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): |
December 10, 2003 |
CONTINENTAL AIRLINES, INC. |
(Exact name of registrant as specified in its charter) |
Delaware |
1-10323 |
74-2099724 |
(State or other jurisdiction |
(Commission File Number) |
(IRS Employer |
of incorporation) |
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) |
Item 9. Regulation FD Disclosure.
On December 10, 2003, we provided a letter to investors and analysts presenting information relating to our financial and operational outlook for the remainder of 2003 and a capacity forecast for 2004. The letter is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
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. |
December 10, 2003 |
By /s/ Jennifer L. Vogel |
Jennifer L. Vogel |
|
Senior Vice President, General Counsel and Secretary |
|
EXHIBIT INDEX |
99.1 |
Letter to Investors and Analysts |
Sarah Zaozirny
December 10, 2003
Dear Investors and Analysts:
Attached are updated current expectations for several operating and financial statistics for the remainder of 2003 and capacity guidance for full year 2004 (Attachment A). As a reminder, after November 12, 2003, Continental Airlines, Inc. will no longer consolidate the financial results of ExpressJet Holdings, Inc. ("ExpressJet") in its financial statements, and the attached guidance reflects this change. Continental's income statement will reflect Minority Interest for the period October 1, 2003 through November 12, 2003 and will reflect our proportionate share of ExpressJet's net income in Nonoperating income for the period November 13, 2003 through December 31, 2003 and for all reporting periods thereafter. In addition, we have attached a breakout by quarter of the recently published pro forma results to demonstrate how expense line items would have been affected by deconsolidation in the first, second and third quarters of 2003 had the deconsolidation occurred on January 1, 2003 (Attachment B). P>
We are comfortable with our outlook for advance booking levels through the next six weeks. However, while load factors systemwide continue to show good year-over-year ("yoy") strength, as we expected, yields continue to be weak. Domestic advance bookings are averaging about 2 points ahead of last year. Our six-week look at Trans-Atlantic bookings show them continuing to be strong, and we expect Trans-Atlantic load factors for December will be up about 7 points yoy on a capacity increase of 5%. Latin bookings look fairly flat yoy through the end of the year with the first couple of weeks in January being ahead of last year by about 2 points. In Micronesia we anticipate very favorable yoy improvement in load factors due to the negative impact last December of supertyphoon Pongsona. Trans-Pacific bookings continue to strengthen and are ahead of last year by more than 10 points. Despite this strength in bookings, however, we expect yields to continue to be down yoy throughout the system. The excepti on is the Pacific region, where the stronger yen will help keep dollar-denominated yields fairly close to last year's yields.
Continental anticipates ending the fourth quarter 2003 with a cash balance of approximately $1.5 billion, including restricted cash and short-term investments. This balance excludes all of ExpressJet's cash.
During the quarter, Continental completed a financing for four 737-800 aircraft delivering this quarter and six 737-800 aircraft scheduled for delivery in 2004.
In November, Continental sold its entire investment in Hotwire, resulting in a net nonoperating gain of approximately $37 million ($23 million after income taxes).
Additionally, Continental will be recording a special operating charge of approximately $21 million ($13 million after taxes) related to the permanent grounding of five MD-80 aircraft in December. The charge is associated with future obligations for rent and return conditions net of assumed sublease income. Our current plans are to remove all MD-80 aircraft from service by January 2005.
If you have any questions regarding this information, please do not hesitate to contact us.
Best wishes for a happy holiday season.
Sarah Zaozirny
This letter contains forward-looking statements that are not limited to historical facts, but reflect our current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in our 2002 10-K and our other securities filings, which identify important matters such as terrorist attacks, domestic and international economic conditions, the significant cost of aircraft fuel, labor costs, competition and industry conditions including the demand for air travel, airline pricing environment and industry capacity decisions, regulatory matters and the seasonal nature of the airline business. In addition to the foregoing risks, there can be no assurance that the company will be able to achieve the pre-tax benefits from the revenue-generatin g and cost-reducing initiatives discussed previously, some of which will depend, among other matters, on customer acceptance and competitor actions. We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this letter.
Attachment A
Continental Airlines' Quarterly Update
2003 Estimated |
2004 Estimated |
|||
ASMs |
4th Qtr.(E) |
Full Year (E) |
||
|
|
|
||
Domestic |
0.0 % |
3.2% |
2003 Estimate |
||
Load Factor |
4th Qtr.(E) |
|
Mainline |
75 - 76% |
2003 Estimate (cents) |
||
Mainline Operating Statistics |
4th Qtr.(E) |
|
CASM (including special items) |
9.58 - 9.63 |
2003 Estimate (cents) |
||
Consolidated Operating Statistics |
4th Qtr.(E) |
|
CASM (including special items) |
10.24 - 10.29 |
*Please note that following deconsolidation of ExpressJet, only fuel expense related to mainline operations will be recorded under the fuel expense line item and excluded from this particular calculation. Fuel expense related to regional operations, including fuel expense in excess of any negotiated fuel expense caps, will be recorded under the Regional capacity purchase line item and is not excluded from this calculation.
2003 Estimate |
||
Fuel Gallons Consumed |
4th Qtr.(E) |
|
Mainline |
310 Million |
Fuel Hedges |
% of Volume Hedged |
Wtd. Average Strike Price of Caps |
Fourth Quarter |
60% |
$28.75/Barrel |
2003 Estimated Amounts ($Millions) |
|||
Selected Expense Amounts |
4th Qtr.(E) |
||
Aircraft Rent |
$225 |
|
2003 Estimated Amounts |
2004 Estimated Amounts |
|||
Fleet & Fleet Related |
$100 |
|
$115 |
|
Continental Airlines, Inc. Quarterly Tax Computation
Taxes on Consolidated Profit/(Loss) |
Tax Rate of 36.8% |
Debit /(Credit) |
Permanent tax differences are primarily related to non-deductible per diems, meals and entertainment.
*Applies to portion of the quarter prior to deconsolidation of ExpressJet financials.
EPS Estimated Share Count
Share count estimates for calculating basic and diluted earnings per share at different income levels are as follows:
Fourth Quarter 2003 (Millions)
Quarterly |
Number of Shares |
||
Earnings Level |
Basic |
Diluted |
Interest Addback |
Over $36 |
65.7 |
75.4 |
$3.6 |
Full Year 2003 (Millions)
Year-to-date |
Number of Shares |
||
Earnings Level |
Basic |
Diluted |
Interest Addback |
Over $140 |
65.4 |
74.7 |
$14.2 |
These share count charts are based upon several assumptions including market stock price and number of shares outstanding. The number of shares used in the actual EPS calculation will likely be different from those set forth above.
Attachment B
Continental Airlines' Quarterly Update
The data in the table below was derived from the pro forma financial statements for the nine months ended September 30, 2003 as filed as Form 8-K with the SEC dated November 12, 2003. The table illustrates how operating expenses would have been reported in the first, second and third quarters of 2003 had we deconsolidated ExpressJet financials prior to January 1, 2003. We have included this information to assist in modeling Continental's 2004 financials. Please note, however, that since we owned a sufficient amount of shares to consolidate ExpressJet during this period, we were required to consolidate the results of ExpressJet and will not be allowed to restate prior periods in future financial statements. |
Quarter Ended |
||||
Pro Forma Expenses ($Millions) |
Mar 30, 2003 |
Jun 30, 2003 |
Sep 30, 2003 |
|
Wages, salaries and related costs |
$696 |
$676 |
$686 |