Continental Airlines plans to exit the SkyTeam alliance with Delta Air Lines, Air France and others after its last flight Oct. 24 and join the rival Star Alliance shortly thereafter, CEO Larry Kellner said today.
Kellner said the transition to Star, the world’s biggest alliance led by United Airlines and Lufthansa, will be a major focus for the carrier this year. The October date jibes with Houston-based Continental’s previously announced plan to begin new service to Frankfurt, Lufthansa’s global hub, on Nov. 1.
Continental also is slated to begin a separate ticketing and cost-sharing partnership with United during the fourth quarter. The two carriers announced that deal, which still requires regulatory approval, shortly after the merger between Delta and Northwest Airlines was announced last year.
Kellner's statements came on a conference call after Continental reported that it lost $266 million in the fourth quarter as the recession bit into traffic.
Continental lost $2.33 per share, compared with a loss of $32 million, or 33 cents per share, a year ago.
Excluding net charges of $170 million, Continental’s loss would have been $96 million, or 84 cents per share. Analysts surveyed by Thomson Reuters expected a loss of 89 cents per share.
Revenue slipped 1.5 percent to $3.47 billion, slightly below analysts’ forecast of $3.49 billion.
Fuel and labor — Continental’s two biggest expenses — rose 4 percent and 5.1 percent, respectively.
Continental said in a regulatory filing today that international bookings over the next six weeks are lagging behind last year’s pace. As a percentage of available seats, trans-Atlantic bookings are running 6 to 7 percentage points behind last year, and Pacific and Latin American flights are also filling less quickly.
Kellner said the airline industry is prepared for the current economic downturn because of the large capacity cuts made last fall in response to high fuel prices. Those cuts included a more than 10 percent capacity reduction at Bush Intercontinental Airport, according to the filing, although the remaining flights were fuller than the previous year.
Those moves came with job cuts, but Continental has no additional layoffs planned, Kellner said. However, he cautioned the airline will do whatever it takes to return to profitability and be a viable long-term survivor.
The fact that fuel prices have fallen from historic summertime highs has helped Continental and the industry in the wake of the softened travel demand, Kellner said. Continental expects to pay about $2 billion less for fuel this year than it did in 2008.
Revenue slipped 1.5 percent to $3.47 billion, slightly below analysts’ forecast of $3.49 billion.
Continental disclosed last week that it took a $125 million charge against fourth-quarter earnings to cover losses on a fuel-hedging contract with a Lehman Brothers unit that later filed for bankruptcy.
Still, Standard & Poor’s analyst Philip Baggaley said hedging losses were less at Continental than at some rivals. He added that Continental’s ability to preserve unrestricted cash during the fourth quarter “with less financing activity than some peers was also encouraging.”
Continental raised $200 million by selling stock in the fourth quarter and ended 2008 with $2.64 billion in unrestricted cash and short-term investments. It expects to end March with about $2.6 billion.
Ray Neidl, an analyst with Calyon Securities, said Continental posted good increases in revenue and yield with no real surprises elsewhere in its report. He praised the company for containing non-fuel costs at the same time it cut capacity.
Continental expects to take delivery of 13 new Boeing 737 aircraft this year — it dropped 12 older versions of the same plane from its fleet in the fourth quarter. The company expects to get 11 more 737s, two Boeing 777 jets and lease four 757 models from Boeing in 2010.
For all of 2008, Continental lost $585 million compared with a profit of $459 million in 2007. Revenue rose just over $1 billion, or 7.1 percent, to $15.24 billion, but that was swamped by a $1.9 billion increase in spending on fuel.
The Associated Press contributed to this report
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