SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 10, 1996
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-09781 74-2099724
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2929 Allen Parkway, Suite 2010, Houston, Texas 77019
(Address of principal executive offices) (Zip Code)
(713) 834-2950
(Registrant's telephone number, including area code)
Item 5. Other Events.
On October 10, 1996, Continental Airlines, Inc. issued a press
release, which is filed herewith as Exhibit 99.1 and incorporated
herein by reference.
The following information contains forward looking statements, and
certain assumptions upon which such forward looking statements are
in part based. Numerous important factors, including those factors
identified as Risk Factors set forth under the captions "Risk
Factors - Risk Factors Relating to the Company" and "- Risk Factors
Relating to the Airline Industry" in the Company's registration
statement on Form S-4 (Registration No. 333-12171), which factors
are incorporated herein by reference and filed as Exhibit 99.2
hereto, and the fact that the assumptions set forth below could
prove incorrect, could cause actual results to differ materially
from those contained in such forward looking statements.
GROWTH PLAN REMAINS FLEXIBLE
Committed Aircraft
12/31/94 9/30/96 12/31/99 (E) || Options
||
Core Fleet ||
||
737-300/500/600/700/800 80 102 209 || 80
||
MD-80 67 67 62 || -
||
757 11 17 25 || 16
||
DC10-10/30 11 14 16 || -
||
Stage II/Retired ||
||
DC-9-30 31 30 0 || -
||
737-100/200 31 30 0 || -
||
727-200 52 31 0 || -
||
A300 21 0 0 || -
||
747-100/200 3 0 0 || -
||
Continental Micronesia 23 23 5* || -
||
Total 330 314 317 || 96
CONTINENTAL FLEET TYPES 9 7 4
Average Age (years) 13.4 14.1 8.2
*Continental Micronesia Fleet Plan not finalized
Replacement Decision Expected
to have Positive Future Results*
---------------------Estimated--------------------
($Millions) 1996 1997 1998 1999 2000 2001
Aircraft Ownership - 6 (56) (116) (121) (125)
Maintenance/Inventory - 30 78 135 153 157
Fuel - 1 20 49 67 69
Pilots/Training - (9) (11) (2) 16 15
Other (128) - - - - -
Total Pre-Tax (128) 28 31 66 115 116
*See special note concerning forward looking statements on page 2 and see Assumptions
in Appendix A, below.
Financing at Reasonable Rates is Available
Continental's blended EETC rate is approximately 8%*
($Millions) 1997 1998 1999 Total
Expected EETC Financing $450 $1,250 $1,050 $2,750
Debt Commitments in Place 1,170
Net Financing Required $1,580
*Based on current trading levels
Remainder of acquisition cost expected to be provided by third party lease equity or internal
cash flow
Appendix A - Assumptions
Aircraft Ownership
All new aircraft leased assuming a lease factor of .80% per month.
All old aircraft are assumed to continue as leased or owned with
leases on leased aircraft being renewed at market rates and the
cost of hushkits and upgraded interiors being 100% financed by
Continental at 9.5% and depreciated over 10 to 15 years depending
on fleet type.
Aircraft ownership compares the ownership costs of new aircraft
versus old aircraft had they been refurbished with hushkits and
upgraded interiors. In addition, new aircraft provide a
utilization benefit because there is less time allocated for
planned and unplanned maintenance. Initial pilot training is
capitalized for the new 737-600/800 fleet types. As a result of
the write-down of owned aircraft, depreciation related to the owned
aircraft was reduced.
Maintenance/Inventory
Maintenance expense savings are determined based on the difference
between the planned hangar schedule for new versus old aircraft
(comparison by fleet type by maintenance event at budgeted cost per
event). Maintenance overhead expense is reduced by $15 million per
year based on eliminating fleet-specific expenses for the three
retired fleet types.
As a result of the inventory write-down to net realizable value,
future depreciation of related inventory will be reduced.
Fuel Expense - Fuel expense savings are calculated based on the
planned block hour fuel burn rates for new versus old aircraft,
using a base price per gallon of $.575 (1996 dollars).
Pilot/Training
Pilot expense savings will result as 3-pilot 727s are replaced with
2-pilot 737-800s.
