of a change in accounting principle charge ($6 million, net of taxes) related to the write-off of pilot training costs. Passenger revenue increased 9.1%, $326 million, during the six months ended June 30, 1999 as compared to the same period in 1998. The increase was due to a 11.3% increase in revenue passenger miles, partially offset by a 2.9% decrease in yield. The Company estimates that passenger revenue in the first quarter of 1999 increased by $19 million due to a significant number of flight cancellations at one of its competitors. The decrease in yield was due to lower industry-wide fare levels and a 6.5% increase in average stage length. Other operating revenue increased 24.3%, $37 million, in the six months ended June 30, 1999 compared to the same period in the prior year primarily due to an increase in OnePass revenue. Wages, salaries and related costs increased 21.6%, $220 million, during the six months ended June 30, 1999 as compared to the same period in 1998, primarily due to an 8.7% increase in average full- time equivalent employees to support increased flying, increased on-time bonus payments and higher wage rates resulting from the Company's decision to increase employee wages to industry standards by the year 2000. Aircraft rentals increased 17.3%, $55 million, during the six months ended June 30, 1999 as compared to the same period in 1998, due primarily to the delivery of new aircraft. Maintenance, materials and repairs decreased 2.3%, $7 million, during the six months ended June 30, 1999 as compared to the same period in the prior year due to newer aircraft and the volume and timing of engine overhauls as part of the Company's ongoing maintenance program. Aircraft fuel expense decreased 18.5%, $69 million, in the six months ended June 30, 1999 as compared to the same period in the prior year. The average price per gallon decreased 22.2% from 49.30 cents in the first six months of 1998 to 38.37 cents in the first six months of 1999. This reduction was partially offset by a 3.9% increase in the quantity of jet fuel used principally reflecting increased capacity. In addition, during the first six months of 1999, the Company recognized approximately a $37 million gain related to its fuel hedging program. See "Fuel Hedging" below. Commissions expense decreased 2.7%, $8 million, during the six months ended June 30, 1999 as compared to the same period in 1998 due to a lower volume of commissionable sales and lower rates as the result of the international commission cap, partially offset by increased passenger revenue. Other rentals and landing fees increased 17.5%, $35 million, primarily due to higher facilities rent due to increased rates and volume, and higher landing fees resulting from increased operations. Depreciation and amortization expense increased 23.6%, $33 million, in the first six months of 1999 compared to the same period in 1998 primarily due to the addition of new aircraft and related spare parts. These increases were partially offset by approximately a $4 million reduction in the amortization of routes, gates and slots resulting from the recognition of previously unbenefitted NOLs during 1998. Other operating expense increased 14.6%, $119 million, in the six months ended June 30, 1999 as compared to the same period in the prior year, primarily as a result of increases in passenger services expense, aircraft servicing expense, reservations and sales expense and other miscellaneous expense, primarily due to an increase in enplanements and revenue passenger miles. Interest expense increased 31.0%, $26 million, due to an increase in long-term debt resulting from the purchase of new aircraft and $200 million of 8% unsecured senior notes issued in December 1998, offset by interest savings of $1.7 million due to the conversion of the Company's 6-3/4% Convertible Subordinated Notes. The Company's other nonoperating income (expense) in the six months ended June 30, 1999 includes a $20 million gain on the sale of a portion of the Company's indirect interest in Equant partially offset by foreign currency losses of $10.5 million. Other nonoperating income (expense) in the first six months of 1998 included a $6 million gain on the sale of certain America West stock. Certain Statistical Information An analysis of statistical information for Continental's jet operations, excluding regional jet operations, for the periods indicated is as follows:
Three Months Ended Net June 30, Increase/ 1999 1998 (Decrease) Revenue passenger miles (millions) (1). . . . . . . . . . 14,919 13,675 9.1 % Available seat miles (millions) (2). . . . . . . . . . 20,163 18,574 8.6 % Passenger load factor (3). . . . . 74.0% 73.6% 0.4 pts. Breakeven passenger load factor (4). . . . . . . . . . . . 61.9% 59.0% 2.9 pts. Passenger revenue per available seat mile (cents). . . . . . . . 9.20 9.39 (2.0)% Total revenue per available seat mile (cents) . . . . . . . . 10.15 10.27 (1.2)% Operating cost per available seat mile (cents) . . . . . . . . 8.97 8.85 1.4 % Average yield per revenue passenger mile (cents) (5) . . . 12.44 12.75 (2.4)% Average fare per revenue passenger . . . . . . . . . . . .$161.47 $154.80 4.3 % Revenue passengers (thousands) . .11,493 11,261 2.1 % Average length of aircraft flight (miles) . . . . . . . . . 1,104 1,038 6.4 % Average daily utilization of each aircraft (hours) (6). . . . 10:35 10:19 2.6 % Actual aircraft in fleet at end of period (7) . . . . . . . . 360 353 2.0 %
Six Months Ended Net June 30, Increase/ 1999 1998 (Decrease) Revenue passenger miles (millions) (1). . . . . . . . . .28,656 25,747 11.3 % Available seat miles (millions) (2). . . . . . . . . .39,388 36,097 9.1 % Passenger load factor (3). . . . . 72.8% 71.3% 1.5 pts. Breakeven passenger load factor (4). . . . . . . . . . . . 62.7% 59.8% 2.9 pts. Passenger revenue per available seat mile (cents). . . . . . . . 9.17 9.25 (0.9)% Total revenue per available seat mile (cents) . . . . . . . . 10.10 10.15 (0.5)% Operating cost per available seat mile (cents) . . . . . . . . 9.09 8.99 1.1 % Average yield per revenue passenger mile (cents) (5) . . . 12.60 12.98 (2.9)% Average fare per revenue passenger . . . . . . . . . . . .$162.16 $156.60 3.6 % Revenue passengers (thousands) . .22,271 21,333 4.4 % Average length of aircraft flight (miles) . . . . . . . . . 1,093 1,026 6.5 % Average daily utilization of each aircraft (hours) (6). . . . 10:23 10:16 1.1 % Actual aircraft in fleet at end of period (7) . . . . . . . . 360 353 2.0 %
Continental has entered into block-space arrangements with certain other carriers whereby one or both of the carriers is obligated to purchase capacity on the other. For the three months ended June 30, 1999 and June 30, 1998, the table above excludes 633 million and 346 million available seat miles, and related revenue passenger miles and enplanements, operated by Continental but purchased and marketed by the other carrier, and includes 258 million and 43 million available seat miles, and related revenue passenger miles and enplanements, operated by other carriers but purchased and marketed by Continental. For the six months ended June 30, 1999 and June 30, 1998, the table above excludes 1.3 billion and 676 million available seat miles, and related revenue passenger miles and enplanements, operated by Continental but purchased and marketed by the other carrier, and includes 490 million and 65 million available seat miles, and related revenue passenger miles and enplanements, operated by other carriers but purchased and marketed by Continental. __________________ (1) The number of scheduled miles flown by revenue passengers. (2) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown. (3) Revenue passenger miles divided by available seat miles. (4) The percentage of seats that must be occupied by revenue passengers in order for the airline to break even on an income before income taxes basis, excluding nonrecurring charges, nonoperating items and other special items. (5) The average revenue received for each mile a revenue passenger is carried. (6) The average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival). (7) Excludes six all-cargo 727 aircraft at CMI in 1999 and 1998. During the first six months of 1999, the Company took delivery of 24 aircraft and removed 27 aircraft from service. LIQUIDITY AND CAPITAL COMMITMENTS In the first six months of 1999, the Company completed several transactions intended to strengthen its long-term financial position and enhance earnings. In February 1999, the Company completed an offering of $806 million of pass-through certificates to be used to finance (either through leveraged leases or secured debt financings) the debt portion of the acquisition cost of 22 aircraft scheduled to be delivered from March 1999 through September 1999. In March of 1999, the Company completed a $160 million Credit Facility, with a maturity date of March 2001, to finance pre- delivery deposits for certain new Boeing aircraft to be delivered between March 1999 and March 2002. On April 15, 1999, the Company announced a $500 million increase in the size of its common stock repurchase program, bringing the total size of the program to $800 million. As of July 16, 1999, the Company had repurchased 9,812,200 shares of Class B common stock for $437 million. Also on April 15, 1999, the Company exercised its right and called for redemption on May 25, 1999, all $230 million of its 6-3/4% Convertible Subordinated Notes due 2006. The notes were converted into 7,617,120 shares of Class B common stock during May 1999. In May 1999, the Company completed an offering of $742 million of pass-through certificates to be used to finance (either through leveraged leases or secured debt financings) the debt portion of the acquisition cost of 21 new Boeing aircraft scheduled for delivery from July 1999 to December 1999. As of June 30, 1999, the Company had $1.2 billion in cash and cash equivalents (excluding restricted cash of $11 million). Net cash provided by operating activities decreased $151 million during the six months ended June 30, 1999 compared to the same period in the prior year primarily due to a decrease in net income and changes in working capital. Net cash used by investing activities decreased $87 million for the six months ended June 30, 1999 compared to the same period in the prior year, primarily as a result of the purchase of short-term investments in the second quarter of 1998. Net cash used by financing activities for the six months ended June 30, 1999 compared to the same period in the prior year increased $119 million primarily due to a decrease in proceeds from the issuance of long-term debt and an increase in the purchase of the Company's Class B common stock, partially offset by a decrease in payments on long-term debt and capital lease obligations. Deferred Tax Assets. The Company had, as of December 31, 1998, deferred tax assets aggregating $803 million, including $372 million of NOLs and a valuation allowance of $263 million. To the extent the Company were to determine in the future that additional NOLs of the Company's predecessor could be recognized in the accompanying consolidated financial statements, such benefit would further reduce routes, gates and slots. As a result of NOLs, the Company will not pay United States federal income taxes (other than alternative minimum tax) until it has recorded approximately an additional $1.1 billion of taxable income following December 31, 1998. Section 382 of the Internal Revenue Code ("Section 382") imposes limitations on a corporation's ability to utilize NOLs if it experiences an "ownership change." In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. On November 20, 1998, an affiliate of Northwest Airlines, Inc. completed its acquisition of certain equity of the Company previously held by Air Partners, L.P. and its affiliates, together with certain Class A common stock of the Company held by certain other investors, totaling 8,661,224 shares of Class A common stock (the "Air Partners Transaction"). Based on information currently available, the Company does not believe that the Air Partners Transaction resulted in an ownership change for purposes of Section 382. Purchase Commitments. Continental has substantial commitments for capital expenditures, including for the acquisition of new aircraft. As of July 16, 1999, Continental had agreed to acquire a total of 101 Boeing jet aircraft through 2005. The Company anticipates taking delivery of 61 Boeing jet aircraft in 1999 (24 of which were delivered during the first six months of 1999 and financed through enhanced equipment trust certificates, with the Company purchasing 14 of those aircraft and leasing the other ten). Continental also has options for an additional 121 Boeing aircraft (exercisable subject to certain conditions). The estimated aggregate cost of the Company's firm commitments for Boeing aircraft is approximately $4.8 billion. Continental currently plans to finance its new Boeing aircraft with a combination of enhanced pass through trust certificates, lease equity and other third-party financing, subject to availability and market conditions. As of July 16, 1999, Continental had approximately $948 million in financing arranged for such future Boeing deliveries. In addition, Continental has commitments or letters of intent for backstop financing for approximately one-third of the anticipated remaining acquisition cost of such Boeing deliveries. In addition, at July 16, 1999, Continental had firm commitments to purchase 28 spare engines related to the new Boeing aircraft for approximately $200 million which will be deliverable through December 2004. As of July 16, 1999, Express had firm commitments to acquire 27 Embraer ERJ-145 ("ERJ-145") 50-seat regional jets and 25 Embraer ERJ-135 ("ERJ-135") 37-seat regional jets, with options for an additional 125 ERJ-145 and 50 ERJ-135 aircraft exercisable through 2008. Express anticipates taking delivery of 19 ERJ-145 (ten of which were delivered in the first six months of 1999) and six ERJ- 135 regional jets in 1999 and the remainder of its firm orders through the third quarter of 2001. Neither Express nor Continental will have any obligation to take any of the firm ERJ-145 or ERJ-135 aircraft that are not financed by a third-party and leased to Continental. Additional financing will be needed to satisfy the Company's capital commitments for other aircraft and aircraft-related expenditures such as engines, spare parts, simulators and related items. There can be no assurance that sufficient financing will be available for all aircraft and other capital expenditures not covered by firm financing commitments. Deliveries of new Boeing aircraft are expected to continue to increase aircraft rental, depreciation and interest costs while generating cost savings in the areas of maintenance, fuel and pilot training. Continental expects its cash outlays for 1999 capital expenditures, exclusive of fleet plan requirements, to aggregate $254 million, primarily relating to mainframe, software application and automation infrastructure projects, aircraft modifications and mandatory maintenance projects, passenger terminal facility improvements and office, maintenance, telecommunications and ground equipment. Continental's capital expenditures during the six months ended June 30, 1999 aggregated $105 million, exclusive of fleet plan expenditures. The Company expects to fund its future capital commitments through internally generated funds together with general Company financings and aircraft financing transactions. However, there can be no assurance that sufficient financing will be available for all aircraft and other capital expenditures not covered by firm financing commitments. Year 2000. The Year 2000 issue arises as a result of computer programs having been written using two digits (rather than four) to define the applicable year, among other problems. Any information technology ("IT") systems that have time-sensitive software might recognize a date using "00" as the year 1900 rather than the year 2000, which could result in miscalculations and system failures. The problem also extends to many "non-IT" systems; that is, operating and control systems that rely on embedded chip systems. In addition, the Company is at risk from Year 2000 failures on the part of third-party suppliers and governmental agencies with which the Company interacts. The Company uses a significant number of computer software programs and embedded operating systems that are essential to its operations. For this reason, the Company implemented a Year 2000 project in late 1996 so that the Company's computer systems would function properly in the year 2000 and thereafter. The Company's Year 2000 project involves the review of a number of internal and third-party systems. Each system is subjected to the project's five phases which consist of systems inventory, evaluation and analysis, modification implementation, user testing and integration compliance. The Company anticipates completing its review or modification implementation of systems in July 1999 and believes that, with modifications to its existing software and systems and/or conversions to new software, the Year 2000 issue will not pose significant operational problems for its computer systems. The Company also is conducting extensive communications and on-site visits with its significant suppliers, vendors and governmental agencies with which its systems interface and exchange data or upon which its business depends. The Company is coordinating efforts with these parties to minimize the extent to which its business may be vulnerable to their failure to remediate their own Year 2000 problems. The Company's business is dependent upon certain domestic and foreign governmental organizations or entities such as the Federal Aviation Administration ("FAA") that provide essential aviation industry infrastructure. There can be no assurance that the systems of such third parties on which the Company's business relies will be modified on a timely basis. The Company's business, financial condition or results of operations could be materially adversely affected by the failure of its equipment or systems or those operated by other parties to operate properly beyond 1999. Although the Company currently has day-to-day operational contingency plans, management is in the process of updating these plans for possible Year 2000-specific operational requirements. To facilitate the completion of these plans, the Company has hired an outside consultant. Based on current progress, the Company anticipates completing the revision of current contingency plans and the creation of additional contingency plans by September 1999. In addition, the Company will continue to monitor third-party (including governmental) readiness and will modify its contingency plans accordingly. While the Company does not currently expect any significant modification of its operations in response to the Year 2000 issue, in a worst-case scenario the Company could be required to suspend flights to certain locations or otherwise alter its operations significantly. The total cost of the Company's Year 2000 project (excluding internal payroll) is currently estimated at $18-20 million and has been and will be funded through cash from operations. As of June 30, 1999, the Company had incurred and expensed approximately $18 million relating to its Year 2000 project. The cost of the Year 2000 project is limited by the substantial outsourcing of the Company's systems and the significant implementation of new systems following the Company's emergence from bankruptcy in 1993. The costs of the Company's Year 2000 project and the date on which the Company believes it will be completed are based on management's best estimates and include assumptions regarding third-party modification plans. However, in particular due to the potential impact of third-party modification plans, there can be no assurance that these estimates will be achieved, and actual results could differ materially from those anticipated. Bond Financings. In July 1996, the Company announced plans to expand its gates and related facilities into Terminal B at Bush Intercontinental Airport, as well as planned improvements at Terminal C and the construction of a new automated people mover system linking Terminal B and Terminal C which was completed in May 1999. In April 1997 and January 1999, the City of Houston completed the offering of $190 million and $46 million, respectively, aggregate principal amount of tax-exempt special facilities revenue bonds (the "IAH Bonds"). The IAH Bonds are unconditionally guaranteed by Continental. In connection therewith, the Company has entered into long-term leases (or amendments to existing leases) with the City of Houston providing for the Company to make rental payments sufficient to service the related tax-exempt bonds, which have a term no longer than 30 years. The majority of the Company's expansion project is expected to be completed during the summer of 1999. Employees. In September 1997, the Company announced a plan to bring all employees to industry standard wages no later than the end of the year 2000. Wage increases began in 1997, and will continue to be phased in through 2000 as revenue, interest rates and rental rates also reach industry standards. On January 5, 1999, the Company's mechanics ratified an initial three-year collective bargaining agreement between the Company and the IBT. The contract becomes amendable in January 2002. On June 4, 1999, following a mail ballot election, the National Mediation Board ("NMB") determined that fewer than 29% of the Company and Express's 8,000 fleet service employees desired to be represented by the International Association of Machinists ("IAM"), and dismissed the IAM's representation petition. Pursuant to the NMB's rules there is a one-year bar from the date of the dismissal on union organizing. In July 1999, a tentative initial agreement was reached between Express and the IBT, which represents Express's mechanics. The IBT will now present the tentative agreement to the covered employees for ratification, a process that is expected to be completed by mid-August 1999. If ratified, the agreement will become amendable in January 2003. In addition, the Company's and Express's flight attendants, pilots and dispatchers are represented by unions as are CMI's flight attendants, mechanics and related employees and agents. The other employees of Continental, Express and CMI are not represented and are not covered by collective bargaining agreements. Fuel Hedging. The Company uses a combination of petroleum swap contracts, petroleum call options, and jet fuel purchase commitments to provide some short-term protection against a sharp increase in jet fuel prices. During the second quarter, the Company entered into petroleum swap contracts and call options to hedge jet fuel prices for approximately 95% of its anticipated fuel requirements through October 1999. The fair value was approximately $22 million at June 30, 1999 and has been recorded in other assets with the offset to other comprehensive income, net of applicable income taxes and hedge ineffectiveness. As of July 16, 1999, the fair value of the petroleum swap contracts and call options was approximately $36 million. Other. Management believes that the Company's costs are likely to be affected in the future by (i) higher aircraft ownership costs as new aircraft are delivered, (ii) higher wages, salaries and related costs as the Company compensates its employees comparable to industry average, (iii) changes in the costs of materials and services (in particular, the cost of fuel, which can fluctuate significantly in response to global market conditions), (iv) changes in governmental regulations and taxes affecting air transportation and the costs charged for airport access, including new security requirements, (v) changes in the Company's fleet and related capacity and (vi) the Company's continuing efforts to reduce costs throughout its operations, including reduced maintenance costs for new aircraft, reduced distribution expense from using Continental's electronic ticket product and the internet for bookings, and reduced interest expense. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information called for by this item is provided under the caption "Fuel Hedging" under Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. Also see Item 7A. Quantitative and Qualitative Disclosures About Market Risk in Continental's 1998 10-K. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Following the announcement of the long-term global alliance with Northwest, the Air Partners Transaction and the related governance agreement between the Company and certain affiliates of Northwest (collectively, the "Northwest Transaction"), six separate lawsuits were filed against the Company and its Directors and certain other parties (the "Stockholder Litigation"). The complaints in the Stockholder Litigation generally alleged that the Company's Directors improperly accepted the Northwest Transaction in violation of their fiduciary duties owed to the stockholders of the Company. They further allege that Delta Air Lines, Inc. submitted a proposal to purchase the Company which, in the plaintiffs' opinion, was superior to the Northwest Transaction. On April 1, 1999, the plaintiffs voluntarily dismissed their lawsuit. On April 12, 1999, the judge approved the dismissal. Although the dismissal is without prejudice, so the plaintiffs could again file their claim, the Company does not expect them to do so. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Stockholders was held on May 18, 1999. The following individuals were elected to the Company's Board of Directors to hold office for the ensuing year:
NOMINEE VOTES FOR VOTES WITHHELD Thomas J. Barrack, Jr. 152,431,654 2,273,512 Gordon M. Bethune 152,429,309 2,275,857 David Bonderman 152,240,815 2,464,351 Gregory D. Brenneman 152,431,517 2,273,649 Kirbyjon H. Caldwell 154,705,166 - Patrick Foley 152,430,705 2,274,461 Douglas H. McCorkindale 152,431,975 2,273,191 George G.C. Parker 152,430,957 2,274,209 Richard W. Pogue 152,431,222 2,273,944 William S. Price III 152,431,653 2,273,513 Donald L. Sturm 152,431,124 2,274,042 Charles A. Yamarone 152,431,716 2,273,450 Karen Hastie Williams 152,245,789 2,459,377
A proposal to ratify the appointment of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending December 31, 1999 was voted on by the stockholders as follows:
Votes Votes Broker Votes For Against Abstaining Non-Votes 154,567,557 60,862 76,747 -
ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 10.1 First Amendment to Continental Airlines, Inc. Deferred Compensation Plan, effective January 1, 1999. 10.2 Amendment to Employment Agreement between the Company and Gordon M. Bethune, dated as of May 19, 1999. 10.3 Amendment to Employment Agreement between the Company and Gregory D. Brenneman, dated as of May 19, 1999. 10.4 Amendment to Employment Agreement between the Company and Lawrence W. Kellner, dated as of May 19, 1999. 10.5 Amendment to Employment Agreement between the Company and C.D. McLean, dated as of May 19, 1999. 10.6 Amendment to Employment Agreement between the Company and Jeffery A. Smisek, dated as of May 19, 1999. 10.7 Supplemental Agreement No. 11, including side letters, to Boeing Purchase Agreement No. 1951, dated May 14, 1999. 10.8 Supplemental Agreement No. 2, including side letter, to Boeing Purchase Agreement No. 2060, dated June 8, 1999. 10.9 Supplemental Agreement No. 6, including side letter, to Boeing Purchase Agreement No. 2061, dated May 14, 1999. 27.1 Financial Data Schedule. (b) Reports on Form 8-K: (i) Report dated May 18, 1999 reporting Item 5. "Other Events". No financial statements were filed with the report, which included a Press Release related to the election of Kirbyjon H. Caldwell to the Board of Directors. (ii) Report dated June 25, 1999 reporting Item 7. "Financial Statements and Exhibits". No financial statements were filed with the report, which included an Exhibit Index related to the Continental 1999-2 offering of pass through certificates. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONTINENTAL AIRLINES, INC. (Registrant) Date: July 23, 1999 by: /s/ Lawrence W. Kellner Lawrence W. Kellner Executive Vice President and Chief Financial Officer (On behalf of Registrant) Date: July 23, 1999 /s/ Michael P. Bonds Michael P. Bonds (Principle Accounting Officer) INDEX TO EXHIBITS OF CONTINENTAL AIRLINES, INC. 10.1 First Amendment to Continental Airlines, Inc. Deferred Compensation Plan, effective January 1, 1999. 10.2 Amendment to Employment Agreement between the Company and Gordon M. Bethune, dated as of May 19, 1999. 10.3 Amendment to Employment Agreement between the Company and Gregory D. Brenneman, dated as of May 19, 1999. 10.4 Amendment to Employment Agreement between the Company and Lawrence W. Kellner, dated as of May 19, 1999. 10.5 Amendment to Employment Agreement between the Company and C.D. McLean, dated as of May 19, 1999. 10.6 Amendment to Employment Agreement between the Company and Jeffery A. Smisek, dated as of May 19, 1999. 10.7 Supplemental Agreement No. 11, including side letters, to Boeing Purchase Agreement No. 1951, dated May 14, 1999. (1) 10.8 Supplemental Agreement No. 2, including side letter, to Boeing Purchase Agreement No. 2060, dated June 8, 1999. (1) 10.9 Supplemental Agreement No. 6, including side letter, to Boeing Purchase Agreement No. 2061, dated May 14, 1999. (1) 27.1 Financial Data Schedule. __________________________ (1) The Company has applied to the Commission for confidential treatment for a portion of this exhibit.
                                                     EXHIBIT 10.1

