The cost of aviation turbine fuel, and dealing with Hurricane Ike were loss-making events for Continental Airlines during the third quarter to the tune of $236 million.
Continental said $91 million of the loss was on account of special items, including hurricane Ike which had battered the Gulf Coast in September. Continental had to cancel flights across the US as hurricane Ike forced the closure of Bush Intercontinental Airport at Houston, which is Continental's base. The airline's headquarters staff moved operations to a Cold War-era bunker 50 miles north of Houston.
"My co-workers did a great job working through significant operational challenges this past quarter," said Larry Kellner, Continental's chairman and chief executive officer. "Despite several severe storms, including Hurricane Ike, affecting both our employees' personal lives and our operations, we worked together to deliver a superb product." Continental estimated the adverse impact of Hurricane Ike on operating results in the third quarter of 2008 was approximately $50 million.
Continental has reported a third quarter loss of $2.14 per share, against a profit of $241 million or $2.15 per share during the third quarter of 2007. Other than the one-time items, the loss was $1.32 per share, lower than the $1.55 that Wall Street was anticipating, as reported by Reuters. Continental said a run-up in fuel costs that peaked in July at $145 per barrel of crude spurred fuel expenses for its mainline jets $606 million in the third quarter as compared to a year ago.
Continental's third quarter revenues were $4.2 billion, jumping 8.8 per cent or $336 million over numbers from the same quarter a year ago. The airline closed the third quarter with around $2.9 billion in unrestricted cash, cash equivalents and short-term investments. Passenger revenue was up 7.1 per cent or $249 million from the 2007 third quarter.
"We had solid revenue performance in an exceedingly difficult operating environment," said Jeff Smisek, Continental's president and chief operating officer. "Despite four hurricanes and two tropical storms, our team took care of our customers and delivered on the revenue."
Consolidated revenue passenger miles (RPMs) for the quarter decreased 2.3 per cent year-over-year on a slight decrease in capacity of 0.1 per cent, which resulted in a third quarter consolidated load factor of 82 per cent, around 1.8 points lower than the third quarter record set in 2007. Consolidated yield for the quarter increased 9.6 per cent year-over-year. Consolidated passenger revenue per available seat mile (RASM) for the quarter increased 7.3 per cent year-over-year due to increased yields.
The airline polled corporate customers some time ago, and found that the weakening economy is starting to impact both business and leisure travel. Chairman and CEO Larry Kellner said customers were now reducing travel and using advance purchase tickets and "preferred" carriers to trim expenses.
Southwest Airlines, the Dallas based low cost airline has also incurred losses, but from the falling fuel prices that have plummeted 50 per cent since July on account of the turmoil in the financial markets. Southwest announced ahead of the weekend that it would be writing down $247 million on account of the loss of value of its fuel hedges.
Rescheduled aircraft deliveries
Continental rescheduled to 2010 two Boeing 777s originally scheduled for delivery in 2009. Additionally, Continental has reached an in principle agreement with Boeing to reschedule 16 narrow-body aircraft originally scheduled for delivery in 2009 and 2010. They would now be delivered in 2011 and beyond.
As a result of these changes, in 2009, Continental is scheduled to take delivery of 14 Boeing 737 aircraft and in 2010, to take delivery of 12 Boeing 737, two Boeing 777 and two Boeing 787 Dreamliner aircraft.
Continental has also agreed in principal to terms under which it would lease up to four additional 757-300 aircraft from Boeing Capital Corporation. Boeing has until 31 December, 2008 to decide to lease these aircraft to Continental. If these leases are entered into, Continental expects that the 757-300s would be placed in service between late 2009 and early 2010.