737-500 initial pilot training and all "cascade" training that will
result as new replacement aircraft enter service are expensed when
incurred. Expense is calculated by forecasting the number of
training cycles required at an average cost per training cycle
versus training cycles required had stage II aircraft remained.
Annual pilot training expense will be reduced on average by $2
million as the number of fleet types decreases (less cascade
training required with fewer fleet types).
Other - Other costs in 1996 consist of a non-recurring charge due
to the write-down of inventory and other expenses related to the
stage II aircraft being retired.
General - Inflation is assumed to be three percent per year during
this time period.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release
99.2 Risk Factors
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, Continental Airlines, Inc. has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
CONTINENTAL AIRLINES, INC.
By /s/ Jeffery A. Smisek
Jeffery A. Smisek
Senior Vice President and
General Counsel
October 10, 1996
Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT: CORPORATE COMMUNICATIONS
(713) 834-5080
CONTINENTAL AIRLINES ANNOUNCES NEW BOEING JET ORDER
HOUSTON, Oct. 10, 1996 -- Continental Airlines, Inc. (NYSE:
CAI.B and CAI.A) today announced an order for 60 firm 737-500 and
the new -600 model aircraft that will replace 60 older, less
efficient 737-100, 737-200 and DC-9 aircraft between July 1997
and December 1999. By the end of 1999, Continental will reduce
major aircraft types from seven to four and have one of the
youngest fleets in the industry. The new aircraft will put
Continental in full compliance with stringent federal Stage III
noise requirements.
"This order represents the final major decision of our five-
year flexible growth initiative. Combined with other orders,
Continental will have one of the youngest and most economical
fleets in the world," said Gordon Bethune, chairman of the board
and chief executive officer of Continental Airlines.
Younger Fleet Age
The combination of the new order announced today, along with
the previously announced Boeing aircraft order, will drop
Continental's fleet age from a current average of 14.1 years to 8.2
years by the end of 1999.
Economic Analysis and Operational Benefits
Continental's decision to order the new aircraft came after
extensive analysis of the cost of hushkitting, refurbishing and
operating the airline's existing aircraft versus purchasing and
operating new aircraft. Continental found it more economical to
operate newer, more efficient aircraft while being more responsive
to its customers' preferences.
By the end of 1999, approximately 60 percent of Continental's
aircraft will consist of common-rated Boeing 737 series aircraft --
including the -300, -500, -600 , -700 or -800 models. The common
fleet type allows for greater flexibility for flight crew
assignments, simplifies maintenance and reduces the spare part
inventory costs.
Additionally, the common fleet type will allow the airline to
better match passenger demand with the correct size aircraft on
relatively short notice. This will permit the airline to fly routes
more profitably.
-more-
Boeing Order/Page 2
Newer Fleet Benefits Customers
Continental customers will enjoy several benefits of the new
planes, including more spacious cabins, faster cruising speeds and
shorter flight times on many routes. Additionally, new aircraft
will be equipped with handset phones with facsimile capabilities at
the passenger seat, inflight entertainment systems and additional
ability to use personal computers while on board.
Financing Commitment
Continental plans to finance all new aircraft using enhanced
equipment trust certificates (EETC) or similar financing. In 1996,
the company completed two EETC financings totaling more than $660
million. Continental's current EETC's are trading at a blended rate
of approximately 8 percent.
The company has received commitments of approximately $690
million of backstop financing for the new orders, which when added
to existing commitments brings the company's total backstop
financing commitments to $1.365 billion.
One-Time Charge
As a result of the decision to retire older aircraft and
return leased aircraft being replaced by the new aircraft ordered,
Continental will take a non-recurring charge of $77 million ($128
million on a pre-tax basis) during the third quarter of 1996,
principally due to a write-down of associated inventory and other
related expenses of the aircraft being retired. Continental
expects to release its third quarter results on Oct. 16.
Five-Year Flexible Growth Initiative
The company's previously announced five-year initiative
focuses on moderate growth at Continental's hub franchises in
Newark, Houston, Guam and Cleveland -- provided market conditions
permit profitability. The mix of new aircraft and the ability to
control the number of leased aircraft allow the airline to decide
how much to grow. Under the flexible fleet initiative, Continental
can adjust annual departure growth between the range of zero to 2.8
percent domestically, and zero to 8.2 percent internationally over
the next five years. A schedule of Continental's fleet plan is
attached.