                       FIRST AMENDMENT TO
                   CONTINENTAL AIRLINES, INC.
                   DEFERRED COMPENSATION PLAN


     WHEREAS, CONTINENTAL AIRLINES, INC. (the "Company") has
heretofore adopted the CONTINENTAL AIRLINES, INC. DEFERRED
COMPENSATION PLAN (the "Plan") for the benefit of certain of its
employees and directors and certain employees of its adopting
subsidiaries; and

     WHEREAS, the Company desires to amend the Plan in certain
respects;

     NOW, THEREFORE, the Plan shall be amended as follows,
effective as of January 1, 1999:

     1.   The following shall be added to the end of Section 6.3(a)
of the Plan:

     "Notwithstanding the preceding provisions of this Section
     6.3(a), a Member shall not be entitled to a withdrawal
     under this Section 6.3(a) if the Committee determines, in
     its sole discretion, that the primary purpose of such
     withdrawal is the cessation of Compensation deferrals
     under the Plan.  The Committee shall consider such
     factors as it deems appropriate in order to make a
     determination pursuant to the preceding sentence,
     including, without limitation, the amount of the
     requested withdrawal, the balance in the Member's
     Account, the Member's Compensation deferral election then
     in effect, and the timing of such withdrawal request."

     2.   As amended hereby, the Plan is specifically ratified and
reaffirmed.

     IN WITNESS WHEREOF, the undersigned officer of the Company
acting pursuant to authority granted to him by the Human Resources
Committee of the Company's Board of Directors has executed this
instrument on this 18th day of May, 1999.


                              CONTINENTAL AIRLINES, INC.


                              By:/s/ Jeffery A. Smisek
                                 Jeffery A. Smisek
                                 Executive Vice President


                                                     EXHIBIT 10.2

                AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and Gordon M. Bethune ("Executive").

                            Recitals:

     WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 20,
1998 (the "Existing Agreement"); and

     WHEREAS, the Board of Directors of the Company, and the Human
Resources Committee of the Board of Directors of the Company, by
resolutions duly adopted on May 18, 1999, have authorized the
execution and delivery of this Amendment; and

     WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;

     NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

     1.   Section 4.7(iii) of the Existing Agreement (the
          definition of "Flight Benefits") is hereby amended to
          read in its entirety as follows:

          ""Flight Benefits" shall mean flight benefits on each
          airline operated by the Company or any of its affiliates
          or any successor or successors thereto (the "CO system"),
          consisting of the highest priority space available flight
          passes for Executive and Executive's eligible family
          members (as such eligibility is in effect on May 18,
          1999), a Universal Air Travel Plan (UATP) card (or, in
          the event of discontinuance of the UATP program, a
          similar charge card permitting the purchase of air travel
          through direct billing to the Company or any successor or
          successors thereto (a "Similar Card")) in Executive's
          name for charging on an annual basis up to the applicable
          Annual Travel Limit (as hereinafter defined) with respect
          to such year in value (valued identically to the
          calculation of imputed income resulting from such flight
          benefits described below) of flights (in any fare class)
          on the CO system for Executive, Executive's spouse,
          Executive's family and significant others as determined
          by Executive, a Platinum Elite OnePass Card (or similar
          highest category successor frequent flyer card) in
          Executive's name for use on the CO system,  a membership
          for Executive and Executive's spouse in the Company's
          President's Club (or any successor program maintained in
          the CO system) and payment by the Company to Executive of
          an annual amount (not to exceed in any year the
          applicable Annual Gross Up Limit (as hereinafter defined)
          with respect to such year) sufficient to pay, on an after
          tax basis (i.e., after the payment by Executive of all
          taxes on such amount), the U.S. federal, state and local
          income taxes on imputed income resulting from such
          flights (such imputed income to be calculated during the
          term of such Flight Benefits at the lowest published fare
          (i.e., 21 day advance purchase coach fare, lowest
          negotiated consolidator net fare, or other lowest
          available fare) for the applicable itinerary (or similar
          flights on or around the date of such flight), regardless
          of the actual fare class booked or flown, or as otherwise
          required by law) or resulting from any other flight
          benefits extended to Executive as a result of Executive's
          service as an executive of the Company;"

     2.   The last paragraph of Section 4.7 (Certain Definitions
          and Additional Terms), which immediately follows the last
          numbered subsection of Section 4.7, is hereby deleted and
          replaced in its entirety as follows:

          "As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Travel Limit" shall mean an
          amount (initially $50,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Company's average fare per revenue
          passenger for its jet operations (excluding regional
          jets) with respect to the applicable year as reported in
          its Annual Report on Form 10-K (or, if not so reported,
          as determined by the Company's independent auditors) (the
          "Average Fare") for such year, and the denominator of
          which shall be the Average Fare for the prior year, (ii)
          annually to add thereto any portion of such amount unused
          since the year 1999, and (iii) after adjustments
          described in clauses (i) and (ii) above, automatically
          upon any change in the valuation methodology for imputed
          income from flights (as compared with the valuation
          methodology for imputed income from flights used by the
          Company as of May 18, 1999), so as to preserve the
          benefit of $50,000 annually (adjusted in accordance with
          clauses (i) and (ii) above) of flights relative to the
          valuations resulting from the valuation methodology used
          by the Company as of May 18, 1999 (e.g., if a change in
          the valuation methodology results, on average, in such
          flights being valued 15% higher than the valuation that
          would result using the valuation methodology used by the
          Company as of May 18, 1999, then the Annual Travel Limit
          would be increased by 15% to $57,500, assuming no other
          adjustments pursuant to clauses (i) and (ii) above).  In
          determining any adjustment pursuant to clause (iii)
          above, the Company shall be entitled to rely on a good
          faith calculation performed by its independent auditors
          based on a statistically significant random sampling of
          flight valuations compared with the applicable prior
          valuations of identical flights, which calculation (and
          the basis for any adjustments pursuant to clauses (i) or
          (ii) above) will be provided to Executive upon request.
           The Company will promptly notify Executive in writing of
          any adjustments to the Annual Travel Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Gross Up Limit" shall mean an
          amount (initially $10,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Average Fare for such year, and the
          denominator of which shall be the Average Fare for the
          prior year, (ii) annually to add thereto any portion of
          such amount unused since the year 1999, and (iii) after
          adjustments described in clauses (i) and (ii) above,
          automatically upon any change in the valuation
          methodology for imputed income from flights (as compared
          with the valuation methodology for imputed income from
          flights used by the Company as of May 18, 1999), so as to
          preserve the benefit of $10,000 annually (adjusted in
          accordance with clauses (i) and (ii) above) of tax gross
          up relative to the valuations resulting from the
          valuation methodology used by the Company as of May 18,
          1999 (e.g., if a change in the valuation methodology
          results, on average, in flights being valued 15% higher
          than the valuation that would result using the valuation
          methodology used by the Company as of May 18, 1999, then
          the Annual Gross Up Limit would be increased by 15% to
          $11,500, assuming no other adjustments pursuant to
          clauses (i) and (ii) above).  In determining any
          adjustment pursuant to clause (iii) above, the Company
          shall be entitled to rely on a good faith calculation
          performed by its independent auditors based on a
          statistically significant random sampling of flight
          valuations compared with the applicable prior valuations
          of identical flights, which calculation (and the basis
          for any adjustments pursuant to clauses (i) or (ii)
          above) will be provided to Executive upon request.   The
          Company will promptly notify Executive in writing of any
          adjustments to the Annual Gross Up Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, a year may
          consist of twelve consecutive months other than a
          calendar year, it being the Company's practice as of May
          18, 1999 for purposes of Flight Benefits for a year to
          commence on December 1 and end on the following November
          30 (for example, the twelve-month period from December 1,
          1998 to November 30, 1999 is considered the year 1999 for
          purposes of Flight Benefits); provided that all
          calculations for purposes of clause (i) in the prior two
          paragraphs shall be with respect to fiscal years of the
          Company.

