Continental’s 2Q profit almost doubles on 23 percent boost in passenger revenue
HOUSTON – Continental Airlines on Thursday added to the airline industry’s apparent turnaround from years of struggles by nearly doubling its second-quarter net income through higher fares and packed planes.The nation’s fifth-largest carrier reported a 98 percent jump in second-quarter net income as a 23 percent boost in passenger revenue helped offset higher fuel prices and a hefty accrual for employee profit sharing.”I think it’s an industrywide thing,” Continental Chairman and Chief Executive Larry Kellner said Thursday, the day after Southwest Airlines Co. and the parent of American Airlines, the biggest U.S. carrier, reported second-quarter results more than double that of the year-ago period.Helane Becker, an analyst with The Benchmark Company, agreed. She said fare hikes prompted by soaring fuel prices have stuck as customers keep coming in the summer flying season.”Even with fares going up, people are still flying,” she said. “It was pretty important to note that bookings for the rest of the summer look pretty good. We expect that after Labor Day things will slow down, but they usually do.”Whether the turnaround and increased fares are sustainable amid concerns about the economy and continued high fuel prices remains to be seen, she said.”The industry is doing its best to keep fares up while oil prices are high,” Becker said.Continental shares fell 63 cents, or 2 percent, to $29.94 in afternoon trading Thursday on the New York Stock Exchange.Continental reported Thursday that its second-quarter net income rose to $198 million, or $1.84 per share, from $100 million, or $1.26 per share, a year ago. Excluding special charges, Continental recorded net income of $208 million, or $1.93 per share, in the latest period.Revenue rose 22.8 percent to $3.51 billion from $2.86 billion last year.Analysts polled by Thomson Financial expected $1.90 per share on sales of $3.49 billion.Operating income totaled $244 million, more than double that of the year-ago quarter, even though the carrier saw fuel costs jump $200 million and a $60 million accrual for employee profit sharing.Passenger revenue increased 23.1 percent to $3.2 billion, and total quarterly traffic increased 15.2 percent year-over-year on a capacity increase of 10.9 percent. As a result, 82.7 percent of available seats were filled in the quarter, 3.1 percentage points above the same period in 2005.Last year Continental forged pay and benefit concessions with its unions to help combat high fuel prices and quarterly losses.”To sum it up, our plan is working,” Kellner told analysts Thursday, though he noted the carrier would maintain focus on shaving unnecessary costs.Continental said mainline fuel costs increased $216 million over the second quarter of 2005, primarily due to a 26.4 percent increase in fuel prices compared with the same period last year. Continental hedged about 25 percent of its expected fuel requirements for the second quarter of 2006, resulting in an $11 million benefit. Fuel hedging involves buying fuel for future delivery at a set price, protecting the airline from future price spikes.The company said it has hedged about 33 percent of fuel requirements for the third quarter and 13 percent for the fourth quarter.During the second quarter, wages, salaries and related costs increased 14.6 percent – 5.4 percent excluding employee profit sharing – over the second quarter 2005.