EX-99.2 3 exhibit992.htm EXHIBIT 99.2 - INVESTOR UPDATE exhibit992.htm

Exhibit 99.2
DeAnne Gabel
Director - Investor Relations
 

Investor Update
             Issue Date:  April 22, 2010

This investor update provides information on Continental's guidance for the second quarter and full year 2010, as well as certain historical information pertaining to the first quarter of 2010.

Continental reported a net loss of $146 million for the first quarter of 2010, including $10 million of special charges.  The Company reported other non-operating expense of $10 million primarily related to foreign exchange losses with the largest component related to the devaluation of the Venezuelan currency announced in January of this year.

Advanced Booked Seat Factor (Percentage of Available Seats that are Sold)
Compared to the same period last year, for the next six weeks, mainline domestic advanced booked seat factor is down 1 to 2 points, mainline Latin advanced booked seat factor is down 2 to 3 points, Transatlantic advanced booked seat factor is flat to up 1 point, Pacific advanced booked seat factor is up 4 to 5 points, and regional advanced booked seat factor is down 1 to 2 points.

Last year at this time, due to declining business mix and weakness in yields, the Company made the decision to make more domestic leisure inventory available for sale earlier in the booking curve.  This year the Company has seen a modest improvement in business demand and, therefore, has returned to a more normal management of the domestic booking curve.

For the second quarter of 2010, the Company expects both its consolidated and mainline load factors to be up about 1 point year-over-year (“yoy”) compared to the same period in 2009.

Unrestricted Cash, Cash Equivalents and Short Term Investments Balance
The Company anticipates ending the second quarter of 2010 with an unrestricted cash, cash equivalents and short-term investments balance of between $3.0 and $3.1 billion.  This range assumes that the Company’s $175M 5% convertible notes (“the notes”), the holders of which have an initial put option exercisable in June 2010, are repurchased by the Company and settled in cash.  However, a holder may elect not to exercise the put option, in which case the holder’s notes would remain outstanding until the next put date in 2013, unless the Company chooses to exercise its call option in accordance with the terms of the indenture for the notes.

Cargo, Mail, and Other Revenue
The Company's Cargo, Mail, and Other Revenue for the second quarter of 2010 is expected to be between $375 and $385 million.

Available Seat Miles (ASMs)
2010 Estimate
     
Year-over-Year % Change
     
2nd Qtr.
Mainline
  
 
Domestic
(2.4%)
 
Latin America
10.7%
 
Transatlantic
(5.4%)
 
Pacific
2.8%
   
Total Mainline
(0.8%)
       
Regional
2.9%
       
Consolidated
  
 
Domestic
(1.3%)
 
International
0.6%
   
Total Consolidated
(0.4%)

For the full year 2010, Continental expects its consolidated capacity to be up 0.5% to 1.5% yoy.  The Company expects its mainline capacity to be up 0.5% to 1.5% yoy, with its mainline domestic capacity down 0.5% to 1.5% yoy and its mainline international capacity up 2% to 3% yoy.

Load Factor
2nd Qtr. 2010 (E)
  
Full Year 2010 (E)
Domestic
86%
-
87%
  
84%
-
85%
Latin America
80%
-
81%
  
81%
-
82%
Transatlantic
82%
-
83%
  
80%
-
81%
Pacific
82%
-
83%
  
79%
-
80%
Total Mainline
83%
-
84%
  
82%
-
83%
               
Regional
80%
-
81%
  
78%
-
79%
               
Consolidated
83%
-
84%
  
81%
-
82%

Continental's month-to-date consolidated load factor is updated daily and can be found on continental.com on the Investor Relations page under the About Continental menu.

Pension Expense and Contributions
During the first quarter of 2010, the Company contributed $34 million to its tax-qualified defined benefit pension plans and the Company contributed an additional $40 million to the plans earlier this month.  The Company estimates that its remaining minimum funding requirements for calendar year 2010 are approximately $50 million.

The Company estimates that its non-cash pension expense will be approximately $215 million for 2010.  This amount excludes non-cash settlement charges related to lump-sum distributions.  Settlement charges are possible during 2010, but the Company is not able at this time to estimate the amount of these charges.

CASM Mainline Operating Statistics
2010 Estimate (cents)
 
2nd Qtr.
  