          As used for purposes of Flight Benefits, the term
          "affiliates" of the Company means any entity controlled
          by, controlling, or under common control with the
          Company, it being understood that control of an entity
          shall require the direct or indirect ownership of a
          majority of the outstanding capital stock of such entity.

          No tickets issued on the CO system in connection with the
          Flight Benefits may be purchased other than directly from
          the Company or its successor or successors (i.e., no
          travel agent or other fee or commission based distributor
          may be used), nor may any such tickets be sold or
          transferred by Executive or any other person, nor may any
          such tickets be used by any person other than the person
          in whose name the ticket is issued.  Executive agrees
          that, after receipt of an invoice or other accounting
          statement therefor, he will promptly (and in any event
          within 45 days after receipt of such invoice or other
          accounting statement) reimburse the Company for all
          charges on his UATP card (or Similar Card) which are not
          for flights on the CO system and which are not otherwise
          reimbursable to Executive under the provisions of
          paragraph 3.7(ii) hereof, or which are for tickets in
          excess of the applicable Annual Travel Limit.   Executive
          agrees that the credit availability under Executive's
          UATP card (or Similar Card) may be suspended if Executive
          does not timely reimburse the Company as described in the
          foregoing sentence or if Executive exceeds the applicable
          Annual Travel Limit with respect to a year; provided,
          that, immediately upon the Company's receipt of
          Executive's reimbursement in full (or, in the case of
          exceeding the applicable Annual Travel Limit, beginning
          the next following year and after such reimbursement),
          the credit availability under Executive's UATP card (or
          Similar Card) will be restored.

          The sole cost to Executive of flights on the CO system
          pursuant to use of Executive's Flight Benefits will be
          the imputed income with respect to flights on the CO
          system charged on Executive's UATP card (or Similar
          Card), calculated throughout the term of Executive's
          Flight Benefits at the lowest published fare (i.e., 21
          day advance purchase coach fare, lowest negotiated
          consolidator net fare or other lowest available fare) for
          the applicable itinerary (or similar flights on or around
          the date of such flight), regardless of the actual fare
          class booked or flown, or as otherwise required by law,
          and reported to Executive as required by applicable law.
          With respect to any period for which the Company is
          obligated to provide the tax gross up described above,
          Executive will provide to the Company, upon request, a
          calculation or other evidence of Executive's marginal tax
          rate sufficient to permit the Company to calculate
          accurately the amount to be paid to Executive.

          Executive will be issued a UATP card (or Similar Card),
          a Platinum Elite OnePass Card (or similar highest
          category successor frequent flyer card), a membership
          card in the Company's Presidents Club (or any successor
          program maintained in the CO system) for Executive and
          Executive's spouse, and an appropriate flight pass
          identification card, each valid at all times during the
          term of Executive's Flight Benefits."


     3.   The Existing Agreement, as amended by this Amendment, is
          hereby ratified and confirmed and shall continue in full
          force and effect in accordance with its terms.


*******


     IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 19th day of May, 1999.


                              CONTINENTAL AIRLINES, INC.



                              By: ____________________________
                                  Jeffery A. Smisek
                                  Executive Vice President


                              EXECUTIVE



                              _________________________________
                              Gordon M. Bethune

                                                     EXHIBIT 10.3

                AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and Gregory D. Brenneman ("Executive").

                            Recitals:

     WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 20,
1998 (the "Existing Agreement"); and

     WHEREAS,  the Board of Directors of the Company, and the Human
Resources Committee of the Board of Directors of the Company, by
resolutions duly adopted on May 18, 1999, have authorized the
execution and delivery of this Amendment; and

     WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;

     NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

     1.   Section 4.7(iii) of the Existing Agreement (the
          definition of "Flight Benefits") is hereby amended to
          read in its entirety as follows:

          ""Flight Benefits" shall mean flight benefits on each
          airline operated by the Company or any of its affiliates
          or any successor or successors thereto (the "CO system"),
          consisting of the highest priority space available flight
          passes for Executive and Executive's eligible family
          members (as such eligibility is in effect on May 18,
          1999), a Universal Air Travel Plan (UATP) card (or, in
          the event of discontinuance of the UATP program, a
          similar charge card permitting the purchase of air travel
          through direct billing to the Company or any successor or
          successors thereto (a "Similar Card")) in Executive's
          name for charging on an annual basis up to the applicable
          Annual Travel Limit (as hereinafter defined) with respect
          to such year in value (valued identically to the
          calculation of imputed income resulting from such flight
          benefits described below) of flights (in any fare class)
          on the CO system for Executive, Executive's spouse,
          Executive's family and significant others as determined
          by Executive, a Platinum Elite OnePass Card (or similar
          highest category successor frequent flyer card) in
          Executive's name for use on the CO system,  a membership
          for Executive and Executive's spouse in the Company's
          President's Club (or any successor program maintained in
          the CO system) and payment by the Company to Executive of
          an annual amount (not to exceed in any year the
          applicable Annual Gross Up Limit (as hereinafter defined)
          with respect to such year) sufficient to pay, on an after
          tax basis (i.e., after the payment by Executive of all
          taxes on such amount), the U.S. federal, state and local
          income taxes on imputed income resulting from such
          flights (such imputed income to be calculated during the
          term of such Flight Benefits at the lowest published fare
          (i.e., 21 day advance purchase coach fare, lowest
          negotiated consolidator net fare, or other lowest
          available fare) for the applicable itinerary (or similar
          flights on or around the date of such flight), regardless
          of the actual fare class booked or flown, or as otherwise
          required by law) or resulting from any other flight
          benefits extended to Executive as a result of Executive's
          service as an executive of the Company;"


     2.   The last paragraph of Section 4.7 (Certain Definitions
          and Additional Terms), which immediately follows the last
          numbered subsection of Section 4.7, is hereby deleted and
          replaced in its entirety as follows:

          "As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Travel Limit" shall mean an
          amount (initially $50,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Company's average fare per revenue
          passenger for its jet operations (excluding regional
          jets) with respect to the applicable year as reported in
          its Annual Report on Form 10-K (or, if not so reported,
          as determined by the Company's independent auditors) (the
          "Average Fare") for such year, and the denominator of
          which shall be the Average Fare for the prior year, (ii)
          annually to add thereto any portion of such amount unused
          since the year 1999, and (iii) after adjustments
          described in clauses (i) and (ii) above, automatically
          upon any change in the valuation methodology for imputed
          income from flights (as compared with the valuation
          methodology for imputed income from flights used by the
          Company as of May 18, 1999), so as to preserve the
          benefit of $50,000 annually (adjusted in accordance with
          clauses (i) and (ii) above) of flights relative to the
          valuations resulting from the valuation methodology used
          by the Company as of May 18, 1999 (e.g., if a change in
          the valuation methodology results, on average, in such
          flights being valued 15% higher than the valuation that
          would result using the valuation methodology used by the
          Company as of May 18, 1999, then the Annual Travel Limit
          would be increased by 15% to $57,500, assuming no other
          adjustments pursuant to clauses (i) and (ii) above).  In
          determining any adjustment pursuant to clause (iii)
          above, the Company shall be entitled to rely on a good
          faith calculation performed by its independent auditors
          based on a statistically significant random sampling of
          flight valuations compared with the applicable prior
          valuations of identical flights, which calculation (and
          the basis for any adjustments pursuant to clauses (i) or
          (ii) above) will be provided to Executive upon request.
           The Company will promptly notify Executive in writing of
          any adjustments to the Annual Travel Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Gross Up Limit" shall mean an
          amount (initially $10,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Average Fare for such year, and the
          denominator of which shall be the Average Fare for the
          prior year, (ii) annually to add thereto any portion of
          such amount unused since the year 1999, and (iii) after
          adjustments described in clauses (i) and (ii) above,
          automatically upon any change in the valuation
          methodology for imputed income from flights (as compared
          with the valuation methodology for imputed income from
          flights used by the Company as of May 18, 1999), so as to
          preserve the benefit of $10,000 annually (adjusted in
          accordance with clauses (i) and (ii) above) of tax gross
          up relative to the valuations resulting from the
          valuation methodology used by the Company as of May 18,
          1999 (e.g., if a change in the valuation methodology
          results, on average, in flights being valued 15% higher
          than the valuation that would result using the valuation
          methodology used by the Company as of May 18, 1999, then
          the Annual Gross Up Limit would be increased by 15% to
          $11,500, assuming no other adjustments pursuant to
          clauses (i) and (ii) above).  In determining any
          adjustment pursuant to clause (iii) above, the Company
          shall be entitled to rely on a good faith calculation
          performed by its independent auditors based on a
          statistically significant random sampling of flight
          valuations compared with the applicable prior valuations
          of identical flights, which calculation (and the basis
          for any adjustments pursuant to clauses (i) or (ii)
          above) will be provided to Executive upon request.   The
          Company will promptly notify Executive in writing of any
          adjustments to the Annual Gross Up Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, a year may
          consist of twelve consecutive months other than a
          calendar year, it being the Company's practice as of May
          18, 1999 for purposes of Flight Benefits for a year to
          commence on December 1 and end on the following November
          30 (for example, the twelve-month period from December 1,
          1998 to November 30, 1999 is considered the year 1999 for
          purposes of Flight Benefits); provided that all
          calculations for purposes of clause (i) in the prior two
          paragraphs shall be with respect to fiscal years of the
          Company.

          As used for purposes of Flight Benefits, the term
          "affiliates" of the Company means any entity controlled
          by, controlling, or under common control with the
          Company, it being understood that control of an entity
          shall require the direct or indirect ownership of a
          majority of the outstanding capital stock of such entity.

          No tickets issued on the CO system in connection with the
          Flight Benefits may be purchased other than directly from
          the Company or its successor or successors (i.e., no
          travel agent or other fee or commission based distributor
          may be used), nor may any such tickets be sold or
          transferred by Executive or any other person, nor may any
          such tickets be used by any person other than the person
          in whose name the ticket is issued.  Executive agrees
          that, after receipt of an invoice or other accounting
          statement therefor, he will promptly (and in any event
          within 45 days after receipt of such invoice or other
          accounting statement) reimburse the Company for all
          charges on his UATP card (or Similar Card) which are not
          for flights on the CO system and which are not otherwise
          reimbursable to Executive under the provisions of
          paragraph 3.7(ii) hereof, or which are for tickets in
          excess of the applicable Annual Travel Limit.   Executive
          agrees that the credit availability under Executive's
          UATP card (or Similar Card) may be suspended if Executive
          does not timely reimburse the Company as described in the
          foregoing sentence or if Executive exceeds the applicable
          Annual Travel Limit with respect to a year; provided,
          that, immediately upon the Company's receipt of
          Executive's reimbursement in full (or, in the case of
          exceeding the applicable Annual Travel Limit, beginning
          the next following year and after such reimbursement),
          the credit availability under Executive's UATP card (or
          Similar Card) will be restored.

          The sole cost to Executive of flights on the CO system
          pursuant to use of Executive's Flight Benefits will be
          the imputed income with respect to flights on the CO
          system charged on Executive's UATP card (or Similar
          Card), calculated throughout the term of Executive's
          Flight Benefits at the lowest published fare (i.e., 21
          day advance purchase coach fare, lowest negotiated
          consolidator net fare or other lowest available fare) for
          the applicable itinerary (or similar flights on or around
          the date of such flight), regardless of the actual fare
          class booked or flown, or as otherwise required by law,
          and reported to Executive as required by applicable law.
          With respect to any period for which the Company is
          obligated to provide the tax gross up described above,
          Executive will provide to the Company, upon request, a
          calculation or other evidence of Executive's marginal tax
          rate sufficient to permit the Company to calculate
          accurately the amount to be paid to Executive.

          Executive will be issued a UATP card (or Similar Card),
          a Platinum Elite OnePass Card (or similar highest
          category successor frequent flyer card), a membership
          card in the Company's Presidents Club (or any successor
          program maintained in the CO system) for Executive and
          Executive's spouse, and an appropriate flight pass
          identification card, each valid at all times during the
          term of Executive's Flight Benefits."


     3.   The Existing Agreement, as amended by this Amendment, is
          hereby ratified and confirmed and shall continue in full
          force and effect in accordance with its terms.


                             *******

     IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 19th day of May, 1999.


                              CONTINENTAL AIRLINES, INC.



                              By: ____________________________
                                  Jeffery A. Smisek
                                  Executive Vice President


                              EXECUTIVE



                              _________________________________
                              Gregory D. Brenneman


                                                     EXHIBIT 10.4

                AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and Lawrence W. Kellner ("Executive").

                            Recitals:

     WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995, as amended by Amendment to Employment Agreement dated as of
April 19, 1996, Amendment to Employment Agreement dated as of
September 30, 1996, and Amendment to Employment Agreement dated as
of November 20, 1998 (as so amended, the "Existing Agreement"); and

     WHEREAS, the Board of Directors of the Company, and the Human
Resources Committee of the Board of Directors of the Company, by
resolutions duly adopted on May 18, 1999, have authorized the
execution and delivery of this Amendment; and

     WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;

     NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

     1.   Section 4.7(iv) of the Existing Agreement (the definition
          of "Flight Benefits") is hereby amended to read in its
          entirety as follows:

          ""Flight Benefits" shall mean flight benefits on each
          airline operated by the Company or any of its affiliates
          or any successor or successors thereto (the "CO system"),
          consisting of the highest priority space available flight
          passes for Executive and Executive's eligible family
          members (as such eligibility is in effect on May 18,
          1999), a Universal Air Travel Plan (UATP) card (or, in
          the event of discontinuance of the UATP program, a
          similar charge card permitting the purchase of air travel
          through direct billing to the Company or any successor or
          successors thereto (a "Similar Card")) in Executive's
          name for charging on an annual basis up to the applicable
          Annual Travel Limit (as hereinafter defined) with respect
          to such year in value (valued identically to the
          calculation of imputed income resulting from such flight
          benefits described below) of flights (in any fare class)
          on the CO system for Executive, Executive's spouse,
          Executive's family and significant others as determined
          by Executive, a Platinum Elite OnePass Card (or similar
          highest category successor frequent flyer card) in
          Executive's name for use on the CO system,  a membership
          for Executive and Executive's spouse in the Company's
          President's Club (or any successor program maintained in
          the CO system) and payment by the Company to Executive of
          an annual amount (not to exceed in any year the
          applicable Annual Gross Up Limit (as hereinafter defined)
          with respect to such year) sufficient to pay, on an after
          tax basis (i.e., after the payment by Executive of all
          taxes on such amount), the U.S. federal, state and local
          income taxes on imputed income resulting from such
          flights (such imputed income to be calculated during the
          term of such Flight Benefits at the lowest published fare
          (i.e., 21 day advance purchase coach fare, lowest
          negotiated consolidator net fare, or other lowest
          available fare) for the applicable itinerary (or similar
          flights on or around the date of such flight), regardless
          of the actual fare class booked or flown, or as otherwise
          required by law) or resulting from any other flight
          benefits extended to Executive as a result of Executive's
          service as an executive of the Company;"


     2.   The last paragraph of Section 4.7 (Certain Definitions
          and Additional Terms), which immediately follows the last
          numbered subsection of Section 4.7, is hereby deleted and
          replaced in its entirety as follows:

