Continental Reports Solid June

The airline pegs unit revenue at 6% to 7% for the month.
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The odds look even better that

Continental Airlines

(CAL) - Get Report

will earn a profit in the second quarter after the company issued a stronger-than-expected revenue report for June.

The Houston-based airline late Friday said mainline unit revenue rose between 6.0% and 7.0% in June from a year before. Airlines measure unit revenue with revenue per available seat mile, or RASM -- the money brought in for each seat flown one mile. Mainline statistics exclude regional flights.

The increase topped estimates of Wall Street analysts, who generally were looking for a 4% to 5% gain. The results suggest that yield, or average fare, rose even more than expected, evidence that a string of industry fare increases since February are paying off.

The news prompted Goldman Sachs' Glenn Engel to lift his second-quarter EPS forecast for Continental to 45 cents from 18 cents. Engel estimates Continental's yields gained 6% in June from a year ago, 2 points better than he expected.

Still, Continental's good news probably won't translate into full-year profits. That's because the warm second and third quarters benefit from strong seasonal travel demand that doesn't extend into the fourth and first quarters. This year, airlines are also struggling with record-high fuel costs that show no sign of abating anytime soon. Engel, whose firm does and seeks to do business with companies covered in its research reports, predicts a full-year loss of $3.10 a share. That would include Continental's first-quarter loss of $2.77 a share.

Continental said mainline passenger traffic rose 6.4% in June from a year before, while capacity grew by 5.7%. That allowed the airline to fill slightly more seats on its planes. Its mainline load factor, or percentage of occupied seats, was 82.9% last month, 0.5 of a percentage point higher than last year.

Investors appeared to shrug off the strong revenue report, however. Continental shares were down 18 cents, or 1.4%, at $13.13. Airline investors may have been more focused on prices of crude oil futures, which jumped Tuesday morning and are only about a dollar below last week's record closing price of $60.54 a barrel.