Full Year
CASM
11.23
-
11.28
  
11.33
-
11.38
 
Special Items per ASM
0.00
  
(0.01)
CASM Less Special Items (a)
11.23
-
11.28
  
11.32
-
11.37
 
Aircraft Fuel & Related Taxes per ASM
(3.27)
  
(3.31)
CASM Less Special Items and Aircraft Fuel & Related Taxes (b)
7.96
-
8.01
  
8.01
-
8.06
                 
CASM Consolidated Operating Statistics
              
               
CASM
12.06
-
12.11
  
12.20
-
12.25
 
Special Items per ASM
0.00
  
(0.01)
CASM Less Special Items (a)
12.06
-
12.11
  
12.19
-
12.24
 
Aircraft Fuel & Related Taxes per ASM
(3.49)
  
(3.53)
CASM Less Special Items and Aircraft Fuel & Related Taxes (b)
8.57
-
8.62
  
8.66
-
8.71

(a) Special charges for the full year consist of $6 million of aircraft-related charges, net, and $4 million of severance.
(b) Cost per available seat mile less special items is computed by dividing operating expenses excluding special items by available seat miles. These financial measures provide management and investors the ability to measure and monitor Continental's performance on a consistent basis.
(c) Cost per available seat mile less special items and aircraft fuel and related taxes is computed by dividing operating expenses excluding special charges and aircraft fuel and related taxes by available seat miles.  This statistic provides management and investors the ability to measure and monitor Continental's cost performance absent special items and fuel price volatility.  Both the cost and availability of fuel are subject to many economic and political factors beyond Continental's control.

First Quarter 2010 Domestic Performance on a Hub-by-Hub Basis
Continental’s first quarter 2010 consolidated domestic capacity at its New York Liberty hub was down 3.3%, with traffic up 1.0%, resulting in a load factor increase of 3.4 pts, compared to the first quarter of 2009.  Transcon capacity, which is a subset of New York Liberty capacity, was up 1.3% yoy in the first quarter while traffic was up 6.2%, resulting in a load factor increase of 3.8 pts, compared to the same period in 2009.  Consolidated domestic capacity at its Houston hub was down 0.1% yoy, with traffic up 1.9 %, resulting in a load factor increase of 1.5 pts, compared to the first quarter of 2009.  Consolidated domestic capacity at its Cleveland hub was down 3.6% yoy, with traffic up 0.8%, resulting in a first quarter load factor increase of 3.5 pts, compared to the same period in 2009.

 
 
 


Selected Expense Amounts (Consolidated Expense)
2010 Estimate Amounts (millions)
 
2nd Qtr.
Full Year
Aircraft Rent
$230
$919
Depreciation & Amortization
$124
$515
Net Interest Expense*
$84
$338
*Net Interest Expense includes interest expense, capitalized interest and interest income.

Fuel Requirements (Gallons)
2010 Estimate
 
2nd Qtr.
Full Year
Mainline
 356 million
 1,417 million
Regional
 72 million
 283 million
     
Consolidated Fuel Price per Gallon (including fuel taxes and
$2.28
$2.30
impact of hedges)
    

Fuel Hedges - As of April 19, 2010
As of April 19, 2010, the Company's projected consolidated fuel requirements were hedged as follows:

 
Maximum Price
Minimum Price
 
% of
Expected
Consumption
Weighted Average Price (per gallon)
% of
Expected
Consumption
Weighted
Average Price
(per gallon)
Second Quarter 2010
                
WTI crude oil swaps
21%
  
$1.88
  
21%
  
$1.88
  
WTI crude call options
10%
  
$2.20
  
n/a
  
n/a
  
     Total
31%
      
21%
      
Third Quarter 2010
                
WTI crude oil swaps
15%
  
$1.92
  
15%
  
$1.92
  
WTI crude call options
19%
  
$2.25
  
n/a
  
n/a
  
     Total
34%
      
15%
      
Fourth Quarter 2010
                
WTI crude oil swaps
3%
  
$1.78
  
3%
  
$1.78
  
WTI crude call options
20%
  
$2.30
  
n/a
  
n/a
  
     Total
23%
      
3%
      

Continental Airlines, Inc. Tax Computation
Generally, the Company's ability to record a tax benefit on net losses is limited by its net deferred tax position.  The Company previously recorded the maximum available deferred tax benefit permitted by its prior net deferred tax liability position.  Subsequent losses will generally not be benefitted until the Company re-establishes a net deferred tax liability.  Subsequent pretax income, when considered along with subsequent other comprehensive income, will generally not carry tax expense until the Company exhausts its beginning unbenefitted net deferred tax assets via release of valuation allowance.