          "As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Travel Limit" shall mean an
          amount (initially $50,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Company's average fare per revenue
          passenger for its jet operations (excluding regional
          jets) with respect to the applicable year as reported in
          its Annual Report on Form 10-K (or, if not so reported,
          as determined by the Company's independent auditors) (the
          "Average Fare") for such year, and the denominator of
          which shall be the Average Fare for the prior year, (ii)
          annually to add thereto any portion of such amount unused
          since the year 1999, and (iii) after adjustments
          described in clauses (i) and (ii) above, automatically
          upon any change in the valuation methodology for imputed
          income from flights (as compared with the valuation
          methodology for imputed income from flights used by the
          Company as of May 18, 1999), so as to preserve the
          benefit of $50,000 annually (adjusted in accordance with
          clauses (i) and (ii) above) of flights relative to the
          valuations resulting from the valuation methodology used
          by the Company as of May 18, 1999 (e.g., if a change in
          the valuation methodology results, on average, in such
          flights being valued 15% higher than the valuation that
          would result using the valuation methodology used by the
          Company as of May 18, 1999, then the Annual Travel Limit
          would be increased by 15% to $57,500, assuming no other
          adjustments pursuant to clauses (i) and (ii) above).  In
          determining any adjustment pursuant to clause (iii)
          above, the Company shall be entitled to rely on a good
          faith calculation performed by its independent auditors
          based on a statistically significant random sampling of
          flight valuations compared with the applicable prior
          valuations of identical flights, which calculation (and
          the basis for any adjustments pursuant to clauses (i) or
          (ii) above) will be provided to Executive upon request.
           The Company will promptly notify Executive in writing of
          any adjustments to the Annual Travel Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Gross Up Limit" shall mean an
          amount (initially $10,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Average Fare for such year, and the
          denominator of which shall be the Average Fare for the
          prior year, (ii) annually to add thereto any portion of
          such amount unused since the year 1999, and (iii) after
          adjustments described in clauses (i) and (ii) above,
          automatically upon any change in the valuation
          methodology for imputed income from flights (as compared
          with the valuation methodology for imputed income from
          flights used by the Company as of May 18, 1999), so as to
          preserve the benefit of $10,000 annually (adjusted in
          accordance with clauses (i) and (ii) above) of tax gross
          up relative to the valuations resulting from the
          valuation methodology used by the Company as of May 18,
          1999 (e.g., if a change in the valuation methodology
          results, on average, in flights being valued 15% higher
          than the valuation that would result using the valuation
          methodology used by the Company as of May 18, 1999, then
          the Annual Gross Up Limit would be increased by 15% to
          $11,500, assuming no other adjustments pursuant to
          clauses (i) and (ii) above).  In determining any
          adjustment pursuant to clause (iii) above, the Company
          shall be entitled to rely on a good faith calculation
          performed by its independent auditors based on a
          statistically significant random sampling of flight
          valuations compared with the applicable prior valuations
          of identical flights, which calculation (and the basis
          for any adjustments pursuant to clauses (i) or (ii)
          above) will be provided to Executive upon request.   The
          Company will promptly notify Executive in writing of any
          adjustments to the Annual Gross Up Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, a year may
          consist of twelve consecutive months other than a
          calendar year, it being the Company's practice as of May
          18, 1999 for purposes of Flight Benefits for a year to
          commence on December 1 and end on the following November
          30 (for example, the twelve-month period from December 1,
          1998 to November 30, 1999 is considered the year 1999 for
          purposes of Flight Benefits); provided that all
          calculations for purposes of clause (i) in the prior two
          paragraphs shall be with respect to fiscal years of the
          Company.

          As used for purposes of Flight Benefits, the term
          "affiliates" of the Company means any entity controlled
          by, controlling, or under common control with the
          Company, it being understood that control of an entity
          shall require the direct or indirect ownership of a
          majority of the outstanding capital stock of such entity.

          No tickets issued on the CO system in connection with the
          Flight Benefits may be purchased other than directly from
          the Company or its successor or successors (i.e., no
          travel agent or other fee or commission based distributor
          may be used), nor may any such tickets be sold or
          transferred by Executive or any other person, nor may any
          such tickets be used by any person other than the person
          in whose name the ticket is issued.  Executive agrees
          that, after receipt of an invoice or other accounting
          statement therefor, he will promptly (and in any event
          within 45 days after receipt of such invoice or other
          accounting statement) reimburse the Company for all
          charges on his UATP card (or Similar Card) which are not
          for flights on the CO system and which are not otherwise
          reimbursable to Executive under the provisions of
          paragraph 3.4(i) hereof, or which are for tickets in
          excess of the applicable Annual Travel Limit.   Executive
          agrees that the credit availability under Executive's
          UATP card (or Similar Card) may be suspended if Executive
          does not timely reimburse the Company as described in the
          foregoing sentence or if Executive exceeds the applicable
          Annual Travel Limit with respect to a year; provided,
          that, immediately upon the Company's receipt of
          Executive's reimbursement in full (or, in the case of
          exceeding the applicable Annual Travel Limit, beginning
          the next following year and after such reimbursement),
          the credit availability under Executive's UATP card (or
          Similar Card) will be restored.

          The sole cost to Executive of flights on the CO system
          pursuant to use of Executive's Flight Benefits will be
          the imputed income with respect to flights on the CO
          system charged on Executive's UATP card (or Similar
          Card), calculated throughout the term of Executive's
          Flight Benefits at the lowest published fare (i.e., 21
          day advance purchase coach fare, lowest negotiated
          consolidator net fare or other lowest available fare) for
          the applicable itinerary (or similar flights on or around
          the date of such flight), regardless of the actual fare
          class booked or flown, or as otherwise required by law,
          and reported to Executive as required by applicable law.
          With respect to any period for which the Company is
          obligated to provide the tax gross up described above,
          Executive will provide to the Company, upon request, a
          calculation or other evidence of Executive's marginal tax
          rate sufficient to permit the Company to calculate
          accurately the amount to be paid to Executive.

          Executive will be issued a UATP card (or Similar Card),
          a Platinum Elite OnePass Card (or similar highest
          category successor frequent flyer card), a membership
          card in the Company's Presidents Club (or any successor
          program maintained in the CO system) for Executive and
          Executive's spouse, and an appropriate flight pass
          identification card, each valid at all times during the
          term of Executive's Flight Benefits."


     3.   The Existing Agreement, as amended by this Amendment, is
          hereby ratified and confirmed and shall continue in full
          force and effect in accordance with its terms.


     IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 19th day of May, 1999.


                              CONTINENTAL AIRLINES, INC.



                              By: ____________________________
                                  Jeffery A. Smisek
                                  Executive Vice President


                              EXECUTIVE



                              _________________________________
                              Lawrence W. Kellner


                                                     EXHIBIT 10.5

                AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and C.D. McLean ("Executive").

                            Recitals:

     WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995, as amended by Amendment to Employment Agreement dated as of
April 19, 1996, Amendment to Employment Agreement dated as of
September 30, 1996, and Amendment to Employment Agreement dated as
of November 20, 1998 (as so amended, the "Existing Agreement"); and

     WHEREAS,  the Board of Directors of the Company, and the Human
Resources Committee of the Board of Directors of the Company, by
resolutions duly adopted on May 18, 1999, have authorized the
execution and delivery of this Amendment; and

     WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;

     NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

     1.   Section 4.7(iv) of the Existing Agreement (the definition
          of "Flight Benefits") is hereby amended to read in its
          entirety as follows:

          ""Flight Benefits" shall mean flight benefits on each
          airline operated by the Company or any of its affiliates
          or any successor or successors thereto (the "CO system"),
          consisting of the highest priority space available flight
          passes for Executive and Executive's eligible family
          members (as such eligibility is in effect on May 18,
          1999), a Universal Air Travel Plan (UATP) card (or, in
          the event of discontinuance of the UATP program, a
          similar charge card permitting the purchase of air travel
          through direct billing to the Company or any successor or
          successors thereto (a "Similar Card")) in Executive's
          name for charging on an annual basis up to the applicable
          Annual Travel Limit (as hereinafter defined) with respect
          to such year in value (valued identically to the
          calculation of imputed income resulting from such flight
          benefits described below) of flights (in any fare class)
          on the CO system for Executive, Executive's spouse,
          Executive's family and significant others as determined
          by Executive, a Platinum Elite OnePass Card (or similar
          highest category successor frequent flyer card) in
          Executive's name for use on the CO system,  a membership
          for Executive and Executive's spouse in the Company's
          President's Club (or any successor program maintained in
          the CO system) and payment by the Company to Executive of
          an annual amount (not to exceed in any year the
          applicable Annual Gross Up Limit (as hereinafter defined)
          with respect to such year) sufficient to pay, on an after
          tax basis (i.e., after the payment by Executive of all
          taxes on such amount), the U.S. federal, state and local
          income taxes on imputed income resulting from such
          flights (such imputed income to be calculated during the
          term of such Flight Benefits at the lowest published fare
          (i.e., 21 day advance purchase coach fare, lowest
          negotiated consolidator net fare, or other lowest
          available fare) for the applicable itinerary (or similar
          flights on or around the date of such flight), regardless
          of the actual fare class booked or flown, or as otherwise
          required by law) or resulting from any other flight
          benefits extended to Executive as a result of Executive's
          service as an executive of the Company;"


     2.   The last paragraph of Section 4.7 (Certain Definitions
          and Additional Terms), which immediately follows the last
          numbered subsection of Section 4.7, is hereby deleted and
          replaced in its entirety as follows:

          "As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Travel Limit" shall mean an
          amount (initially $50,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Company's average fare per revenue
          passenger for its jet operations (excluding regional
          jets) with respect to the applicable year as reported in
          its Annual Report on Form 10-K (or, if not so reported,
          as determined by the Company's independent auditors) (the
          "Average Fare") for such year, and the denominator of
          which shall be the Average Fare for the prior year, (ii)
          annually to add thereto any portion of such amount unused
          since the year 1999, and (iii) after adjustments
          described in clauses (i) and (ii) above, automatically
          upon any change in the valuation methodology for imputed
          income from flights (as compared with the valuation
          methodology for imputed income from flights used by the
          Company as of May 18, 1999), so as to preserve the
          benefit of $50,000 annually (adjusted in accordance with
          clauses (i) and (ii) above) of flights relative to the
          valuations resulting from the valuation methodology used
          by the Company as of May 18, 1999 (e.g., if a change in
          the valuation methodology results, on average, in such
          flights being valued 15% higher than the valuation that
          would result using the valuation methodology used by the
          Company as of May 18, 1999, then the Annual Travel Limit
          would be increased by 15% to $57,500, assuming no other
          adjustments pursuant to clauses (i) and (ii) above).  In
          determining any adjustment pursuant to clause (iii)
          above, the Company shall be entitled to rely on a good
          faith calculation performed by its independent auditors
          based on a statistically significant random sampling of
          flight valuations compared with the applicable prior
          valuations of identical flights, which calculation (and
          the basis for any adjustments pursuant to clauses (i) or
          (ii) above) will be provided to Executive upon request.
           The Company will promptly notify Executive in writing of
          any adjustments to the Annual Travel Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Gross Up Limit" shall mean an
          amount (initially $10,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Average Fare for such year, and the
          denominator of which shall be the Average Fare for the
          prior year, (ii) annually to add thereto any portion of
          such amount unused since the year 1999, and (iii) after
          adjustments described in clauses (i) and (ii) above,
          automatically upon any change in the valuation
          methodology for imputed income from flights (as compared
          with the valuation methodology for imputed income from
          flights used by the Company as of May 18, 1999), so as to
          preserve the benefit of $10,000 annually (adjusted in
          accordance with clauses (i) and (ii) above) of tax gross
          up relative to the valuations resulting from the
          valuation methodology used by the Company as of May 18,
          1999 (e.g., if a change in the valuation methodology
          results, on average, in flights being valued 15% higher
          than the valuation that would result using the valuation
          methodology used by the Company as of May 18, 1999, then
          the Annual Gross Up Limit would be increased by 15% to
          $11,500, assuming no other adjustments pursuant to
          clauses (i) and (ii) above).  In determining any
          adjustment pursuant to clause (iii) above, the Company
          shall be entitled to rely on a good faith calculation
          performed by its independent auditors based on a
          statistically significant random sampling of flight
          valuations compared with the applicable prior valuations
          of identical flights, which calculation (and the basis
          for any adjustments pursuant to clauses (i) or (ii)
          above) will be provided to Executive upon request.   The
          Company will promptly notify Executive in writing of any
          adjustments to the Annual Gross Up Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, a year may
          consist of twelve consecutive months other than a
          calendar year, it being the Company's practice as of May
          18, 1999 for purposes of Flight Benefits for a year to
          commence on December 1 and end on the following November
          30 (for example, the twelve-month period from December 1,
          1998 to November 30, 1999 is considered the year 1999 for
          purposes of Flight Benefits); provided that all
          calculations for purposes of clause (i) in the prior two
          paragraphs shall be with respect to fiscal years of the
          Company.

          As used for purposes of Flight Benefits, the term
          "affiliates" of the Company means any entity controlled
          by, controlling, or under common control with the
          Company, it being understood that control of an entity
          shall require the direct or indirect ownership of a
          majority of the outstanding capital stock of such entity.

          No tickets issued on the CO system in connection with the
          Flight Benefits may be purchased other than directly from
          the Company or its successor or successors (i.e., no
          travel agent or other fee or commission based distributor
          may be used), nor may any such tickets be sold or
          transferred by Executive or any other person, nor may any
          such tickets be used by any person other than the person
          in whose name the ticket is issued.  Executive agrees
          that, after receipt of an invoice or other accounting
          statement therefor, he will promptly (and in any event
          within 45 days after receipt of such invoice or other
          accounting statement) reimburse the Company for all
          charges on his UATP card (or Similar Card) which are not
          for flights on the CO system and which are not otherwise
          reimbursable to Executive under the provisions of
          paragraph 3.4(i) hereof, or which are for tickets in
          excess of the applicable Annual Travel Limit.   Executive
          agrees that the credit availability under Executive's
          UATP card (or Similar Card) may be suspended if Executive
          does not timely reimburse the Company as described in the
          foregoing sentence or if Executive exceeds the applicable
          Annual Travel Limit with respect to a year; provided,
          that, immediately upon the Company's receipt of
          Executive's reimbursement in full (or, in the case of
          exceeding the applicable Annual Travel Limit, beginning
          the next following year and after such reimbursement),
          the credit availability under Executive's UATP card (or
          Similar Card) will be restored.

          The sole cost to Executive of flights on the CO system
          pursuant to use of Executive's Flight Benefits will be
          the imputed income with respect to flights on the CO
          system charged on Executive's UATP card (or Similar
          Card), calculated throughout the term of Executive's
          Flight Benefits at the lowest published fare (i.e., 21
          day advance purchase coach fare, lowest negotiated
          consolidator net fare or other lowest available fare) for
          the applicable itinerary (or similar flights on or around
          the date of such flight), regardless of the actual fare
          class booked or flown, or as otherwise required by law,
          and reported to Executive as required by applicable law.
          With respect to any period for which the Company is
          obligated to provide the tax gross up described above,
          Executive will provide to the Company, upon request, a
          calculation or other evidence of Executive's marginal tax
          rate sufficient to permit the Company to calculate
          accurately the amount to be paid to Executive.

          Executive will be issued a UATP card (or Similar Card),
          a Platinum Elite OnePass Card (or similar highest
          category successor frequent flyer card), a membership
          card in the Company's Presidents Club (or any successor
          program maintained in the CO system) for Executive and
          Executive's spouse, and an appropriate flight pass
          identification card, each valid at all times during the
          term of Executive's Flight Benefits."


     3.   The Existing Agreement, as amended by this Amendment, is
          hereby ratified and confirmed and shall continue in full
          force and effect in accordance with its terms.


     IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 19th day of May, 1999.


                              CONTINENTAL AIRLINES, INC.



