DALLAS – Continental Airlines (CAL) Tuesday sank into a quarterly loss burdened by high fuel prices and lower fares against a year-ago profit boosted by a hefty U.S. government payment.
The airline posted a loss of $17 million, or 26 cents per share, compared with a profit of $79 million, or $1.10 a share, last year. In second-quarter 2003, Continental received a one-time government payment of $111 million, after taxes, for security costs.
The Houston-based company said it had an expense of $19 million, after taxes, in the latest quarter due to the retirement of leased MD-80 (search) aircraft. Excluding the aircraft retirement charge, Continental reported a profit of $2 million, or 3 cents a share.
Wall Street analysts were expecting a loss of 9 cents a share, according to Reuters Estimates.
"These results remain disappointing in a year where we hoped to break even," said Gordon Bethune (search), Continental's chief executive.
The airline said revenue in the quarter was up 15.1 percent to $2.3 billion from the same period in 2003. But due to intense competition with low-cost carriers, yields were weak, dropping 1.6 percent from the year-ago quarter.
Its costs rose by 8.7 percent in the quarter due to record high fuel prices that are expected to increase the airline's fuel expense by several hundred million dollars this year.
The average price per gallon it paid for jet fuel, one of the larger expenses for any airline, increased by about 30 percent in the quarter from what it paid a year ago.
The airline ended the second quarter with $1.9 billion in cash and short-term investments.
Also in the quarter, it took delivery of one Boeing 757-300 (search) aircraft and three Boeing 737-800s (search). It expects to take delivery of five additional Boeing 737-800s in the second half of 2004.
The airline said it may reduce pension contributions due in 2004. It said it expects to make a decision regarding the funding by mid-September of this year.
Jeff Misner, Continental's chief financial officer said cost-cutting remains a top priority for the airline.
"While we are making good progress on our initiatives, it is clear that we have much more work to do to become profitable in this weak domestic fare environment," Misner said.