-more-
Boeing Order/Page 3
Continental Profile
Continental Airlines is the fifth largest airline in the U.S.,
offering more than 2,100 jet and Express departures daily to 136
domestic and 57 international destinations. Operating major hubs in
Newark, Houston, Guam and Cleveland, Continental is strategically
positioned for transcontinental travel, and offers extensive
service to Latin America and Europe via its Houston and Newark
gateways. Continental was recently ranked the top airline in
customer satisfaction among the nine major U.S. carriers on long-
haul (500+ miles) flights, based on an independent survey of
frequent flyers conducted by J. D. Power and Associates in
conjunction with Frequent Flyer magazine.
###
96127
Attachment
Aircraft Order Summary
Continental has a very flexible fleet plan. Continental's
committed fleet (current aircraft plus firm orders less all lease
expirations) is shown below:
Continental's Committed Fleet
Scheduled/ 1999 YE Orders
Aircraft Current Potential* Committed After
Type Aircraft Firm Retirement Aircraft Options 1999
737-300/ 102 108 (1) 209 80 -
500/600/
700/800
MD-80 67 2 (7) 62 - -
757 17 8 - 25 16 -
DC-10-10/30 14 7 (5) 16 - -
DC-9-30 30 - (30) 0 - -
737-100/200 30 - (30) 0 - -
727-200 31 - (31) 0 - -
777 - - - 0 - 5
Continental
Micronesia 23 - (18) 5** - -
Total 314 125 122 317 96 5
Continental
Fleet
Types 7 4
Average Age
(years) 14.1 8.2
* Scheduled Retirement - 91
Potential Retirement - 31
** Continental Micronesia fleet plan has not been finalized
Exhibit 99.2
[The following material is reproduced from pages 26-30 of the
referenced registration statement filed with the Securities and
Exchange Commission on September 17, 1996.]
Risk Factors Relating to the Company
Continental's History of Operating Losses
Although Continental recorded net income of $224 million in 1995
and $255 million in the six months ended June 30, 1996, it had
experienced significant operating losses in the previous eight
years. In the long term, Continental's viability depends on its
ability to sustain profitable results of operations.
Leverage and Liquidity
Continental has successfully negotiated a variety of agreements to
increase its liquidity during 1995 and 1996. Nevertheless,
Continental remains more leveraged and has significantly less
liquidity than certain of its competitors, several of whom have
available lines of credit and/or significant unencumbered assets.
Accordingly, Continental may be less able than certain of its
competitors to withstand a prolonged recession in the airline
industry.
As of June 30, 1996, Continental and its consolidated subsidiaries
had approximately $1.7 billion (including current maturities) of
long-term indebtedness and capital lease obligations and had
approximately $867 million of minority interest, Continental-
obligated mandatorily redeemable preferred securities of subsidiary
trust, redeemable warrants, redeemable preferred stock and common
stockholders' equity. Common stockholders' equity reflects the
adjustment of the Company's balance sheet and the recording of
assets and liabilities at fair market value as of April 27, 1993 in
accordance with fresh start reporting.
During the first and second quarters of 1995, in connection with
negotiations with various lenders and lessors, Continental ceased
or reduced contractually required payments under various
agreements, which produced a significant number of events of
default under debt, capital lease and operating lease agreements.
Through agreements reached with the various lenders and lessors,
Continental has cured all of these events of default. The last
such agreement was put in place during the fourth quarter of 1995.
As of June 30, 1996, Continental had approximately $825 million of
cash and cash equivalents, including restricted cash and cash
equivalents of $104 million. Continental does not have general
lines of credit and has significant encumbered assets.
Continental had firm commitments with The Boeing Company ("Boeing")
to take delivery of 43 new jet aircraft during the years 1997
through 2002 with an estimated aggregate cost of $2.6 billion.
Continental has recently amended the terms of its commitments with
Boeing to take delivery of a total of 61 jet aircraft during the
years 1997 through 2003 with options for an additional 23 aircraft.
