Continental Airlines Q1 2010 Earnings Call Transcript

Continental Airlines Q1 2010 Earnings Call Transcript
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Continental Airlines (CAL)

Q1 2010 Earnings Call

April 22, 2010 10:30 AM EST

Executives

Nene Foxhall – SVP, Communications and Government Affairs

DeAnne Gabel – Director, IR

Jeff Smisek – Chairman, President and CEO

Jim Compton – EVP, President and Chief Marketing Officer

Zane Rowe – EVP and CFO

Gerry Laderman – SVP, Finance and Treasurer

Analysts

Jamie Baker – JPMorgan

Dan McKenzie – Hudson Securities

Hunter Keay – Stifel Nicolaus

Bill Greene – Morgan Stanley

Kevin Crissey – UBS

Gary Chase – Barclays Capital

Helane Becker – Jesup & Lamont

Bill Mastoris – Broadpoint

Terry Maxon – Dallas Morning News

Deepa Seetharaman – Thomson Reuters

David Koenig – Associated Press

Jed Melnick – New York Times

Richard Newman – The Record

Ted Reed – TheStreet.com

Dan Reed – USA TODAY

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to Continental Airlines first quarter 2010 financial results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference call is being webcast and recorded Thursday, April 22, 2010.

I would like to turn the conference over to Nene Foxhall, Senior Vice President of Communications and Government Affairs; and DeAnne Gabel, Director of Investor Relations. First Ms. Foxhall, ma’am you may begin.

Nene Foxhall

Thank you, John. Good morning everyone. Joining us here in Houston are Continental’s Chairman, President and Chief Executive Officer, Jeff Smisek; Executive Vice President and Chief Marketing Officer, Jim Compton; Executive Vice President and Chief Financial Officer, Zane Rowe; Executive Vice President and Chief Operations Officer, Mark Moran; and Senior Vice President of Finance and Treasurer, Gerry Laderman to discuss Continental’s first quarter 2010 financial results.

Jeff will begin with some overview comments after, which Jim will review our capacity and revenue results. Zane will follow with a discussion of Continental’s cost structure and balance sheet. At that point we will open the call for questions. And with questions, we will follow the executive comments, and then we will begin a question-and-answer session for the media. We would appreciate it if each of you would limit your questions to one with one follow up.

With that I will turn it over to DeAnne.

DeAnne Gabel

Thanks, Nene. Earlier today we issued an update for investors presenting information relating to our financial and operational outlook for the second quarter and full-year 2010 and other information. This investor update was included and filed with the SEC. Today we will be discussing some non-GAAP financial measures such as net income excluding special items.

Please note that a reconciliation of the GAAP to non-GAAP financial measures as well as the investor update can be found on our website at continental.com under the Investor Relations section. In addition, our discussion today may contain forward-looking statements that are not limited to historical facts, but reflect the company’s current beliefs, expectations, or intentions regarding future events.

All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. For examples of such risks and uncertainties please see the risk factors set forth in the company’s 2009 10-K and with other securities filings.

With that, let me turn the call over to Jeff.

Jeff Smisek

Thanks, Nene and DeAnne. Good morning and thanks for joining us. I want to start by thanking my coworkers for overcoming the many operational challenges we had this quarter. Despite those challenges, the remain committed to delivering a high-quality product and excellent customer service that our passengers come to expect from us. I also want to thank our customers and crews for their patience as we work through recover from the operational challenges caused by the volcanic ash plume in Europe. Beginning last Wednesday, the volcanic ash led to the cancellation of some UK-bound flights and most eastbound flights canceled on Thursday, escalating to the cancellation of virtually all our European operations for the next five days.

Yesterday, we resumed all our eastbound flights and today we began to operating a full schedule to Europe and have added extra flights as well as larger aircraft. We will continue to look for opportunities to add more seats to help re-accommodate our passengers. We understand how stressful it can be to be stranded faraway from home and also understand the difficulty our customers maybe experiencing in getting re-accommodated. We are keenly focused on getting our customers to their scheduled destination as quickly as possible.

Now, turning to our financial results, for the first quarter of 2010, Continental reported a net loss of a $146 million, which is a loss of $1.05 per diluted share or a loss of $0.98 per diluted share excluding $10 million of severance and aircraft special charges. On the operational front, twice during the quarter, we had severe winter storms that forced us to suspend operations at our North Liberty Hub. Our team did an excellent job of getting the operation back on schedule and seeing to our customers. Our system wide mainline completion factor was 98.3% for the quarter.

Running an airline is a tough business. We have low barriers to entry and high barriers to exit, resulting in a highly fragmented and brutally competitive business, but it’s prone to overcapacity. Notwithstanding this reality, I and my entire management team and my more than 40,000 coworkers around the world are committed to achieving and sustain profitability. To do that, we must increase revenue, decrease cost and take decisive actions to remain competitive.

We are offering our customers more choice among the products and services they want and they are willing to pay for. And we will be offering additional products and services in the future. We continue to invest in modern fuel efficient aircraft and in our onboard product and are getting very good reviews for our flatbed seats, direct TV and audio/video on demand. We are also investing in self service technology that is better for our customers and less costly to Continental.

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