An exception to this general rule exists in the event the Company generates a loss from continuing operations while generating other comprehensive income.  Under this circumstance, accounting rules require the Company to record a tax benefit on the loss from continuing operations and a tax expense on other comprehensive income.  The tax benefit is non-cash and is reported on the income statement while the tax expense is non-cash and is recorded directly to other comprehensive income, which is a component of stockholders’ equity.  Items of other comprehensive income broadly include changes in the fair value of the Company’s hedging instruments and changes in the Company’s pension liability resulting from, among other things, changes in actuarial assumptions and the fair value of the pension plan assets.  Because these items are generally not known until late in the year, this exception would only likely be recorded during the fourth quarter.

Debt and Capital Leases
As of April 22, 2010, scheduled debt and capital lease payments for the full year 2010 are $989 million, with $151 million paid in the first quarter and approximately $437 million, $77 million and $324 million scheduled in the second, third and fourth quarters of 2010, respectively.


 
 
 


Cash Capital Expenditures ($Millions)
2010 Estimate
Fleet Related
$265
Non-Fleet
            140
 
Net Capital Expenditures*
$405
Net Purchase Deposits Paid/(Refunded)
             20
   Total Cash Expenditures
$425

*Includes rotable parts and capitalized interest

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

Second Quarter 2010 (Millions)
Quarterly
Number of Shares
Interest addback (net of applicable profit
Earnings Level
Basic
Diluted
sharing and income taxes impact)
Over $118
140
167
$10
Between $68 - $118
140
163
$6
Between $30 - $68
140
154
$2
Under $30
140
142
--
Net Loss
140
140
--

Full Year 2010 (Millions)
Year-to-date
Number of Shares
Interest addback (net of applicable profit
Earnings Level
Basic
Diluted
sharing and income taxes impact)
Over $469
140
163
$31
Between $291 - $469
140
159
$18
Between $119 - $291
140
154
$10
Under $119
140
143
--
Net Loss
140
140
--

These share count charts are based upon several assumptions including market stock price and number of shares outstanding.  Share counts also assume that the Company’s $175 million 5% convertible notes that are puttable in June 2010 are settled in cash. The number of shares used in the actual EPS calculation will likely be different than those set forth above.
 
This update contains forward-looking statements that are not limited to historical facts, but reflect the company’s current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in the company’s 2009 Form 10-K and its other securities filings, including any amendments thereto, which identify important matters such as the potential for significant volatility in the cost of aircraft fuel, the consequences of its high leverage and other significant capital commitments, its high labor and pension costs, delays in scheduled aircraft deliveries, service interruptions at one of its hub airports, disruptions to the operations of its regional operators, disruptions in its computer systems, and industry conditions, including continuing weakness in the U.S. and global economies, the airline pricing environment, terrorist attacks, regulatory matters, excessive taxation, industry consolidation and airline alliances, the availability and cost of insurance, public health threats and the seasonal nature of the airline business. The company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this update, except as required by applicable law.
 

 
 
 


Continental Airlines Fleet Plan

Includes Aircraft Operated by the Company or Operated on the
Company's Behalf Under a Capacity Purchase Agreement

April 22, 2010

 
Total
  
Total
Year End
Net Inductions and Exits
Year End
 
2009
1Q10
2Q10E
3Q10E
4Q10E*
2010E
         
Mainline
777-200ER
       20
       -
     -
  2
   -
22
767-400ER
       16
       -
     -
   -
   -
16
767-200ER
       10
       -
     -
   -
   -
10
757-300
       18
       2
   1
   -
   -
21
757-200
       41
       -
     -
   -
   -
41
737-900ER
       30
       -
     -
   -
  2
32
737-900
       12
       -
     -
   -
   -
12
737-800
     117
       -
     -
  9
  -
126
737-700
       36
       -
     -
   -
   -
36
737-300
         3
      (3)
     -
   -
   -
-
737-500
       34
      (3)
    3
   -
   -
34
     Total
     337
      (4)
    4
11
  2
350
         
         
Regional
ERJ-145
     227
      (4)
   (2)
   -
   -
221
ERJ-135
          -
       -
     -
   -
   -
-
CRJ200LR
         7
      (7)
     -
   -
   -
-
Q400
       14
       -
     -
  1
  5
20
Q200
       16
       -
     -
   -
   -
16
     Total
     264
    (11)
  (2)
  1
  5
257
             
Total Count
     601
    (15)
   2
12
  7
607

*Excludes one 737-800 scheduled for delivery in December 2010 that is expected to enter service in 1Q11

The following aircraft are currently scheduled for delivery from Boeing in 2011:
-  
Six 787-8s (four in 3Q11 and two in 4Q11)
-  
Four 737-900ERs (four in 2Q11)
-  
Three 737-800s (two in 1Q11 and one in 3Q11)