The estimated aggregate cost of the firm-commitment aircraft is
$2.7 billion. These amendments changed the aircraft mix and timing
of delivery of aircraft, in order to more closely match
Continental's anticipated future aircraft needs. In addition, the
Company took delivery of three Beech 1900-D aircraft in the second
quarter of 1996 and an additional four such aircraft are scheduled
to be delivered later in 1996. The Company currently anticipates
that the firm financing commitments available to it with respect to
its acquisition of new aircraft from Boeing and Beech Acceptance
Corporation ("Beech") will be sufficient to fund all new aircraft
deliveries scheduled during 1996, and that it will have remaining
financing commitments from aircraft manufacturers of $676 million
for jet aircraft deliveries beyond 1996. However, the Company
believes that further financing will be needed to satisfy the
remaining amount of such capital commitments. There can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by firm
financing commitments. Continental has also entered into letters
of intent or agreements with several outside parties to lease four
DC10-30 aircraft and to purchase three DC10-30 aircraft and two MD-
80 aircraft. These nine aircraft are expected to be delivered by
mid-year 1997, and Continental expects to finance the aircraft to
be purchased from available cash or from third-party sources. The
Company's wholly-owned subsidiary, Continental Express, Inc.
("Express"), recently announced an order for EMB-145 regional jets.
Express' order, which is for 25 firm aircraft and 175 option
aircraft, is structured so that Express will lease, under operating
leases, the aircraft it takes under the aircraft order, and neither
Express nor Continental will have any obligation to take aircraft
which are not financed by a third party and leased to Express.
Continental will guarantee Express' obligations under the operating
leases.
For 1996, Continental expects to incur cash expenditures under
operating leases relating to aircraft of approximately $568
million, compared with $521 million for 1995, and approximately
$229 million relating to facilities and other rentals, the same
amount as for 1995. In addition, Continental has capital
requirements relating to compliance with regulations that are
discussed below. See "--Regulatory Matters."
CMI recently consummated a $320 million secured term loan financing
with a group of banks and other financial institutions. The loan
was made in two tranches -- a $180 million five-year amortizing
term loan and a $140 million seven-year amortization extended loan.
Each tranche bears interest at a floating rate. The loan is
secured by the stock of CMI and substantially all its unencumbered
assets, consisting primarily of CMI's route authorities, and is
guaranteed by Continental and Air Micronesia, Inc. (CMI's parent
company).
CMI used the net proceeds of the financing to prepay $160 million
in principal amount of indebtedness to an affiliate of General
Electric Company (General Electric Company and affiliates,
collectively "GE") and to pay transaction costs, and Continental
used the $136 million in proceeds received by it as an indirect
dividend from CMI, together with approximately $28 million of cash
on hand, to prepay approximately $164 million in principal amount
of indebtedness to GE. The bank financing does not contain any
restrictive covenants at the Continental parent level, and none of
the assets of Continental Airlines, Inc. (other than its stock in
Air Micronesia, Inc.) is pledged in connection with the new
financing.
The bank financing contains significant financial covenants
relating to CMI, including maintenance of a minimum fixed charge
coverage ratio, a minimum consolidated net worth and minimum
liquidity, and covenants restricting CMI's leverage, its incurrence
of certain indebtedness and its pledge of assets. The financial
covenants also limit the ability of CMI to pay dividends to
Continental.
On July 2, 1996, the Company announced its plan to expand its gates
and related facilities in Terminal B as well as planned
improvements at Terminal C at Continental's Houston
Intercontinental Airport hub. The expansion is expected to cost
approximately $115 million, which the Company expects will be
funded principally by the issuance of tax-exempt debt by the
applicable municipal authority. In connection therewith, the
Company expects to enter into long-term leases (or amendments to
existing leases) with the applicable municipal authority containing
rental payments sufficient to service the related tax-exempt debt.
Aircraft Fuel
Since fuel costs constitute a significant portion of Continental's
operating costs (approximately 12.5% for the year ended December
31, 1995 and 12.8% for the six months ended June 30, 1996),
significant changes in fuel costs would materially affect the
Company's operating results. Jet fuel prices have recently
increased. Fuel prices continue to be susceptible to international
events, and the Company cannot predict near or longer-term fuel
prices. The Company has entered into petroleum option contracts to
provide some short-term protection (currently approximately six
months) against a sharp increase in jet fuel prices. In the event
of a fuel supply shortage resulting from a disruption of oil
imports or otherwise, higher fuel prices or curtailment of
scheduled service could result.