                              By: ____________________________
                                  Jeffery A. Smisek
                                  Executive Vice President


                              EXECUTIVE



                              _________________________________
                              C.D. McLean


                                                     EXHIBIT 10.6

                AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and Jeffery A. Smisek ("Executive").

                            Recitals:

     WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995, as amended by Amendment to Employment Agreement dated as of
April 19, 1996, Amendment to Employment Agreement dated as of
September 30, 1996, and Amendment to Employment Agreement dated as
of November 20, 1998 (as so amended, the "Existing Agreement"); and

     WHEREAS,  the Board of Directors of the Company, and the Human
Resources Committee of the Board of Directors of the Company, by
resolutions duly adopted on May 18, 1999, have authorized the
execution and delivery of this Amendment; and

     WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;

     NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

     1.   Section 4.7(iv) of the Existing Agreement (the definition
          of "Flight Benefits") is hereby amended to read in its
          entirety as follows:

          ""Flight Benefits" shall mean flight benefits on each
          airline operated by the Company or any of its affiliates
          or any successor or successors thereto (the "CO system"),
          consisting of the highest priority space available flight
          passes for Executive and Executive's eligible family
          members (as such eligibility is in effect on May 18,
          1999), a Universal Air Travel Plan (UATP) card (or, in
          the event of discontinuance of the UATP program, a
          similar charge card permitting the purchase of air travel
          through direct billing to the Company or any successor or
          successors thereto (a "Similar Card")) in Executive's
          name for charging on an annual basis up to the applicable
          Annual Travel Limit (as hereinafter defined) with respect
          to such year in value (valued identically to the
          calculation of imputed income resulting from such flight
          benefits described below) of flights (in any fare class)
          on the CO system for Executive, Executive's spouse,
          Executive's family and significant others as determined
          by Executive, a Platinum Elite OnePass Card (or similar
          highest category successor frequent flyer card) in
          Executive's name for use on the CO system,  a membership
          for Executive and Executive's spouse in the Company's
          President's Club (or any successor program maintained in
          the CO system) and payment by the Company to Executive of
          an annual amount (not to exceed in any year the
          applicable Annual Gross Up Limit (as hereinafter defined)
          with respect to such year) sufficient to pay, on an after
          tax basis (i.e., after the payment by Executive of all
          taxes on such amount), the U.S. federal, state and local
          income taxes on imputed income resulting from such
          flights (such imputed income to be calculated during the
          term of such Flight Benefits at the lowest published fare
          (i.e., 21 day advance purchase coach fare, lowest
          negotiated consolidator net fare, or other lowest
          available fare) for the applicable itinerary (or similar
          flights on or around the date of such flight), regardless
          of the actual fare class booked or flown, or as otherwise
          required by law) or resulting from any other flight
          benefits extended to Executive as a result of Executive's
          service as an executive of the Company;"


     2.   The last paragraph of Section 4.7 (Certain Definitions
          and Additional Terms), which immediately follows the last
          numbered subsection of Section 4.7, is hereby deleted and
          replaced in its entirety as follows:

          "As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Travel Limit" shall mean an
          amount (initially $50,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Company's average fare per revenue
          passenger for its jet operations (excluding regional
          jets) with respect to the applicable year as reported in
          its Annual Report on Form 10-K (or, if not so reported,
          as determined by the Company's independent auditors) (the
          "Average Fare") for such year, and the denominator of
          which shall be the Average Fare for the prior year, (ii)
          annually to add thereto any portion of such amount unused
          since the year 1999, and (iii) after adjustments
          described in clauses (i) and (ii) above, automatically
          upon any change in the valuation methodology for imputed
          income from flights (as compared with the valuation
          methodology for imputed income from flights used by the
          Company as of May 18, 1999), so as to preserve the
          benefit of $50,000 annually (adjusted in accordance with
          clauses (i) and (ii) above) of flights relative to the
          valuations resulting from the valuation methodology used
          by the Company as of May 18, 1999 (e.g., if a change in
          the valuation methodology results, on average, in such
          flights being valued 15% higher than the valuation that
          would result using the valuation methodology used by the
          Company as of May 18, 1999, then the Annual Travel Limit
          would be increased by 15% to $57,500, assuming no other
          adjustments pursuant to clauses (i) and (ii) above).  In
          determining any adjustment pursuant to clause (iii)
          above, the Company shall be entitled to rely on a good
          faith calculation performed by its independent auditors
          based on a statistically significant random sampling of
          flight valuations compared with the applicable prior
          valuations of identical flights, which calculation (and
          the basis for any adjustments pursuant to clauses (i) or
          (ii) above) will be provided to Executive upon request.
           The Company will promptly notify Executive in writing of
          any adjustments to the Annual Travel Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, with respect to
          any year, the term "Annual Gross Up Limit" shall mean an
          amount (initially $10,000), which amount shall be
          adjusted (i) annually (beginning with the year 2000) by
          multiplying such amount by a fraction, the numerator of
          which shall be the Average Fare for such year, and the
          denominator of which shall be the Average Fare for the
          prior year, (ii) annually to add thereto any portion of
          such amount unused since the year 1999, and (iii) after
          adjustments described in clauses (i) and (ii) above,
          automatically upon any change in the valuation
          methodology for imputed income from flights (as compared
          with the valuation methodology for imputed income from
          flights used by the Company as of May 18, 1999), so as to
          preserve the benefit of $10,000 annually (adjusted in
          accordance with clauses (i) and (ii) above) of tax gross
          up relative to the valuations resulting from the
          valuation methodology used by the Company as of May 18,
          1999 (e.g., if a change in the valuation methodology
          results, on average, in flights being valued 15% higher
          than the valuation that would result using the valuation
          methodology used by the Company as of May 18, 1999, then
          the Annual Gross Up Limit would be increased by 15% to
          $11,500, assuming no other adjustments pursuant to
          clauses (i) and (ii) above).  In determining any
          adjustment pursuant to clause (iii) above, the Company
          shall be entitled to rely on a good faith calculation
          performed by its independent auditors based on a
          statistically significant random sampling of flight
          valuations compared with the applicable prior valuations
          of identical flights, which calculation (and the basis
          for any adjustments pursuant to clauses (i) or (ii)
          above) will be provided to Executive upon request.   The
          Company will promptly notify Executive in writing of any
          adjustments to the Annual Gross Up Limit described in
          this paragraph.

          As used for purposes of Flight Benefits, a year may
          consist of twelve consecutive months other than a
          calendar year, it being the Company's practice as of May
          18, 1999 for purposes of Flight Benefits for a year to
          commence on December 1 and end on the following November
          30 (for example, the twelve-month period from December 1,
          1998 to November 30, 1999 is considered the year 1999 for
          purposes of Flight Benefits); provided that all
          calculations for purposes of clause (i) in the prior two
          paragraphs shall be with respect to fiscal years of the
          Company.

          As used for purposes of Flight Benefits, the term
          "affiliates" of the Company means any entity controlled
          by, controlling, or under common control with the
          Company, it being understood that control of an entity
          shall require the direct or indirect ownership of a
          majority of the outstanding capital stock of such entity.

          No tickets issued on the CO system in connection with the
          Flight Benefits may be purchased other than directly from
          the Company or its successor or successors (i.e., no
          travel agent or other fee or commission based distributor
          may be used), nor may any such tickets be sold or
          transferred by Executive or any other person, nor may any
          such tickets be used by any person other than the person
          in whose name the ticket is issued.  Executive agrees
          that, after receipt of an invoice or other accounting
          statement therefor, he will promptly (and in any event
          within 45 days after receipt of such invoice or other
          accounting statement) reimburse the Company for all
          charges on his UATP card (or Similar Card) which are not
          for flights on the CO system and which are not otherwise
          reimbursable to Executive under the provisions of
          paragraph 3.4(i) hereof, or which are for tickets in
          excess of the applicable Annual Travel Limit.   Executive
          agrees that the credit availability under Executive's
          UATP card (or Similar Card) may be suspended if Executive
          does not timely reimburse the Company as described in the
          foregoing sentence or if Executive exceeds the applicable
          Annual Travel Limit with respect to a year; provided,
          that, immediately upon the Company's receipt of
          Executive's reimbursement in full (or, in the case of
          exceeding the applicable Annual Travel Limit, beginning
          the next following year and after such reimbursement),
          the credit availability under Executive's UATP card (or
          Similar Card) will be restored.

          The sole cost to Executive of flights on the CO system
          pursuant to use of Executive's Flight Benefits will be
          the imputed income with respect to flights on the CO
          system charged on Executive's UATP card (or Similar
          Card), calculated throughout the term of Executive's
          Flight Benefits at the lowest published fare (i.e., 21
          day advance purchase coach fare, lowest negotiated
          consolidator net fare or other lowest available fare) for
          the applicable itinerary (or similar flights on or around
          the date of such flight), regardless of the actual fare
          class booked or flown, or as otherwise required by law,
          and reported to Executive as required by applicable law.
          With respect to any period for which the Company is
          obligated to provide the tax gross up described above,
          Executive will provide to the Company, upon request, a
          calculation or other evidence of Executive's marginal tax
          rate sufficient to permit the Company to calculate
          accurately the amount to be paid to Executive.

          Executive will be issued a UATP card (or Similar Card),
          a Platinum Elite OnePass Card (or similar highest
          category successor frequent flyer card), a membership
          card in the Company's Presidents Club (or any successor
          program maintained in the CO system) for Executive and
          Executive's spouse, and an appropriate flight pass
          identification card, each valid at all times during the
          term of Executive's Flight Benefits."


     3.   The Existing Agreement, as amended by this Amendment, is
          hereby ratified and confirmed and shall continue in full
          force and effect in accordance with its terms.


     IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 19th day of May, 1999.


                              CONTINENTAL AIRLINES, INC.



                              By: ____________________________
                                  Gordon M. Bethune
                                  Chief Executive Officer


                              EXECUTIVE



                              _________________________________
                              Jeffery A. Smisek


                                                     EXHIBIT 10.7

                  Supplemental Agreement No. 11

                               to

                   Purchase Agreement No. 1951

                             between

                       The Boeing Company

                               and

                   Continental Airlines, Inc.

              Relating to Boeing Model 737 Aircraft


     THIS SUPPLEMENTAL AGREEMENT, entered into as of
May 14, 1999, by and between THE BOEING COMPANY, a Delaware
corporation with its principal office in Seattle, Washington,
(Boeing) and CONTINENTAL AIRLINES, INC., a Delaware corporation
with its principal office in Houston, Texas (Buyer);

     WHEREAS, the parties hereto entered into Purchase Agreement
No. 1951 dated July 23, 1996 (the Agreement), as amended and
supplemented, relating to Boeing Model 737-500, 737-600, 737-700,
737-800, and 737-900 aircraft (the Aircraft); and

     WHEREAS, Buyer has requested to exercise [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]; and

     WHEREAS, Buyer has requested to exercise [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]; and

     WHEREAS, Boeing and Buyer have mutually agreed that the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] as described in Paragraph 3 of Letter
Agreement 6-1162-GOC-131R2; and

     WHEREAS, Buyer has requested [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]; and

     WHEREAS, Buyer has requested [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]; and

     WHEREAS, Boeing and Buyer have mutually agreed to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and

     WHEREAS, Boeing and Buyer have mutually agreed to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and

     WHEREAS, Boeing and Buyer have mutually agreed that the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] as described in Paragraph 3 of Letter
Agreement 6-1162-GOC-131R2; and

     WHEREAS, Boeing and Buyer have mutually agreed to amend the
Agreement to incorporate the effect of these and certain other
changes;


     NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:

1.   Table of Contents and Articles:

     1.1   Remove and replace, in its entirety, the "Table of
Contents", with the Table of Contents attached hereto, to reflect
the changes made by this Supplemental Agreement No. 11.

     1.2   Remove and replace, in its entirely, page T-2 of Table
1 entitled "Aircraft Deliveries and Descriptions" that relates to
Model 737-700 Aircraft with new page T-2 attached hereto for the
Model 737-700 Aircraft reflecting the [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

     1.3   Remove and replace, in its entirely, page T-3 of Table
1 entitled "Aircraft Deliveries and Descriptions" that relates to
Model 737-800 Aircraft with new page T-3 attached hereto for the
Model 737-800 Aircraft reflecting the [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].


2.   Letter Agreements:

     2.1   Remove and replace, in its entirety, Letter Agreement
1951-3R6, "Option Aircraft - Model 737-824 Aircraft" with Letter
Agreement 1951-3R7, "Option Aircraft - Model 737-824 Aircraft",
attached hereto, to reflect the [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

     2.2   Remove and replace, in its entirety, Letter Agreement
1951-9R4, "Option Aircraft - Model 737-724 Aircraft" with Letter
Agreement 1951-9R5, "Option Aircraft - Model 737-724 Aircraft",
attached hereto, to reflect the [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

The Agreement will be deemed to be supplemented to the extent
herein provided as of the date hereof and as so supplemented will
continue in full force and effect.


EXECUTED IN DUPLICATE as of the day and year first written above.


THE BOEING COMPANY                 CONTINENTAL AIRLINES, INC.




