Notes
Continental Airlines, Inc., (CAL) an air carrier, engages in the transportation of passengers, cargo, and mail. As of December 31, 2006, the company's fleet consisted of 366 mainline jets and 272 regional jets. It flew to 136 domestic and 126 international destinations, as well as offered additional connecting service through alliances with domestic and foreign carriers. Continental Airlines operates its domestic route system primarily through its hubs at Newark Liberty International Airport in the New York metropolitan area; George Bush Intercontinental Airport in Houston, Texas; and Hopkins International Airport in Cleveland, Ohio. The company directly serves destinations throughout Europe, Canada, Mexico, Central and South America, and the Caribbean, as well as Tel Aviv, Delhi, Hong Kong, Beijing, and Tokyo. Continental Airlines was founded in 1934 and is based in Houston, Texas.--
Barron's DEC 3, 2007 has an interesting article on the deregulation of routes between the US and Europe, centering on opening Heathrow to more airlines. Continental and others will be able to fly into Heathrow for the first time, which should boost revenue. The US - Europe routes are very lucrative.
"For 30 years, the rules of the Bermuda airline agreement limited Heathrow-U.S. traffic to just four airlines -- two U.S. and two British. Originally, the U.S. carriers were Pan Am and TWA, but their rights have long since been transferred to AMR's American Airlines and UAL's United Airlines. On the British side, the two are British Airways and privately held Virgin Atlantic. - Until now, all other airlines, British and U.S. alike, that wanted to fly between London and the U.S. have had to use the far less popular and less accessible airports at Gatwick, Stansted and Luton.
"The spoils, however, won't be divided evenly. Air travelers certainly will win, with trans-Atlantic fares falling by 10% or more. And depending on exactly how it plays out, the deregulation could help the stocks of U.S. carriers like Continental (ticker: CAL), Delta (DLA) and US Airways (LCC), previously barred from Heathrow.
"IT MAY TAKE SOME TIME FOR THE changes to become evident. Though Heathrow will be opened legally to all airlines, in practical terms it will be hard for newcomers to break into, at least in the short term. The airport operates at nearly 99% capacity, with its two parallel runways handling about 1,300 takeoffs and landings, or "slots," every day. The airlines now using the airport control no less than 97% of these slots, and the new Open Skies accord contains no provisions to force the "Heathrow Four" (BA, Virgin, American and United) to give or sell these rights to other airlines.
This is a long-term factor, but interesting nonetheless.
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The company claims to have the youngest, most fuel-efficient fleet. From a 12 MAR, 2007 press release:
" Continental's mainline fleet is the youngest among all network airlines based in the U.S., with an average aircraft age of less than 10 years. The airline has reduced fuel consumption per revenue passenger mile by 34.1 percent in the last 10 years. Furthermore, no other U.S.-based network carrier burns less fuel per available seat mile than Continental, which translates to Continental having lower CO2 emissions per available seat mile than its primary competitors.
11DEC07 - $26
As of DEC 11, 2007Market Cap: 2.76B
Enterprise Value: 4.84B
Trailing P/E: 6.64
Forward P/E (fye 31-Dec-08): 7.10
PEG Ratio (5 yr expected): 0.58
Price/Sales (ttm): 0.20
Price/Book (mrq): 2.26
Enterprise Value/Revenue (ttm): 0.35
Enterprise Value/EBITDA (ttm): 4.523
Profit Margin (ttm): 3.35%
Operating Margin (ttm): 4.79%
Return on Assets (ttm): 3.51%
Return on Equity (ttm): 48.31%
GROWTH
Earnings: Current Qtr. -150.0%. Next Qtr. -324.0%. This Year 55.6%. Next Year -13.7%
No insider buying recently; plenty of selling around $30 (and higher).
Thoughts: It looks like a solid buy & hold candidate for the long-term. The estimates of negative growth for the next 12 months won't move the price in the short-term, however. The only likely short-term catalyst for the price I can see is a decline in oil prices. That seems like an even bet.
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