...but You Gotta Read the Whole Report

Continental Airlines has now reported a second quarter net income of $79 million ($1.10 diluted earnings per share) including a security fee reimbursement of $111 million, and a special charge of $8 million, both net of taxes. First Call consensus for the quarter, adjusted to include the security fee reimbursement and special charge, is $.69 earnings per share.

Second quarter results were adversely impacted by the war in Iraq and Severe Acute Respiratory Syndrome (SARS), and higher year-over-year fuel costs.

Operating income for the second quarter of 2003 was $238 million including the security fee reimbursement of $176 million ($111 million after taxes) and a $14 million ($8 million after taxes) special charge associated with the recently announced deferral of aircraft deliveries. In the second quarter of 2002, the company reported an operating loss of $115 million that included special charges of $164 million.

"We've improved our operating income compared to last year in spite of higher fuel costs and lower passenger revenue," said Gordon Bethune, chairman and CEO. "I believe we're doing the right things to be a survivor."

For the second quarter of 2003, Continental reported a U.S. Department of Transportation (DOT) on-time arrival rate of 85.4 percent and a completion factor of 99.8 percent. Continental reported 31 days without a single flight cancellation during the quarter. During the quarter the airline broke 10 of 12 operational records and in May also set a new all-time record for baggage performance, with a ratio of only 3.65 mishandled bags per 1,000 enplanements.

"Despite the war in Iraq and SARS distractions, our team of professional employees continued to work together to deliver our customers the very best service in the industry," said Larry Kellner, president and chief operating officer. "Our long-term reliability continues to provide us with a revenue premium to the industry."

Continental's mainline cost per available seat mile (CASM) decreased 12.5 percent (15.1 percent decrease holding fuel rate constant) in the second quarter over the same period last year. Excluding the security fee reimbursement and fleet impairment losses and other special charges, Continental's mainline CASM holding fuel rate constant increased 1.2 percent on 6.8 percent fewer ASMs in the second quarter of 2003 compared to the second quarter of 2002. CASM holding fuel rate constant and excluding the security fee reimbursement, fleet impairment losses and other special charges, provides management and investors the ability to measure and monitor Continental's cost performance on a consistent basis.

"We continue to focus on achieving efficiencies and savings that will result in a stable, long-term competitive cost structure," said Jeff Misner, Continental's senior vice president and chief financial officer. "Every member of the Continental team is helping to ensure the survival of our company."

FMI: www.continental.com