- The Washington Times - Monday, April 20, 2009

DALLAS (AP) - Continental Airlines Inc. reports first-quarter earnings on Wednesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Continental is expected to follow American Airlines and Southwest by posting a first-quarter loss, as the carriers fly into the headwinds of recession.

Traffic on Houston-based Continental’s mainline flights fell 11.2 percent in the first three months of the year compared with year-ago figures.

And things seemed to get worse as the quarter went along.

Continental has said that including its regional flying operations, revenue per available seat mile fell 4.8 percent in January, 11.5 percent in February and about 20 percent in March. (RASM, as this statistic is called, measures how well an airline generates revenue relative to its size.)

Like other carriers, Continental has cut capacity, which should help limit the loss. Continental offered 7.6 percent fewer mainline seat miles in the first quarter.

BY THE NUMBERS: As of Monday, analysts expected Continental to report a first-quarter loss of $1.19 per share on sales of $2.98 billion, according to a survey by Thomson Reuters. However, the analysts expect the airline to recover and earn a profit for the full year.

Last year in the first quarter, Continental lost $80 million, or 81 cents per share, on revenue of $3.57 billion.

ANALYST TAKE: Matthew Jacob, an analyst with Majestic Research, estimated that Continental’s revenue as a ratio of capacity fell 12 percent in the quarter. He said revenue per passenger trends at Continental’s Houston hub were lagging while hubs at Newark, N.J., and Cleveland were in line with companywide averages.

WHAT’S AHEAD: By cutting capacity, airlines hope to regain pricing power that they’ve lost during the recession. But the carriers have found it hard to raise fares.

According to Rick Seaney, chief executive of travel Web site FareCompare.com, the carriers have tried twice this year to raise fares but the first one failed and the second _ started by Continental _ appeared in trouble Monday, after Continental and American rolled back their increases.

On the international front, Continental is switching from one team of airlines, SkyTeam, to another _ the Star Alliance, which also includes United and Lufthansa. The move could foreshadow a combination with United, which the airlines discussed last year before rising fuel prices and growing losses at United parent UAL Corp. caused Continental to walk away from the talks.

U.S. regulators have given tentative approval to antitrust immunity for Continental to cooperate with Star Alliance members on international flights. But on Monday, European officials announced they wanted to take a closer look at SkyTeam, including its dealings with Continental, and at one other alliance.

The airlines have sought antitrust immunity to jointly set prices and schedules. But the European Commission, a regulatory arm of the European Union, suggested that the airlines were cooperating too closely and possibly breaking antitrust rules on trans-Atlantic flights.

Like other airlines, Continental is also looking for new sources of revenue including on-board entertainment.

Spokesman Dave Messing said Continental is nearly done equipping its international fleet with video-on-demand for TV shows and movies, and domestic aircraft are being outfitted with satellite TV to allow viewing of live TV.

Eventually, passengers will be able to send and receive e-mails and text messages, but the service won’t include full Internet access, Messing said. Other carriers are beginning to roll out Web surfing for a fee _ up to $12.95 per flight on American and Delta.

STOCK PERFORMANCE: Shares of Continental fell 51 percent in the first quarter, from $18.06 to $8.81, but many rivals did worse. In the same period, shares of American Airlines parent AMR plunged 70 percent, US Airways dropped 67 percent, United parent UAL fell 59 percent, and Delta matched Continental’s 51 percent decline.

Continental shares closed Friday at $13.56. They have doubled since an early March trough.

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