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Continental gets updraft from upbeat profits - UPDATE 3
AFX
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SAN FRANCISCO (AFX) -- Continental Airlines reported a bigger-than-expected second-quarter profit on Wednesday as the carrier's cost-cutting efforts and strong revenue helped beat back rising fuel costs.
But getting to a profit for the year will be tough with jet-fuel prices on the rise.
'We still have a way to go to reach break-even on an annual basis, but while I expect we will see additional airline bankruptcies this year, due to the dedication of professionalism, Continental won't be one of them,' said Chairman and Chief Executive Officer Larry Kellner during a conference call after the results.
Shares of Continental rose 1.3%?to $15.90 with more than 5.7 million shares changing hands.
Calyon Securities analyst Ray Neidl called the results 'strong.'
Net income amounted to $100 million, or $1.26 a share, reversing a loss of $28 million, or 43 cents a share, in the 2004 quarter. The carrier recorded a gain related to the contribution of shares of ExpressJet to its defined pension plan in the latest quarter.
Excluding items, the company would have earned $53 million, or 69 cents a share, well ahead of the average estimate compiled by Thomson First Call for a profit of 20 cents a share.
Revenue rose 11.9% in the latest three months to $2.86 billion from $2.55 billion in the same period a year earlier. Analysts had been looking for revenue of $2.77 billion, on average.
Continental's load factor increased by two percentage points to 79.6% amid an 8.3% rise in traffic and 5.5% growth in capacity.
Mainline fuel expenses jumped 48.6%, or $188 million, to $575 million.
Labor costs slipped 8.7% to $649 million from $711 million a year ago as a result of pay and benefit reductions implemented in April.
Cost per available seat mile rose 3.2% in the quarter, primarily due to the higher fuel prices.
'These results demonstrate the tremendous operating leverage CAL, specifically, and the airlines, in general, have by combining strong revenue with the cost cuts they have recently achieved,' Calyon's Neidl said in a note to clients.
He now expects Continental to lose $2.89 a share, less than his earlier forecast of $3.24 a share in red ink.
Along with reporting results, the carrier noted it restated certain prior financials to correct its lease accounting. The corrections, it said, date back to 1993 and they resulted in increases to rental expense of between $3 million and $12 million per year.
The adjustments had no impact on cash flow and revenue in any year and that results for future periods aren't expected to feel an impact, Continental said.
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This story was supplied by MarketWatch. For further information see www.marketwatch.com.
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