EX-99.2 5 f8k012004e992.htm EXHIBIT 99.2 News Release

EXHIBIT 99.2


Sarah Zaozirny
Director - Investor Relations

Investor Update

Issue Date:

January 20, 2004

This report 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/A 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-generating 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 report.

Current News

    

Fourth Quarter 2003 Results: Today Continental reported fourth quarter net income of $47 million ($0.67 diluted earnings per share). These results include additional net income of $85 million relating to special items as outlined in the table below. Excluding these items, Continental would have reported a net loss of $38 million for the fourth quarter or a loss per share of $0.58.

Debt and Capital Leases: At year-end 2003 our total Debt and Capital Leases were $6.0 billion, of which $5.7 billion is debt. Of the $5.7 billion in debt, $397 million is current.

2004 Non-Cash Pension Expense Estimate: $280 million

Continental/Delta Alliance: Our alliance with Delta is ramping up quicker than anticipated and delivering benefits in excess of our original estimates. We estimate that the incremental contribution from the Delta alliance for 2003 was approximately $30M.

Summary of Special Items

4th Qtr 2003

(in millions except per share data)

Net Income/(Loss)

GAAP Income/(Loss)
Items Excluded (After Tax):
  Gain on Hotwire and Orbitz investments, net
  Revenue adjustment for change in expected redemption     of frequent flyer mileage credits sold
  Lease exit costs for permanently grounded MD-80     aircraft
Non-GAAP Income/(Loss)

Shares Used for Computation:

Earnings (Loss) per Share excluding above items

$ 47

83

15

(13)
$ (38)

65.7

$(0.58)

 

Tax Sharing Agreement with ExpressJet Holding, Inc.
In conjunction with the IPO of ExpressJet, we entered into a tax-sharing agreement whereby ExpressJet will make payments to us for tax savings it may realize over a period of fifteen years attributable to certain deductions generated as a result of the structuring of its IPO. Due to the uncertainty of realization, payments received from ExpressJet are not recorded as income until received. In the fourth quarter, Continental received $17 million related to this agreement, which is included in Other Non-Operating Income or Loss on the Income Statement. Continental expects to receive approximately $40 million in 2004 and $20 million in 2005 related to the agreement.

Targeted Cash Balance

Continental ended the year 2003 with a cash and short-term investments balance of approximately $1.6 billion, including $170 million of restricted cash. Continental anticipates ending the first quarter 2004 with a cash and short-term investments balance of approximately $1.5 billion, including approximately $175 million of restricted cash.

Advanced Bookings - Six Week Outlook

Domestic bookings through February are running a point or so behind last year on about the same capacity. Despite the slight booking weakness, we expect load factors will continue to be strong, most likely in the range of 1-2 pts higher than last year in January and February. We still continue to see negative pressure on yields. Domestic yields for January and February are likely to be down slightly. March yields should be slightly up versus March 2003 which was negatively impacted by the beginning of war in Iraq. For the quarter we expect domestic yields to be about flat.

All the international regions are booked ahead or are expected to finish ahead of last year for most weeks and we expect first quarter load factors in the Transatlantic, Pacific and Latin regions to be up significantly year-over-year as last year which was negatively impacted by the countdown to, and beginning of, the war in Iraq.


 

2004 Estimated
Year-over-Year %Change

ASMs

1st Qtr.(E)

2nd Qtr.(E)

3rd Qtr.(E)

4th Qtr.(E)

Full Year(E)

Domestic
Latin America
Transatlantic
Pacific
Total Mainline System

Regional

6.0%
8.0%
3.0%
5.0%
6.0%

35.5%

5.0%
9.5%
30.0%
24.0%
11.0%

26.0%

2.0%
11.0%
19.5%
3.0%
6.5%

20.0%

(1.0)%
7.5%
14.5%
1.0%
3.0%

17.5%

3.0%
9.0%
17.0%
7.5%
6.5%

24.0%

 
 

2004 Estimate

Load Factor

1st Qtr.(E)

Full Year(E)

Continental
Regional

73 - 74%
64 - 65%

76 - 77%
71 - 72%

 