By:   /s/ D. M. Hurt               By:   /s/ Brian Davis


Its:  Attorney-In-Fact             Its:  Vice President



                       TABLE OF CONTENTS
Page SA Number Number ARTICLES 1. Subject Matter of Sale . . . . . . . . . . 1-1 SA 5 2. Delivery, Title and Risk of Loss . . . . . 2-1 3. Price of Aircraft. . . . . . . . . . . . . 3-1 SA 5 4. Taxes. . . . . . . . . . . . . . . . . . . 4-1 5. Payment. . . . . . . . . . . . . . . . . . 5-1 6. Excusable Delay. . . . . . . . . . . . . . 6-1 7. Changes to the Detail Specification. . . . 7-1 SA 5 8. Federal Aviation Requirements and Certificates and Export License. . . . . . 8-1 SA 5 9. Representatives, Inspection, Flights and Test Data. . . . . . . . . . . . . . . . . 9-1 10. Assignment, Resale or Lease. . . . . . . . 10-1 11. Termination for Certain Events . . . . . . 11-1 12. Product Assurance; Disclaimer and Release; Exclusion of Liabilities; Customer Support; Indemnification and Insurance. . . . . . . 12-1 13. Buyer Furnished Equipment and Spare Parts. 13-1 14. Contractual Notices and Requests . . . . . 14-1 15. Miscellaneous. . . . . . . . . . . . . . . 15-1
TABLE OF CONTENTS
Page SA Number Number TABLES 1. Aircraft Deliveries and Descriptions - 737-500 . . . . . . . . T-1 SA 3 Aircraft Deliveries and Descriptions - 737-700 . . . . . . . . T-2 SA 11 Aircraft Deliveries and Descriptions - 737-800 . . . . . . . . T-3 SA 11 Aircraft Deliveries and Descriptions - 737-600 . . . . . . . . T-4 SA 4 Aircraft Deliveries and Descriptions - 737-900 . . . . . . . . T-5 SA 5 EXHIBITS A-1 Aircraft Configuration - Model 737-724 SA 2 A-2 Aircraft Configuration - Model 737-824 SA 2 A-3 Aircraft Configuration - Model 737-624 SA 1 A-4 Aircraft Configuration - Model 737-524 SA 3 A-5 Aircraft Configuration - Model 737-924 SA 5 B Product Assurance Document . . . . . . SA 1 C Customer Support Document - Code Two - Major Model Differences. . . . . . . . SA 1 C1 Customer Support Document - Code Three - Minor Model Differences. . . . . . . . SA 1 D Aircraft Price Adjustments - New Generation Aircraft (1995 Base Price). SA 1 D1 Airframe and Engine Price Adjustments - Current Generation Aircraft. . . . . . . . . . SA 1 D2 Aircraft Price Adjustments - New Generation Aircraft (1997 Base Price). SA 5 E Buyer Furnished Equipment Provisions Document. . . . . . . . . . SA 5 F Defined Terms Document . . . . . . . . SA 5
TABLE OF CONTENTS
SA Number LETTER AGREEMENTS 1951-1 Not Used . . . . . . . . . . . . . . . . 1951-2R3 Seller Purchased Equipment . . . . . . . SA 5 1951-3R7 Option Aircraft-Model 737-824 Aircraft . SA 11 1951-4R1 Waiver of Aircraft Demonstration . . . . SA 1 1951-5R2 Promotional Support - New Generation . . SA 5 Aircraft 1951-6 Configuration Matters. . . . . . . . . . 1951-7R1 Spares Initial Provisioning. . . . . . . SA 1 1951-8R2 Escalation Sharing - New Generation Aircraft . . . . . . . . . . . . . . . . SA 4 1951-9R5 Option Aircraft-Model 737-724 Aircraft . SA 11 1951-11R1 Escalation Sharing-Current Generation Aircraft . . . . . . . . . . . . . . . . SA 4 1951-12 Option Aircraft - Model 737-924 Aircraft SA 5 1951-13 Configuration Matters - Model 737-924. . SA 5
TABLE OF CONTENTS
SA Number RESTRICTED LETTER AGREEMENTS 6-1162-MMF-295 Performance Guarantees - Model 737-724 Aircraft. . . . . . . . . 6-1162-MMF-296 Performance Guarantees - Model 737-824 Aircraft. . . . . . . . . 6-1162-MMF-308R3 Disclosure of Confidential . . . . SA 5 Information 6-1162-MMF-309R1 [CONFIDENTIAL MATERIAL OMITTED . . SA 1 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-MMF-311R3 [CONFIDENTIAL MATERIAL OMITTED . . SA 5 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-MMF-312R1 Special Purchase Agreement Provisions. . . . . . . . . . . . SA 1 6-1162-MMF-319 Special Provisions Relating to the Rescheduled Aircraft. . . . . 6-1162-MMF-378R1 Performance Guarantees - Model 737-524 Aircraft. . . . . . . . . SA 3 6-1162-GOC-015 [CONFIDENTIAL MATERIAL OMITTED . . SA 2 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-GOC-131R2 Special Matters. . . . . . . . . . SA 5 6-1162-DMH-365 Performance Guarantees - Model 737-924 Aircraft. . . . . . . . . SA 5 6-1162-DMH-624 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]SA 8 6-1162-DMH-680 Delivery Delay Resolution Program. SA 9
TABLE OF CONTENTS SUPPLEMENTAL AGREEMENTS DATED AS OF: Supplemental Agreement No. 1 . . . . . . . . . . October 10,1996 Supplemental Agreement No. 2 . . . . . . . . . . March 5, 1997 Supplemental Agreement No. 3 . . . . . . . . . . July 17, 1997 Supplemental Agreement No. 4 . . . . . . . . . . October 10,1997 Supplemental Agreement No. 5 . . . . . . . . . . May 21,1998 Supplemental Agreement No. 6 . . . . . . . . . . July 30,1998 Supplemental Agreement No. 7 . . . . . . . . . . November 12,1998 Supplemental Agreement No. 8 . . . . . . . . . . December 7,1998 Supplemental Agreement No. 9 . . . . . . . . . . February 18,1999 Supplemental Agreement No. 10. . . . . . . . . . March 19,1999 Supplemental Agreement No. 11. . . . . . . . . . May 14, 1999 Table 1 to Purchase Agreement 1951 Aircraft Deliveries and Descriptions Model 737-700 Aircraft CFM56-7B24 Engines Detail Specification No. D6-38808-42 dated January 6, 1997 Exhibit A-1 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 1951-3R7 May 14, 1999 Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002 Subject: Letter Agreement No. 1951-3R7 to Purchase Agreement No. 1951 - Option Aircraft - Model 737-824 Aircraft Ladies and Gentlemen: This Letter Agreement amends Purchase Agreement No. 1951 dated July 23, 1996(the Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Buyer) relating to Model 737-824 aircraft (the Aircraft). This Letter Agreement supersedes and replaces in its entirety Letter Agreement 1951-3R6 dated March 19, 1999. All terms used and not defined herein shall have the same meaning as in the Agreement. In consideration of Buyer's purchase of the Aircraft, Boeing hereby agrees to manufacture and sell up to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] additional Model 737-824 Aircraft (the Option Aircraft) to Buyer, on the same terms and conditions set forth in the Agreement, except as otherwise described in Attachment A hereto, and subject to the terms and conditions set forth below. 1. Delivery. The Option Aircraft will be delivered to Buyer during or before the months set forth in the following schedule: Month and Year Number of of Delivery Option Aircraft [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2. Price. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 3. Option Aircraft Deposit. In consideration of Boeing's grant to Buyer of options to purchase the Option Aircraft as set forth herein, Buyer will pay a deposit to Boeing of $200,000 for each Option Aircraft (the Option Deposit) on the date of this Letter Agreement. In the event Buyer exercises an option herein for an Option Aircraft, the amount of the Option Deposit for such Option Aircraft will be credited against the first advance payment due for such Option Aircraft pursuant to the advance payment schedule set forth in Article 5 of the Agreement. In the event that Buyer does not exercise its option to purchase a particular Option Aircraft pursuant to the terms and conditions set forth herein, Boeing shall be entitled to retain the Option Deposit for such Option Aircraft. 4. Option Exercise. To exercise its option to purchase the Option Aircraft, Buyer shall give written notice thereof to Boeing on or before the first business day of the month in each Option Exercise Date shown below: Option Aircraft Option Exercise Date [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 5. Contract Terms. Within thirty (30) days after Buyer exercises an option to purchase Option Aircraft pursuant to paragraph 4 above, Boeing and Buyer will use their best reasonable efforts to enter into a supplemental agreement amending the Agreement to add the applicable Option Aircraft to the Agreement as a firm Aircraft (the Option Aircraft Supplemental Agreement). In the event the parties have not entered into such an Option Aircraft Supplemental Agreement within the time period contemplated herein, either party shall have the right, exercisable by written or telegraphic notice given to the other within ten (10) days after such period, to cancel the purchase of such Option Aircraft. 6. Cancellation of Option to Purchase. Either Boeing or Buyer may cancel the option to purchase an Option Aircraft if any of the following events are not accomplished by the respective dates contemplated in this Letter Agreement, or in the Agreement, as the case may be: (i) purchase of the Aircraft under the Agreement for any reason not attributable to the cancelling party; (ii) payment by Buyer of the Option Deposit with respect to such Option Aircraft pursuant to paragraph 3 herein; or (iii) exercise of the option to purchase such Option Aircraft pursuant to the terms hereof. Any cancellation of an option to purchase by Boeing which is based on the termination of the purchase of an Aircraft under the Agreement shall be on a one-for-one basis, for each Aircraft so terminated. Cancellation of an option to purchase provided by this letter agreement shall be caused by either party giving written notice to the other within ten (10) days after the respective date in question. Upon receipt of such notice, all rights and obligations of the parties with respect to an Option Aircraft for which the option to purchase has been cancelled shall thereupon terminate. Boeing shall promptly refund to Buyer, without interest, any payments received from Buyer with respect to the affected Option Aircraft. Boeing shall be entitled to retain the Option Deposit unless cancellation is attributable to Boeing's fault, in which case the Option Deposit shall also be returned to Buyer without interest. 7. Applicability. Except as otherwise specifically provided, limited or excluded herein, all Option Aircraft that are added to the Agreement by an Option Aircraft Supplemental Agreement as firm Aircraft shall benefit from all the applicable terms, conditions and provisions of the Agreement. If the foregoing accurately reflects your understanding of the matters treated herein, please so indicate by signature below. Very truly yours, THE BOEING COMPANY By /s/ D. M. Hurt Its Attorney In Fact ACCEPTED AND AGREED TO this Date: May 14, 1999 CONTINENTAL AIRLINES, INC., By /s/ Brian Davis Its Vice President Attachment Model 737-824 Aircraft 1. Option Aircraft Description and Changes. 1.1 Aircraft Description. The Option Aircraft are described by Boeing Detail Specification D6-38808, Revision E, dated September 15, 1995, as amended and revised pursuant to the Agreement. 1.2 Changes. The Option Aircraft Detail Specification shall be revised to include: (1) Changes applicable to the basic Model 737-800 aircraft which are developed by Boeing between the date of the Detail Specification and the signing of an Option Aircraft Supplemental Agreement. (2) Changes mutually agreed upon. (3) Changes required to obtain a Standard Certificate of Airworthiness. 1.3 Effect of Changes. Changes to the Detail Specification pursuant to the provisions of the clauses above shall include the effects of such changes upon Option Aircraft weight, balance, design and performance. 2. Price Description. 2.1 Price Adjustments. 2.1.1 Base Price Adjustments. The base aircraft price (pursuant to Article 3 of the Agreement) of the Option Aircraft will be adjusted to Boeing's and the engine manufacturer's then- current prices as of the date of execution of the Option Aircraft Supplemental Agreement. 2.1.2 Special Features. The price for special features incorporated in the Option Aircraft Detail Specification will be adjusted to Boeing's then-current prices for such features as of the date of execution of the Option Aircraft Supplemental Agreement [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2.1.3 Escalation Adjustments. The base airframe and special features price will be escalated according to the applicable airframe and engine manufacturer escalation provisions contained in Exhibit D of the Agreement. Buyer agrees that the engine escalation provisions will be adjusted if they are changed by the engine manufacturer prior to signing the Option Aircraft Supplemental Agreement. In such case, the then- current engine escalation provisions in effect at the time of execution of the Option Aircraft Supplemental Agreement will be incorporated into such agreement. 2.1.4 Price Adjustments for Changes. Boeing may adjust the basic price and the advance payment base prices for any changes mutually agreed upon by Buyer and Boeing subsequent to the date that Buyer and Boeing enter into the Option Aircraft Supplemental Agreement. 2.1.5 BFE to SPE. An estimate of the total price for items of Buyer Furnished Equipment (BFE) changed to Seller Purchased Equipment (SPE) pursuant to the Detail Specification is included in the Option Aircraft price build-up. The purchase price of the Option Aircraft will be adjusted by the price charged to Boeing for such items plus 10% of such price. 3. Advance Payments. 3.1 Buyer shall pay to Boeing advance payments for the Option Aircraft pursuant to the schedule for payment of advance payments provided in the Purchase Agreement. 1951-9R5 May 14, 1999 Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002 Subject: Letter Agreement No. 1951-9R5 to Purchase Agreement No. 1951 - Option Aircraft - Model 737-724 Aircraft Ladies and Gentlemen: This Letter Agreement amends Purchase Agreement No. 1951 dated July 23, 1996(the Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Buyer) relating to Model 737-724 aircraft (the Aircraft). This Letter Agreement supersedes and replaces in its entirety Letter Agreement 1951-9R4 dated March 19, 1999. All terms used and not defined herein shall have the same meaning as in the Agreement. In consideration of Buyer's purchase of the Aircraft, Boeing hereby agrees to manufacture and sell up to - thirty-five (35) additional Model 737-724 Aircraft (the Option Aircraft) to Buyer, on the same terms and conditions set forth in the Agreement, except as otherwise described in Attachment A hereto, and subject to the terms and conditions set forth below. 1. Delivery. The Option Aircraft will be delivered to Buyer during or before the months set forth in the following schedule: Month and Year Number of of Delivery Option Aircraft [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2. Price. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 3. Option Aircraft Deposit. In consideration of Boeing's grant to Buyer of options to purchase the Option Aircraft as set forth herein, Buyer will pay a deposit to Boeing of $200,000 for each Option Aircraft (the Option Deposit) on the date of this Letter Agreement. In the event Buyer exercises an option herein for an Option Aircraft, the amount of the Option Deposit for such Option Aircraft will be credited against the first advance payment due for such Option Aircraft pursuant to the advance payment schedule set forth in Article 5 of the Agreement. In the event that Buyer does not exercise its option to purchase a particular Option Aircraft pursuant to the terms and conditions set forth herein, Boeing shall be entitled to retain the Option Deposit for such Option Aircraft. 4. Option Exercise. To exercise its option to purchase the Option Aircraft, Buyer shall give written notice thereof to Boeing on or before the first business day of the month in each Option Exercise Date shown below: Option Aircraft Option Exercise Date [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 5. Contract Terms. Within thirty (30) days after Buyer exercises an option to purchase Option Aircraft pursuant to paragraph 4 above, Boeing and Buyer will use their best reasonable efforts to enter into a supplemental agreement amending the Agreement to add the applicable Option Aircraft to the Agreement as a firm Aircraft (the Option Aircraft Supplemental Agreement). In the event the parties have not entered into such an Option Aircraft Supplemental Agreement within the time period contemplated herein, either party shall have the right, exercisable by written or telegraphic notice given to the other within ten (10) days after such period, to cancel the purchase of such Option Aircraft. 6. Cancellation of Option to Purchase. Either Boeing or Buyer may cancel the option to purchase an Option Aircraft if any of the following events are not accomplished by the respective dates contemplated in this Letter Agreement, or in the Agreement, as the case may be: (i) purchase of the Aircraft under the Agreement for any reason not attributable to the cancelling party; (ii) payment by Buyer of the Option Deposit with respect to such Option Aircraft pursuant to paragraph 3 herein; or (iii) exercise of the option to purchase such Option Aircraft pursuant to the terms hereof. Any cancellation of an option to purchase by Boeing which is based on the termination of the purchase of an Aircraft under the Agreement shall be on a one-for-one basis, for each Aircraft so terminated. Cancellation of an option to purchase provided by this letter agreement shall be caused by either party giving written notice to the other within ten (10) days after the respective date in question. Upon receipt of such notice, all rights and obligations of the parties with respect to an Option Aircraft for which the option to purchase has been cancelled shall thereupon terminate. Boeing shall promptly refund to Buyer, without interest, any payments received from Buyer with respect to the affected Option Aircraft. Boeing shall be entitled to retain the Option Deposit unless cancellation is attributable to Boeing's fault, in which case the Option Deposit shall also be returned to Buyer without interest. 7. Applicability. Except as otherwise specifically provided, limited or excluded herein, all Option Aircraft that are added to the Agreement by an Option Aircraft Supplemental Agreement as firm Aircraft shall benefit from all the applicable terms, conditions and provisions of the Agreement. If the foregoing accurately reflects your understanding of the matters treated herein, please so indicate by signature below. Very truly yours, THE BOEING COMPANY By /s/ D. M. Hurt Its Attorney-In-Fact ACCEPTED AND AGREED TO this Date: May 14, 1999 CONTINENTAL AIRLINES, INC., By /s/ Brian Davis Its Vice President Attachment Model 737-724 Aircraft 1. Option Aircraft Description and Changes. 1.1 Aircraft Description. The Option Aircraft are described by Boeing Detail Specification D6-38808-42, dated as of January 6, 1997, as amended and revised pursuant to the Agreement. 1.2 Changes. The Option Aircraft Detail Specification shall be revised to include: (1) Changes applicable to the basic Model 737-700 aircraft which are developed by Boeing between the date of the Detail Specification and the signing of an Option Aircraft Supplemental Agreement. (2) Changes mutually agreed upon. (3) Changes required to obtain a Standard Certificate of Airworthiness. 1.3 Effect of Changes. Changes to the Detail Specification pursuant to the provisions of the clauses above shall include the effects of such changes upon Option Aircraft weight, balance, design and performance. 2. Price Description. 2.1 Price Adjustments. 2.1.1 Base Price Adjustments. The base aircraft price (pursuant to Article 3 of the Agreement) of the Option Aircraft will be adjusted to Boeing's and the engine manufacturer's then- current prices as of the date of execution of the Option Aircraft Supplemental Agreement. 2.1.2 Special Features. The price for special features incorporated in the Option Aircraft Detail Specification will be adjusted to Boeing's then-current prices for such features as of the date of execution of the Option Aircraft Supplemental Agreement [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2.1.3 Escalation Adjustments. The base airframe and special features price will be escalated according to the applicable airframe and engine manufacturer escalation provisions contained in Exhibit D of the Agreement. Buyer agrees that the engine escalation provisions will be adjusted if they are changed by the engine manufacturer prior to signing the Option Aircraft Supplemental Agreement. In such case, the then- current engine escalation provisions in effect at the time of execution of the Option Aircraft Supplemental Agreement will be incorporated into such agreement. 2.1.4 Price Adjustments for Changes. Boeing may adjust the basic price and the advance payment base prices for any changes mutually agreed upon by Buyer and Boeing subsequent to the date that Buyer and Boeing enter into the Option Aircraft Supplemental Agreement. 2.1.5 BFE to SPE. An estimate of the total price for items of Buyer Furnished Equipment (BFE) changed to Seller Purchased Equipment (SPE) pursuant to the Detail Specification is included in the Option Aircraft price build-up. The purchase price of the Option Aircraft will be adjusted by the price charged to Boeing for such items plus 10% of such price. 3. Advance Payments. 3.1 Buyer shall pay to Boeing advance payments for the Option Aircraft pursuant to the schedule for payment of advance payments provided in the Agreement.
                                                     EXHIBIT 10.8

                  Supplemental Agreement No. 2

                               to

                   Purchase Agreement No. 2060

                             between

                       The Boeing Company

                               and

                   Continental Airlines, Inc.

