CONTINENTAL AIRLINES BUCKS INDUSTRY TREND AND REPORTS 24th CONSECUTIVE PROFITABLE QUARTER

 Continues to distance itself from its competitors

Continental Airlines (NYSE: CAL) today reported first quarter net income of $9 million ($0.16 diluted earnings per share). This marks the 24th consecutive profitable quarter for Continental and exceeds the First Call consensus of $0.05 diluted earnings per share. Continental expects to be one of only two major U.S. carriers to post a profit in the first quarter.

Continental managed to sustain its profitability and boost operating income 21 percent in the first quarter, in spite of the economic slowdown and continued high fuel prices.

Our performance once again proves that all airlines are not alike,” said Gordon Bethune, Continental Airlines’ chairman and chief executive officer. “High employee morale, coupled with consistently good service, provided us with the necessary edge to maintain our profitability.”

First Quarter Operating Results

First quarter passenger revenue rose eight percent to a record $2.3 billion. All geographic markets recorded year-over-year increases in revenue per available seat mile (RASM) in the first quarter. Overall, capacity grew by a modest two percent.

Continental continued to enjoy domestic yield and length-of-haul adjusted RASM premiums to the industry.

Operationally, Continental had another great quarter. The airline finished near the top of the industry in completion factor and on-time performance as measured by the U.S. Department of Transportation. This continues the trend established in 2000 when Continental had the best on-time performance of any major U.S. carrier, having ended the year a full 5.5 percentage points better than the industry average.

During the quarter, the company won several honors, including Airline of the Year 2001 by Air Transport World magazine. Continental is the only airline among the more than 300 airlines in the world to receive this coveted distinction twice in five years. In addition, Continental took top honors in five categories at the OAG (Official Airline Guide) Airline of the Year Awards 2001, and was again named the No. 2 Most Admired U.S. Airline by FORTUNE magazine.

“Thanks to the hard work of the professional men and women at Continental, our completion factor was significantly better than the industry,” said Greg Brenneman, Continental’s president and chief operating officer. “The revenue generated from the higher completion factor allowed us to post a profit while our competitors lost money.”

The positive growth trend in online bookings continued in the first quarter with a 65 percent increase year-over-year. In addition, E-ticket sales now represent 60 percent of total sales, compared to 52 percent in the first quarter of 2000.

Also in the first quarter, the airline made aviation history with the launch of the first-ever daily nonstop service between New York/Newark and Hong Kong.

First Quarter Financial Results

Continental’s cost per available seat mile in the first quarter was 1.9 percent higher holding fuel rate constant, and 2.4 percent higher including the effect of fuel rate increases, as compared to the same period last year. A three percent increase in fuel prices and a two percent increase in available seat miles were partially offset by a two percent decrease in fuel consumption, reflecting the fuel efficiency of Continental’s newer jet fleet. Other costs remained relatively constant on a per unit basis compared to the previous year as a result of the company’s continued disciplined focus on eliminating non-value added costs.

The company again ended the quarter with more than $1.0 billion in cash and short-term investments.

During the first quarter, Continental obtained a 3-year $200 million credit facility to be used to finance purchase deposits on new Boeing aircraft to be delivered to the company over the next several years.

Continental priced a public offering of $709 million of pass-through certificates on April 4th at an average interest rate of 6.7 percent (including hedges). The proceeds will be used to finance the debt portion of the acquisition cost of 21 new Boeing aircraft scheduled to be delivered to the company from October 2001 to March 2002.

In January, the company repurchased 6.7 million shares of its former Class A common stock held by Northwest Airlines for $450 million. A portion of the purchase was funded with the net proceeds from the private placement of $250 million of convertible preferred securities, completed last November, with the remainder funded from the company’s stock repurchase program. Under the stock repurchase program, Continental has repurchased 32 million shares of its common stock for $1.4 billion. As of March 31, 2001, Continental had $106 million remaining in its stock repurchase program.

"Our employees’ consistent focus on eliminating non-value added costs over the last six years paid big dividends in the quarter,” said Larry Kellner, executive vice president and chief financial officer.

Continental took delivery of three Boeing 767-200 and one 767-400 extended range aircraft in the first quarter. The company’s wholly-owned regional carrier Continental Express took delivery of ten new regional jets in the first quarter, including flying its 100th regional jet into operation.

The company also celebrated its sixth consecutive year of profit sharing with its 55,000 employees, which totaled $98 million for 2000. Continental also paid out $11 million in on-time performance bonuses and gave away eight Eddie Bauer Ford Explorers to employees for perfect attendance in the first quarter. In recognition of the company’s independence from Northwest Airlines, Continental also paid $5 million in bonuses to all employees to celebrate the event.

Corporate Background

Continental Airlines is the fifth largest airline in the U.S., offering more than 2,200 departures daily to 133 domestic and 92 international destinations. Operating hubs in Newark, Houston, Cleveland and Guam, Continental serves more international cities than any other U.S. carrier, including extensive service throughout the Americas, Europe and Asia.