 
 

2004 Estimate (cents)

Mainline Operating Statistics

1st Qtr.(E)

Full Year(E)

CASM

CASM Ex-Mainline Fuel

9.58 - 9.63

8.01 - 8.06

9.30 - 9.35

7.84 -7.89

 
 

2004 Estimate (cents)

Consolidated Operating Statistics

1st Qtr.(E)

Full Year(E)

CASM

CASM Ex- Mainline and Regional Fuel

10.42 - 10.47

8.76 - 8.81

10.14 - 10.19

8.58 - 8.63

 
 

2004 Estimate

Fuel Gallons Consumed

1st Qtr.(E)

Full Year(E)

Mainline
Regional

Fuel Price (excluding fuel taxes)

320 Million
  60 Million

$0.99 - $1.01

1,320 Million
   265 Million

$0.91 - $0.95

Fuel Hedges

    

No fuel hedges currently in place

  
 

            2004 Estimated Amounts ($Millions)

Selected Expense Amounts

1st Qtr.(E)

Full Year(E)

Aircraft Rent
Landing Fees & Other Rentals
Depreciation & Amortization
Net Interest Expense

$220
$155
$105
$85

$905
$635
$425
$345

 


Cash Capital Expenditures

2003
($Millions)

2004 Estimate
($Millions)

Fleet & Fleet Related
Non-Fleet
Rotable Parts & Capitalized Interest
   Total
Net Purchase Deposits

$93
76
      36
$205
     (52
$153





)

  

$90
125
      55
$270
   (115)
$155





 

 

EPS Estimated Share Count
Share count estimates for calculating basic and diluted earnings per share at different income levels are as follows:

First Quarter 2004 (Millions)

Quarterly

Number of Shares

  

Earnings Level

Basic

Diluted

Interest Addback

Over $36
Between $19 - $36
Between $0 - $19
Net Loss

65.9
65.9
65.9
65.9

75.5
71.4
66.4
65.9

$3.6
$1.4
--
--

Full Year 2004 (Millions)

Year-to-date

Number of Shares

  

Earnings Level

Basic

Diluted

Interest Addback

Over $143
Between $76 - $143
Between $0 - $76
Net Loss

66.1
66.1
66.1
66.1

76.1
71.9
66.9
66.1

$14.2
$5.7
--
--

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.

Proforma Expenses

The table below illustrates how operating expenses would have been reported for the fourth quarter and full year of 2003 had we deconsolidated ExpressJet financials for the entire period. 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 through November 12, 2003, we were required to consolidate the results of ExpressJet through November 12, 2003 and will not be allowed to restate prior periods in future financial statements.


Pro Forma Expenses ($Millions)

Quarter Ending
Dec 31, 2003

Full Year
2003

Wages, salaries and related costs
Aircraft fuel
Regional capacity purchase, net
Aircraft rentals
Landing fees and other rentals
Maintenance, materials and repairs
Depreciation and amortization
Booking fees, credit card discount and sales
Passenger servicing
Commissions
Other

$694
268
285
225
138
100
106
91
71
38
217

  

$2,752
1,096
1,106
896
532
398
427
377
286
148
875

Fleet News

Continental Airlines Fleet Plan
Includes Continental, Continental Micronesia and Continental Express
January 20, 2004

Firm Commitments Less Planned Retirements

 

Total

Net Inductions and Exits

Total

Mainline

YE 2003

2004E

2005E

YE 2005E

777-200ER
767-400ER
767-200ER
757-300
757-200
737-900
737-800
MD-80
737-700
737-300
737-500

18
16
10
4
41
12
81
23
36
51
63

-
-
-
5
-
-
11
(19)
-
(1)
-

-
-
-
-
-
-
7
(4)
-
(6)
-

18
16
10
9
41
12
99
- 
36
44
63

Total

355

(4)

(3)

348
         

Regional

       

ERJ-145XR
ERJ-145
ERJ-135

54
140
30

21
-
-

21
-
-

96
140
30

Total

224

21

21

266
         

Total Count

579

17

18

614