           Relating to Boeing Model 767-400ER Aircraft


     THIS SUPPLEMENTAL AGREEMENT, entered into as of June
8, 1999, by and between THE BOEING COMPANY, a Delaware corporation
with its principal office in Seattle, Washington, (Boeing) and
CONTINENTAL AIRLINES, INC., a Delaware corporation with its
principal office in Houston, Texas (Customer);

     WHEREAS, the parties hereto entered into Purchase Agreement
No. 2060 dated October 10, 1997, (the Purchase Agreement) relating
to Boeing Model 767-400ER aircraft, (Aircraft); and

     WHEREAS, Boeing and Customer have mutually agreed to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and

     WHEREAS, Boeing and Customer wish to update the Agreement to
reflect the finalized configuration of the Aircraft; and

     WHEREAS, Boeing and Customer wish to update the Agreement to
reflect the Installation of Cabin Systems Equipment; and

     WHEREAS, Boeing and Customer have mutually agreed to amend the
Purchase Agreement to incorporate the effect of these and certain
other changes;

     NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Purchase Agreement as
follows:

1.   Table of Contents:

     Remove and replace, in its entirety, the "Table of Contents",
with the Table of Contents attached hereto, to reflect the changes
made by this Supplemental Agreement No. 2.


2.  Table 1:

     Remove and replace, in its entirety, "Table 1, Aircraft
Delivery, Description, Price and Advance Payments" with the revised
"Table 1, Aircraft Delivery, Description, Price and Advance
Payments", attached hereto, to reflect the revised delivery
schedule for the Aircraft and certain other changes.

3.   Exhibits:

     Exhibit A is deleted in its entirety and the revised Exhibit
A (attached hereto) is substituted in lieu thereof.

4.   Letter Agreements:

     Add Letter Agreement 6-1162-JMG-165, "Installation of Cabin
Systems Equipment" to incorporate the agreement regarding Cabin
Systems Equipment.

5.   Payment of Additional Advance Payments:

     Within three (3) business days after execution of this
Supplemental Agreement, Buyer shall transfer to Boeing's account at
Chase Manhattan Bank, New York, N.Y., the sum of [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT], which sum represents advance payments then due with
respect the changes to the Advanced Payment Base Price.

The Purchase Agreement will be deemed to be supplemented to the
extent herein provided as of the date hereof and as so supplemented
will continue in full force and effect.


EXECUTED IN DUPLICATE as of the day and year first written above.



THE BOEING COMPANY                 CONTINENTAL AIRLINES, INC.




By:    /s/ J. A. McGarvey          By:    /s/ Brian Davis


Its:  Attorney-In-Fact             Its:  Vice President________



                       TABLE OF CONTENTS


ARTICLES                                            Revised By:

     1.      Quantity, Model and Description

     2.      Delivery Schedule

     3.      Price

     4.      Payment

     5.      Miscellaneous


TABLE

     1.      Aircraft Information Table             SA No. 2


EXHIBIT

     A.      Aircraft Configuration                 SA No. 2

     B.      Aircraft Delivery Requirements and Responsibilities


SUPPLEMENTAL EXHIBITS

     BFE1.   BFE Variables

     CS1.    Customer Support Variables

     EE1.    Engine Escalation/Engine Warranty and Patent
             Indemnity

             [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
             WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
             TO A REQUEST FOR CONFIDENTIAL TREATMENT]



                       TABLE OF CONTENTS


LETTER AGREEMENTS                                   Revised By:

2060-1       not used

2060-2       Demonstration Flights

2060-3       Spares Initial Provisioning

2060-4       Flight Crew Training Spares

2060-5       Escalation Sharing

6-1162-JMG-165   Installation of Cabin Systems      SA No. 2
                 Equipment


                       TABLE OF CONTENTS


CONFIDENTIAL LETTER AGREEMENTS                      Revised By:

6-1161-GOC-084   [CONFIDENTIAL MATERIAL OMITTED AND FILED
                 SEPARATELY WITH THE SECURITIES AND EXCHANGE
                 COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
                 TREATMENT]

6-1162-GOC-085   [CONFIDENTIAL MATERIAL OMITTED AND FILED
                 SEPARATELY WITH THE SECURITIES AND EXCHANGE
                 COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
                 TREATMENT]

6-1162-GOC-086   Special Matters






SUPPLEMENTAL AGREEMENTS                      Dated as of:

Supplemental Agreement No. 1                 December 18, 1997

Supplemental Agreement No. 2                 June 8, 1999



                            Table 1

                 to Purchase Agreement No. 2060

   Aircraft Delivery, Description, Price and Advance Payments


[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]



                    AIRCRAFT CONFIGURATION

                             between

                       THE BOEING COMPANY

                               and

                   CONTINENTAL AIRLINES, INC.


           Exhibit A to Purchase Agreement Number 2060



                    AIRCRAFT CONFIGURATION

                      Dated  June     1999

                           relating to

                 BOEING MODEL 767-400ER AIRCRAFT


     The Detail Specification is Boeing Detail Specification
D019T001-CAL-64E1 dated as of even date herewith.  Such Detail
Specification will be comprised of Boeing Configuration
Specification D019T003, revision A, dated March 13, 1997 as amended
to incorporate the Options listed below, including the effects on
Manufacturer's Empty Weight (MEW) and Operating Empty Weight (OEW).
Such Options are set forth in Boeing Document D019TCR1-CAL-64E1.
As soon as practicable, Boeing will furnish to Buyer copies of the
Detail Specification, which copies will reflect such Options.  The
Aircraft Basic Price reflects and includes all effects of such
Options, except such Aircraft Basic Price does not include the
price effects of any Buyer Furnished Equipment or Seller Purchased
Equipment.


Exhibit A to
Purchase Agreement No. 2060
Page 2


[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]



June  8, 1999
6-1162-JMG-165

Continental Airlines, Inc.
1600 Smith Street
Houston, TX  77002


Subject:      Installation of Cabin Systems Equipment

Reference:    Purchase Agreement No. 2060 (the Purchase Agreement)
              between The Boeing Company (Boeing) and Continental
              Airlines, Inc. (Customer) relating to Model 767-400
              aircraft (the Aircraft)

Ladies and Gentlemen:

This Letter Agreement amends and supplements the Purchase
Agreement.  All terms used but not defined in this Letter Agreement
have the same meaning as in the Purchase Agreement.

Customer has requested that Boeing install in the Aircraft the
inflight entertainment and cabin communications systems (IFE/CCS)
described in Attachment A to this Letter Agreement.

Because of the complexity of the IFE/CCS, special attention and
additional resources will be required during the development,
integration, certification, and manufacture of the Aircraft to
achieve proper operation of the IFE/CCS at the time of delivery of
the Aircraft.  To assist Customer, Boeing will perform the
functions of project manager (the Project Manager) as set forth in
Attachment B, according to the requirement of Attachment C.

1.   Responsibilities.

     1.1   Customer will:

           1.1.1   Provide Customer's IFE/CCS system requirements
to Boeing;

           1.1.2   Select the IFE/CCS suppliers (Suppliers) from
among those suppliers identified in the Change Requests listed in
Attachment A to this Letter Agreement as otherwise formally offered
by Boeing.

           1.1.3   Promptly after selecting Suppliers, participate
with Boeing in meetings with Suppliers to ensure that Supplier's
functional system specifications meet Customer's and Boeing's
respective requirements.  Such functional systems specifications
define functionality to which Boeing will test prior to delivery
but is not a guarantee of functionality at delivery;

           1.1.4   Select Supplier part numbers;

           1.1.5   Negotiate and obtain agreements on product
assurance, product support following Aircraft delivery (including
spares support), and any other special business arrangements
directly with Suppliers;

           1.1.6   Provide pricing information for part numbers
selected above to Boeing by a mutually selected date;

           1.1.7   Negotiate and obtain agreements with any
required service providers; and

           1.1.8   Include in Customer's contract with any seat
supplier a condition obligating such seat supplier to enter into
and comply with a Boeing approved bonded stores agreement.  This
bonded stores agreement will set forth the procedures concerning
the use, handling and storage for the Boeing owned IFE/CCS
equipment during the time such equipment is under the seat
supplier's control.

           1.1.9   Authorize Boeing to obtain production IFE/CCS
spares for test and or rejection replacement as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] overage for in-seat LCD monitors, in-seat
cables, handsets, cord reels, and remote jacks; [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] overage for seat boxes; and, one each of the head-end
equipment.  Unused parts will be returned to the Customer with the
aircraft delivery and any parts returned to the supplier for repair
will be returned to the Customer, at no further cost, after
aircraft delivery.

     1.2   Boeing will:

           1.2.1   Perform the Project Manager functions stated in
Attachment B;

           1.2.2   Provide Aircraft interface requirements to
Suppliers;

           1.2.3   Assist Suppliers in the development of their
IFE/CCS system specifications and approve such specifications;

           1.2.4   Negotiate terms and conditions (except for
price, product assurance, product support following Aircraft
delivery and any other special business arrangements) and enter
into contracts with Suppliers and manage such contracts for the
IFE/CCS;

           1.2.5   Coordinate the resolution of technical issues
with Suppliers;

           1.2.6   Ensure that at time of Aircraft delivery the
IFE/CCS configuration meets the requirements of the Options
contained in Attachment A to this Letter Agreement as such
Attachment A may be amended from time to time; and

           1.2.7   Obtain FAA certification of the Aircraft with
the IFE/CCS installed therein.

2.   Software.

     IFE/CCS systems may contain software of the following two
types.

     2.1   Systems Software.  The software required to operate and
certify the IFE/CCS systems on the Aircraft is the Systems Software
and is part of the IFE/CCS.

     2.2   Customer's Software.  The software accessible to the
Aircraft passengers which controls Customer's specified optional
features is Customer's Software and is not part of the IFE/CCS.

           2.2.1   Customer is solely responsible for specifying
Customer's Software functional and performance requirements and
ensuring that Customer's Software meets such requirements.
Customer and Customer's Software supplier will have total
responsibility for the writing, certification, modification,
revision, or correction of any of Customer's Software.  Boeing will
not perform the functions and obligations described in paragraph
1.2 above, nor the Project Manager's functions described in
Attachment B, for Customer's Software.

           2.2.2   The omission of any Customer's Software or the
lack of any functionality of Customer's Software will not be a
valid condition for Customer's rejection of the Aircraft at the
time of Aircraft delivery.

           2.2.3   Boeing has no obligation to approve any
documentation to support Customer's Software certification.  Boeing
will only review and operate Customer's Software if in Boeing's
reasonable opinion such review and operation is necessary to
certify the IFE/CCS system on the Aircraft.

           2.2.4   Boeing will not be responsible for obtaining FAA
certification for Customer's Software.

3.   Changes.

     3.1   After Boeing and Supplier have entered into a contract
for the purchase of the IFE/CCS, changes to such contract may only
be made by Boeing.  Any Customer request for changes to the IFE/CCS
specification after the Boeing/Supplier contract has been signed
must be made in writing directly to Boeing.  Boeing shall respond
to such request by Customer in a timely manner.  If such change is
technically feasible and Boeing has the resources and time to
incorporate such change, then Boeing shall negotiate with the
Supplier to incorporate such change into the contract for the
IFE/CCS.  Any Supplier price increase resulting from such a change
will be negotiated between Customer and Supplier.

     3.2   Boeing and Customer recognize that the developmental
nature of the IFE/CCS may require changes to the IFE/CCS or the
Aircraft in order to ensure (i) compatibility of the IFE/CCS with
the Aircraft and all other Aircraft systems, and (ii) FAA
certification of the Aircraft with the IFE/CCS installed therein.
In such event Boeing will notify Customer and recommend to Customer
the most practical means for incorporating any such change.  If
within 15 days after such notification Customer and Boeing through
negotiations cannot mutually agree on the incorporation of any such
change or alternate course of action, then the remedies available
to Boeing in Paragraph 6 shall apply.

     3.3   The incorporation into the Aircraft of any mutually
agreed change to the IFE/CCS may result in Boeing adjusting the
price of the Change Request contained in Attachment A to this
Letter Agreement.

     3.4   Boeing's obligation to obtain FAA certification of the
Aircraft with the IFE/CCS installed is limited to the IFE/CCS as
described in Attachment A, as Attachment A may be amended from time
to time.

4.   Supplier Defaults.

     Boeing shall notify Customer in a timely manner in the event
of a default by a Supplier under the Supplier's contract with
Boeing.  Within 15 days of Customer's receipt of such notification,
Boeing and Customer shall agree through negotiations on an
alternative Supplier or other course of action.  If Boeing and
Customer are unable to agree on an alternative Supplier or course
of action within such time, the remedies available to Boeing in
Paragraph 6 shall apply.

5.   Exhibits B and C to the AGTA.

     IFE/CCS is deemed to be BFE for the purposes of Exhibit B,
Customer Support Document, and Exhibit C, the Product Assurance
Document, of the AGTA.

6.   Boeing's Remedies.

     If Customer does not comply with any of its obligations set
forth herein, Boeing may:

     6.1   delay delivery of the Aircraft pursuant to the
provisions of Article 7, Excusable Delay, of the AGTA; or

     6.2   deliver the Aircraft without part or all of the IFE/CCS
installed, or with part or all of the IFE/CCS inoperative.

     6.3    increase the Aircraft Price by the amount of Boeing's
additional costs attributable to such noncompliance.

7.   Advance Payments.

     7.1   Estimated Price for the IFE/CCS.  An estimated price for
the IFE/CCS purchased by Boeing will be included in the Aircraft
Advance Payment Base Price to establish the advance payments for
each Aircraft.  The estimated price for the Boeing purchased
IFE/CCS installed on each Aircraft by Change Requests listed in
Attachment A is [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] U.S. dollars expressed in 1995 dollars.

     7.2   Aircraft Price.  The Aircraft Price will include the
actual IFE/CCS prices and any associated transportation costs
charged Boeing by Suppliers.

8.   Customer's Indemnification of Boeing.

     Customer will indemnify and hold harmless Boeing from and
against all claims and liabilities, including costs and expenses
(including attorneys' fees) incident thereto or incident to
successfully establishing the right to indemnification, for injury
to or death of any person or persons, including employees of
Customer but not employees of Boeing, or for loss of or damage to
any property, including Aircraft, arising out of or in any way
connected with any nonconformance or defect in any IFE/CCS, and
whether or not arising in tort or occasioned in whole or in part by
the negligence of Boeing. This indemnity will not apply with
respect to any nonconformance or defect caused solely by Boeing's
installation of the IFE/CCS.