Certain Tax Matters
The Company's United States federal income tax return reflects net
operating loss carryforwards ("NOLs") of $2.5 billion, subject to
audit by the Internal Revenue Service, of which $1.2 billion are
not subject to the limitations of Section 382 of the Internal
Revenue Code ("Section 382"). As a result, the Company will not
pay United States federal income taxes (other than alternative
minimum tax) until it has recorded approximately an additional $1.2
billion of taxable income following December 31, 1995. For
financial reporting purposes, Continental began accruing tax
expense on its income statement during the second quarter of 1996.
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. The
sale of the Company's common stock in the Secondary Offering (as
defined in and described under "Recent Developments") gave rise to
an increase in percentage ownership by certain stockholders for
this purpose. Based upon the advice of its counsel, Cleary,
Gottlieb, Steen & Hamilton, the Company believes that such
percentage increase did not give rise to an ownership change under
Section 382. However, no assurance can be given that future
transactions, whether within or outside the control of the Company,
will not cause a change in ownership, thereby substantially
limiting the potential utilization of the NOLs in a given future
year. In the event that an ownership change should occur,
utilization of Continental's NOLs would be subject to an annual
limitation under Section 382 determined by multiplying the value of
the Company's stock (including both common and preferred stock) at
the time of the ownership change by the applicable long-term tax
exempt rate (which was 5.80% for August 1996). Unused annual
limitations may be carried over to later years, and the amount of
the limitation may under certain circumstances be increased by the
built-in gains in assets held by the Company at the time of the
change that are recognized in the five-year period after the
change. Under current conditions, if an ownership change were to
occur, Continental's NOL utilization would be limited to
approximately $90 million per year.
In connection with the Company's 1993 reorganization under Chapter
11 of the U.S. bankruptcy code effective April 27, 1993 (the
"Reorganization") and the recording of assets and liabilities at
fair market value under the American Institute of Certified Public
Accountants' Statement of Position 90-7 - "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
the Company recorded a deferred tax liability at April 27, 1993,
net of the amount of the Company's estimated realizable NOLs as
required by Statement of Financial Accounting Standards No. 109 -
"Accounting for Income Taxes." Realization of a substantial
portion of the Company's NOLs will require the completion during
the five-year period following the Reorganization of transactions
resulting in recognition of built-in gains for federal income tax
purposes. The Company has consummated one such transaction, which
had the effect of realizing approximately 40% of the built-in gains
required to be realized over the five-year period, and currently
intends to consummate one or more additional transactions. If the
Company were to determine in the future that not all such
transactions will be completed, an adjustment to the net deferred
tax liability of up to $116 million would be charged to income in
the period such determination was made.
CMI
CMI's operating profit margins have consistently been greater than
the Company's margins overall. In addition to its non-stop service
between Honolulu and Tokyo, CMI's operations focus on the
neighboring islands of Guam and Saipan, resort destinations that
cater primarily to Japanese travelers. Because the majority of
CMI's traffic originates in Japan, its results of operations are
substantially affected by the Japanese economy and changes in the
value of the yen as compared to the dollar. Appreciation of the
yen against the dollar during 1993 and 1994 increased CMI's
profitability and a decline of the yen against the dollar may be
expected to decrease it. The yen has declined against the dollar
during 1996 as compared to 1995. To reduce the potential negative
impact on CMI's dollar earnings, CMI from time to time purchases
average rate options as a hedge against a portion of its expected
net yen cash flow position. Any significant and sustained decrease
in traffic or yields to and from Japan could materially adversely
affect Continental's consolidated profitability.
