The Wall Street Journal-20080118-Earnings Digest- Continental Turns Pretax Profit Despite Fuel Cost
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Earnings Digest: Continental Turns Pretax Profit Despite Fuel Cost
Despite the soaring price of jet fuel, Continental Airlines Inc. posted a pretax fourth-quarter profit, helped by lucrative international routes.
The fourth-largest U.S. airline by passenger traffic has delayed reporting net results until mid-February to finalize a tax charge. Continental reported pretax income of $71 million, compared with a pretax loss of $26 million a year earlier. Revenue rose 12% to $3.52 billion from $3.16 billion, slightly better than analysts expected, as the airline continued to keep planes full of passengers and to benefit from higher fares.
Though Continental saw some softness in air-travel demand during the holidays, ticket bookings for the next six weeks are ahead of last year, said Chief Executive Larry Kellner. "We do not see a slowdown based on our current booking levels," Mr. Kellner said during a conference call yesterday. Investors are watching quarterly reports closely to see if fear of a recession is hurting travel demand.
As major U.S. airlines cope with jet-fuel prices more than double those of five years ago, only Continental and Southwest Airlines Co. have been expected to avoid net losses in the fourth quarter. Continental's disclosure this week of a noncash tax charge related to pension payments for pilots will hurt its bottom line.
Continental said the charge, related to government regulations that permit pilots to work five years longer until age 65, would be in the range of $70 million to $140 million. The charge will help Continental increase its tax-valuation allowance as its pension liabilities decline.
Continental continues to generate strong revenue as it benefits from a high percentage of international flights and a healthy hometown economy in Houston. The airline will continue with international expansion, initiating flights to London's Heathrow in March. It is also adding service to growth markets like China, India and Latin America. New government caps on flying in the congested New York area won't prevent the airline from growing there since it can switch to larger aircraft out of its hub in Newark, N.J., it said.
Amid talk of airline-industry consolidation, Mr. Kellner said Continental prefers to remain independent. But if mergers happen, Continental's relatively small size compared with several other airlines could be a concern, he said.
In 4 p.m. composite trading on the New York Stock Exchange, shares of Continental were up 31 cents, or 1.3%, at $24.56.
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Donna Kardos contributed to this article.