9.   Title and Risk of Loss.

Title and risk of loss of IFE/CCS equipment will remain with Boeing
until the Aircraft title is transferred to Customer.

If the foregoing correctly sets forth your understanding of our
agreement with respect to the matters treated above, please
indicate your acceptance and approval below.


Very truly yours,

THE BOEING COMPANY


By       /s/ J. A. McGarvey

Its     Attorney-In-Fact


ACCEPTED AND AGREED TO this

Date:    June 8,1999

CONTINENTAL AIRLINES, INC.


By    /s/ Brian Davis

Its  Vice President




                         Attachment A
                     Cabin Systems Equipment



     The following Options describe the items of equipment that
under the terms and conditions of this Letter Agreement are
considered to be IFE/CCS.  Final configuration will be based on
Customer acceptance of any or all options listed below.

Option Numbers and Titles

2318A045B85  Cabin Telecommunication - Cabin Telecommunication Unit
- - Matsushita

2331-000614 Passenger Address - Passenger Address (PA) System -
Rockwell Collins - Dual Class

2331A045B16 Passenger Address - Pre-Recorded Announcement And
Boarding Music System M - Matsushita

2332-002405 Video Entertainment - Interactive In-Seat Video System
- - Partial Provisions - Forward Cabin

2332-002406 Video Entertainment - Interactive In-Seat Video System
- - Partial Provisions - Mid Cabin

2332-002408 Video Entertainment - Interactive In-Seat Video System
- - Partial Provisions - Aft. Cabin

2332-002423 Video Entertainment - Overhead Video System - Partial
Provisions - Video Distribution Unit (VDU) Based Systems

2332-002717 Video Entertainment - Passenger Flight Information
System (PFIS) - Airshow 420

2332A045B14 Video Entertainment - In-Seat Video System - Matsushita
- - With Matsushita 16 Channel CD Player

2332A045B83 Video Entertainment - Video Entertainment - Overhead
Video System - Matsushita

2454A237A06 Electrical Power Outlet For Personal Computer -
Installation - Business Class And 8 Rows Of Economy Class Passenger
Seats


Attachment B Project Manager This Attachment B describes the functions that Boeing will perform as Project Manager to support (i) the development and integration of the IFE/CCS and (ii) the FAA certification of the IFE/CCS when installed on the Aircraft. 1. Project Management Boeing will perform the following functions for the IFE/CCS. Boeing will have authority to make day-to-day management decisions, and decisions on technical details which in Boeing's reasonable opinion do not significantly affect form, fit, function, cost or aesthetics. Boeing will be responsible for: A. Managing the development of all program schedules; B. Evaluating and approving Supplier's program management and developmental plans; C. Defining program metrics and status requirements; D. Scheduling and conducting program status reviews; E. Scheduling and conducting design and schedule reviews with Customer and Suppliers; F. Monitoring compliance with schedules; G. Evaluating and approving any recovery plans or plan revisions which may be required of either Suppliers or Customer; H. Leading the development of a joint IFE/CCS project management plan (the Program Plan) and; I. Managing the joint development of the System Specification 2. System Integration Boeing's performance as Project Manager will include the functions of systems integrator (Systems Integrator). As Systems Integrator Boeing will perform the following functions: A. As required, assist Suppliers in defining their system specifications for the IFE/CCS, approve such specifications and develop an overall system functional specification; B. Coordinate Boeing, Customer and Supplier teams to ensure sufficient Supplier and Supplier sub system testing and an overall cabin system acceptance test are included in the Program Plan; and C. Organize and conduct technical coordination meetings with Customer and Suppliers to review responsibilities, functionality, Aircraft installation requirements and overall program schedule, direction and progress. 3. Seat Integration A. Boeing will coordinate the interface requirements between seat suppliers and Suppliers. Interface requirements are defined in Boeing Document Nos. D6-36230, "Passenger Seat Design and Installation"; D6-36238, "Passenger Seat Structural Design and Interface Criteria"; D222W232, "Seat Wiring and Control Requirements"; and D222W013-4, "Seat Assembly Functional Test Plan". B. The Suppliers will be required to coordinate integration testing and provide seat assembly functional test procedures for seat electronic parts to seat suppliers and Boeing, as determined by Boeing. C. The Suppliers will assist the seat suppliers in the preparation of seat assembly functional test plans.
Attachment C Continental Airlines 767-400 Critical Impact Events The Contingency Plan is the alternate course of action which will be implemented if the critical decision date is not met or other course of action is not agreed to by Boeing and Buyer. The critical impact events listed below are milestones which must be met by IFE and BFE Seat Suppliers to achieve the in-sequence installation of the IFE. The Required Due Dates in such tables are the dates on which Boeing begins to incur disruption costs. The Critical Decision Dates are the dates after which the critical impact event cannot be accomplished to maintain the delivery schedule and/or full system testing, certification or installation. A meeting to discuss a recovery plan cost impact and/or an alternate course of action will be held within one week of knowledge of delinquency or impending delinquency. Event Required Critical Contingency Plan Due Date Decision Date Approvable seat dynamic test plan [CONFIDENTIAL MATERIAL Assess out-of -sequence submitted OMITTED AND FILED charges SEPARATELY WITH THE Abuse load test hardware on-dock at SECURITIES AND Assess out-of -sequence seat supplier EXCHANGE COMMISSION charges PURSUANT TO A REQUEST Dynamic test hardware on-dock at FOR CONFIDENTIAL Assess out-of -sequence seat supplier TREATMENT] charges Cable routing data from seat Suppliers IFE/Passenger Service to Boeing and Matsushita System - inoperative at Delivery Seat dynamic test conduct Deliver airplane without seats - installed (zero passenger) or assess out-of sequence charges Attachment C (continued) Continental Airlines 767-400 Critical Impact Events Event Required Critical Contingency Plan Due Date Decision Date Seat abuse load test plan approval [CONFIDENTIAL MATERIAL Assess out-of-sequence OMITTED AND FILED charges SEPARATELY WITH THE Seat abuse load test conduct SECURITIES AND Deliver airplane without EXCHANGE COMMISSION seats installed (zero PURSUANT TO A REQUEST passenger) or assess FOR CONFIDENTIAL out-of sequence charges TREATMENT] Seat dynamic test report submittal Assess out-of-sequence charges Seat abuse load test report submittal Assess out-of-sequence charges IFE production hardware on-dock at seat supplier Seats on-dock (complete and in-seat Deliver airplane without IFE hardware functionality tested) seats installed (zero at Boeing passenger) or assess additional out-of-sequence charges Attachment C (continued) Continental Airlines 767-400 Critical Impact Events Event Required Critical Contingency Plan Due Date Decision Date VCC structural substantiation plan to [CONFIDENTIAL MATERIAL Assess out-of-sequence Boeing OMITTED AND FILED charges SEPARATELY WITH THE VCC general arrangement drawings to SECURITIES AND Assess out-of-sequence Boeing EXCHANGE COMMISSION charges PURSUANT TO A REQUEST Initial interface loads analysis to FOR CONFIDENTIAL Assess out-of-sequence Boeing TREATMENT] charges VCC approvable drawings submitted Assess out-of-sequence charges Final interface loads analysis submittal Assess out-of-sequence charges or no VCC installed at delivery and IFE inoperative VCC stress analysis submittal Assess out-of-sequence charges or no VCC installed at delivery and IFE inoperative VCC FAI Assess out-of-sequence charges VCC on dock at Boeing Assess additional out-of- sequence charges or deliver airplane without VCC and IFE inoperative
                                                     EXHIBIT 10.9

                  Supplemental Agreement No. 6

                               to

                   Purchase Agreement No. 2061

                             between

                       The Boeing Company

                               and

                   Continental Airlines, Inc.


              Relating to Boeing Model 777 Aircraft


     THIS SUPPLEMENTAL AGREEMENT, entered into as of May 14, 1999,
by and between THE BOEING COMPANY, a Delaware corporation with its
principal office in Seattle, Washington, (Boeing) and CONTINENTAL
AIRLINES, INC., a Delaware corporation with its principal office in
Houston, Texas (Customer);

     WHEREAS, the parties hereto entered into Purchase Agreement
No. 2061 dated October 10, 1997, (the Purchase Agreement) relating
to Boeing Model 777-200IGW aircraft, (the Aircraft); and

     WHEREAS, Boeing and Customer have mutually agreed to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and

     WHEREAS, Boeing and Customer have mutually agreed to
reschedule the delivery of the [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Option Aircraft
to the years [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT];

     NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Purchase Agreement as
follows:

1.   Table of Contents:

     Remove and replace, in its entirety, the "Table of Contents",
with the "Table of Contents" attached hereto, to reflect the
changes made by this Supplemental Agreement No. 6.



2.  Letter Agreements:

     Remove and replace, in its entirety, Letter Agreement
2061-1R2 "Option Aircraft" with the revised Letter Agreement 2061-
1R3, attached hereto, to reflect [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] and revised
delivery of Option Aircraft.


The Purchase Agreement will be deemed to be supplemented to the
extent herein provided as of the date hereof and as so supplemented
will continue in full force and effect.


EXECUTED IN DUPLICATE as of the day and year first written above.



THE BOEING COMPANY                 CONTINENTAL AIRLINES, INC.




By:    /s/ D. M. Hurt              By:   /s/ Brian Davis


Its:  Attorney-In-Fact             Its:  Vice President


                       TABLE OF CONTENTS


ARTICLES                                              Revised By:

     1.      Quantity, Model and Description

     2.      Delivery Schedule

     3.      Price

     4.      Payment

     5.      Miscellaneous


TABLE

     1.      Aircraft Information Table               SA No. 5


EXHIBIT

     A.      Aircraft Configuration

     B.      Aircraft Delivery Requirements and Responsibilities


SUPPLEMENTAL EXHIBITS

     BFE1.   BFE Variables

     CS1.    Customer Support Variables

     EE1.    Engine Escalation/Engine Warranty and Patent
              Indemnity

     SLP1.   Service Life Policy Components



                       TABLE OF CONTENTS


LETTER AGREEMENTS                                     Revised By:

2061-1R3     Option Aircraft                          SA No. 6

2061-2       Demonstration Flights

2061-3       Installation of Cabin Systems Equipment

2061-4       Spares Initial Provisioning

2061-5       Flight Crew Training Spares

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]


                       TABLE OF CONTENTS


CONFIDENTIAL LETTER AGREEMENTS                        Revised By:

6-1161-GOC-087      Aircraft Performance Guarantees

6-1162-GOC-088      Promotion Support

6-1162-GOC-089R1    Special Matters                   SA No. 3

6-1162-GOC-172      Additional Matters                SA No. 1





SUPPLEMENTAL AGREEMENTS                      Dated as of:

Supplemental Agreement No. 1                 December 18, 1997

Supplemental Agreement No. 2                 July 30, 1998

Supplemental Agreement No. 3                 September 25, 1998

Supplemental Agreement No. 4                 February 3, 1999

Supplemental Agreement No. 5                 March 26, 1999

Supplemental Agreement No. 6                 May  14, 1999



May 14, 1999
2061-1R3



Continental Airlines, Inc.
1600 Smith Street
Houston, TX 77002


Subject:       Option Aircraft

Reference:     Purchase Agreement No. 2061 (the Purchase Agreement)
               between The Boeing Company (Boeing) and Continental
               Airlines, Inc. (Customer) relating to
               Model 777-200IGW aircraft (the Aircraft)


Ladies and Gentlemen:

This Letter Agreement amends and supplements the Purchase
Agreement.  All terms used but not defined in this Letter Agreement
have the same meaning as in the Purchase Agreement.  This Letter
Agreement supersedes and replaces in its entirely Letter Agreement
2061-1R2 dated February 3, 1999.

Boeing agrees to manufacture and sell to Customer additional Model
777-200IGW aircraft as Option Aircraft.  The delivery months,
number of aircraft, Advance Payment Base Price per aircraft and
advance payment schedule are listed in the Attachment to this
Letter Agreement (the Attachment).

1.   Aircraft Description and Changes

     1.1   Aircraft Description:  The Option Aircraft are described
by the Detail Specification listed in the Attachment.

     1.2   Changes:  The Detail Specification will be revised to
include:

           (i)     Changes applicable to the basic Model 777
                   aircraft which are developed by Boeing between
                   the date of the Detail Specification and the
                   signing of the definitive agreement to purchase
                   the Option Aircraft;
           (ii)    Changes required to obtain required regulatory
                   certificates; and
           (iii)   Changes mutually agreed upon.

2.   Price

     2.1   The pricing elements of the Option Aircraft are listed
in the Attachment.

     2.2   Price Adjustments.

           2.2.1   Optional Features.  The Optional Features Prices
for the Option Aircraft will be adjusted to Boeing's current prices
as of the date of execution of the definitive agreement for the
Option Aircraft.

           2.2.2   Escalation Adjustments.  The Airframe Price and
the Optional Features Prices for Option Aircraft delivering before
January 2003, will be escalated on the same basis as the Aircraft.

The engine manufacturer's current escalation provisions, listed in
Exhibit Supplement EE1 to the Purchase Agreement, have been
estimated to the months of scheduled delivery using commercial
forecasts to calculate the Advance Payment Base Price listed in the
Attachment to this Letter Agreement.  The engine escalation
provisions will be revised if they are changed by the engine
manufacturer prior to the signing of a definitive agreement for the
Option Aircraft.

           2.2.3   Base Price Adjustments.   The Airframe Price and
the Engine Price of the Option Aircraft delivering before January,
2003, will be adjusted to Boeing's and the engine manufacturer's
then current prices as of the date of execution of the definitive
agreement for the Option Aircraft.

           2.2.4   Prices for Long Lead Time Aircraft.   Boeing and
the engine manufacturer have not established prices and escalation
provisions for Model 777-200IGWaircraft and engines for delivery in
the year 2003 and after.  When prices and the pricing bases are
established for the Model 777-200IGW aircraft delivering in the
year 2003 and after, the information listed in the Attachment will
be appropriately amended.

3.   Payment.

     3.1   Customer will pay a deposit to Boeing in the amount
shown in the Attachment for each Option Aircraft (Deposit), on the
date of this Letter Agreement.  If Customer exercises an option,
the Deposit will be credited against the first advance payment due.
If Customer does not exercise an option, Boeing will retain the
Deposit for that Option Aircraft.

     3.2   Following option exercise, advance payments in the
amounts and at the times listed in the Attachment will be payable
for the Option Aircraft.  The remainder of the Aircraft Price for
the Option Aircraft will be paid at the time of delivery.

4.   Option Exercise.

Customer may exercise an option by giving written notice to Boeing
on or before the date [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT] months prior to the first
business day of the applicable delivery month listed in the
Attachment (Option Exercise Date).

5.   Contract Terms.

     Boeing and Customer will use their best efforts to reach a
definitive agreement for the purchase of an Option Aircraft,
including the terms and conditions contained in this Letter
Agreement, in the Purchase Agreement, and other terms and
conditions as may be agreed upon to add the Option Aircraft to the
Purchase Agreement as an Aircraft.  In the event the parties have
not entered into a definitive agreement within 30 days following
option exercise, either party may terminate the purchase of such
Option Aircraft by giving written notice to the other within 5
days.  [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]

Very truly yours,

THE BOEING COMPANY


By          /s/ D. M. Hurt

Its           Attorney-In-Fact


ACCEPTED AND AGREED TO this

Date:  May 14, 1999

CONTINENTAL AIRLINES, INC.


By        /s/ Brian Davis

Its          Vice President

Attachment


                         Attachment to
       Letter Agreement 2061-1R3 Option Aircraft Delivery,
             Description, Price and Advance Payments


[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]


 

5 6-MOS DEC-31-1999 JUN-30-1999 1,259 0 496 0 207 2,371 3,994 919 7,943 2,564 0 0 0 1 1,614 7,943 4,254 4,254 0 0 3,838 0 110 374 147 227 0 0 6 221 3.17 2.91