Principal Stockholders
As of July 31, 1996, Air Canada held approximately 10.0% of the
common equity interests and 4.0% of the general voting power of the
Company, and Air Partners, L.P. ("Air Partners") held approximately
9.8% of the common equity interests and 39.3% of the general voting
power of the Company. In addition, assuming exercise of all of the
warrants held by Air Partners, approximately 23.3% of the common
equity interests and 52.1% of the general voting power would be
held by Air Partners. As discussed in "Recent Developments", Air
Canada has announced its intention to divest its interest in the
Company during December 1996 or early 1997, subject to market
conditions. At any time after January 1, 1997, shares of Class A
common stock may be freely converted into an equal number of shares
of Class B common stock. Such conversion would effectively
increase the relative voting power of those Class A stockholders
who do not convert.
Various provisions in the Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation")
and Bylaws (the "Bylaws") currently provide Air Partners with the
right to elect one-third of the directors in certain circumstances;
these provisions could have the effect of delaying, deferring or
preventing a change in control of the Company. See "Recent
Developments."
Risk Factors Relating to the Airline Industry
Industry Conditions and Competition
The airline industry is highly competitive and susceptible to price
discounting. The Company has in the past both responded to
discounting actions taken by other carriers and initiated
significant discounting actions itself. Continental's competitors
include carriers with substantially greater financial resources, as
well as smaller carriers with lower cost structures. Airline
profit levels are highly sensitive to, and during recent years have
been severely impacted by, changes in fuel costs, fare levels (or
"average yield") and passenger demand. Passenger demand and yields
have been adversely affected by, among other things, the general
state of the economy, international events and actions taken by
carriers with respect to fares. From 1990 to 1993, these factors
contributed to the domestic airline industry's incurring
unprecedented losses. Although fare levels have increased
recently, significant industry-wide discounts could be
reimplemented at any time, and the introduction of broadly
available, deeply discounted fares by a major United States airline
would like result in lower yields for the entire industry and could
have a material adverse effect on the Company's operating results.
The airline industry has consolidated in past years as a result of
mergers and liquidations and may further consolidate in the future.
Among other effects, such consolidation has allowed certain of
Continental's major competitors to expand (in particular) their
international operations and increase their market strength.
Furthermore, the emergence in recent years of several new carriers,
typically with low cost structures, has further increased the
competitive pressures on the major United States airlines. In many
cases, the new entrants have initiated or triggered price
discounting. Aircraft, skilled labor and gates at most airports
continue to be readily available to start-up carriers. Although
management believes that Continental is better able than some of
its major competitors to compete with fares offered by start-up
carriers because of its lower cost structure, competition with new
carriers or other low cost competitors on Continental's routes
could negatively impact Continental's operating results.
Regulatory Matters
In the last several years, the United States Federal Aviation
Administration (the "FAA") has issued a number of maintenance
directives and other regulations relating to, among other things,
retirement of older aircraft, collision avoidance systems, airborne
windshear avoidance systems, noise abatement, commuter aircraft
safety and increased inspections and maintenance procedures to be
conducted on older aircraft. The Company expects to continue
incurring expenses for the purpose of complying with the FAA's
noise and aging aircraft regulations. In addition, several
airports have recently sought to increase substantially the rates
charged to airlines, and the ability of airlines to contest such
increases has been restricted by federal legislation, U.S.
Department of Transportation regulations and judicial decisions.
Management believes that the Company benefitted significantly from
the expiration of the aviation trust fund tax (the "ticket tax") on
December 31, 1995, although the amount of any such benefit
resulting directly from the expiration of the ticket tax cannot
precisely be determined. In early August 1996, the Congress
approved legislation reinstating the ticket tax until December 31,
1996, and the ticket tax was reinstated on August 27, 1996.
Management believes that the reimposition of the ticket tax has a
negative impact on the Company, although the amount of such
negative impact directly resulting from the reimposition of the
ticket tax cannot be precisely determined.
Additional laws and regulations have been proposed from time to
time that could significantly increase the cost of airline
operations by imposing additional requirements or restrictions on
operations. Laws and regulations have also been considered that
would prohibit or restrict the ownership and/or transfer of airline
routes or takeoff and landing slots. Also, the availability of
international routes to United States carriers is regulated by
treaties and related agreements between the United States and
foreign governments that are amendable. Continental cannot predict
what laws and regulations may be adopted or their impact, but there
can be no assurance that laws or regulations currently proposed or
enacted in the future will not adversely affect the Company.
