Continental Air Sees Red
Continental
(CAL) - Get Report
is off to a bad start in 2005 and don't expect much for the rest of the year either.
The airline Friday said its unrestricted cash position would erode during the first quarter.
In a filing with the
Securities and Exchange Commission
, Continental also said it expected to incur a first-quarter loss and reiterated its warning for a "significant" full-year loss.
In the filing, Continental said unrestricted cash and short-term investments would fall to between $1.3 billion and $1.4 billion by the end of the first quarter, vs. $1.49 billion at the end of 2004.
Typically, airlines have minimum unrestricted cash thresholds they must maintain in order to satisfy financial covenants. In Continental's case, the minimum is $1 billion and is linked to a credit card processing agreement. Failure to maintain the level would require the airline to post an additional $335 million of cash collateral.
The carrier also said it expects to make first-quarter debt and capital lease payments of about $110 million.
U.S. airlines continue to face a bruising environment, with fuel again at record levels. At the same time, industry overcapacity and harsh price competition has made it difficult for individual carriers to raise fares, squeezing margins. Carriers fear that if they raise prices, passengers will just flock to low-cost rivals.
Those difficulties come even though passenger traffic has been robust. In Friday's filing, Continental said domestic bookings through the end of March are strong and it expects the month's load factor, which measures the number of plane seats filled, will be up more than 6% from last year. Still, for the first quarter, the airline expects domestic yields, which measure revenue per passenger per mile flown, will decline 5% to 6%.
Looking ahead to April, Continental said domestic bookings are running slightly behind last year's.