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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 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 Thank you Nene, earlier today we issued an update for investors presenting information relating to our financial and operational outlook for the third quarter and full-year 2010 and other information. This investor update was included in the filing 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 security filings. With that, I will turn the call over to Jeff. Jeff Smisek Thank you, Nene and DeAnne. Good morning and thanks for joining us. I also want to thank all my co-workers. Across the system, they have done a tremendous job managing record high load factors while delivering a great product and excellent customer service, day in and day out. I appreciate all their efforts.
Continental reported net income of $257 million or a profit of $1.60 per diluted share for the second quarter, excluding $24 million of merger related costs and other special charges. Including these special items, our net income was $233 million or $1.46 per share.These results were largely driven by improvement in the revenue environment. Business traffic is coming back, though slowly. Leisure demand has been strong and we expect it will remain so throughout the remainder of the summer. This demand strength, together with the capacity reductions over the last couple of years have helped us to manage yields up. Jim has more detail to share with you in a moment, but I think you will agree that the direction of revenue streams is encouraging. We have also been growing our ancillary revenue streams, our customers are taking advantage of the additional options we have begun to offer such as day of departure upgrades and premium seating. Together, these two initiatives are currently generating over $200,000 per day in additional revenue. On the operation side, we maintained our excellent completion rate by achieving the systemwide mainline segment completion factor of 99.3% for the quarter despite cancellations caused by the Icelandic volcano. We achieved a mainline domestic on-time performance of 80% or greater in all three of the months during the quarter and my co-workers earned $6 million in cash incentives for that performance. So, it’s too early to tell what the fall trends will be like, but we are pleased with the revenue and demand trends we have been seeing so far. We continue to exercise capacity discipline and for the full year 2010, we expect both our consolidated and mainline capacity will be up only about a 0.5% to 1.5% year-over-year, with our mainline domestic capacity down, a 0.5% to 1.5% year-over-year.
As for next year it’s too soon to say what the capacity of the merged carrier will be, but I can tell you that I am pleased with the benefits Continental has experienced from capacity discipline. Over the last several years, we have been focused on reducing capacity in the geographic areas that underperformed, to that end our 2010 mainline domestic capacity will be down about 12% versus 2007.Read the rest of this transcript for free on seekingalpha.com