Continental Airlines Chief Dismisses Consolidation Issue in United States

Continental Airlines Chief Dismisses Consolidation Issue in United States

The flurry of speculative merger and acquisition talks between major carriers in the United States will most likely end with little movement toward consolidation of the country’s industry, according to comments made by Continental Airlines [CAL] Chairman and Chief Executive Gordon Bethune this week.

Continental’s chief also ruled out any possible takeover of the Houston- based carrier, or large-scale expansion of the airline in the near-term.

Bethune’s statements came immediately after Continental announced impressive second quarter financial results, which showed healthy growth in loads and yields, offsetting an almost 100 percent rise in fuel-increases year- on-year.

The good news did not temper Bethune’s opinion of the industry’s evolution. “It is hard to say considering recent history, but given that the (U.S.) government is suing us and Northwest Airlines [NWAC] to undo things we have done in the past, which is minimal,” no consolidation should be expected, he said during an interview on cable television network CNBC’s Squawk Talk July 18, when questioned on supposed mergers between many of Continental’s rivals. The Department of Justice (DOJ) is currently investigating Northwest’s 49 percent total voting rights in Continental.

But Bethune also hedged his bets, stating that it is not possible to fully gauge legislator opinion on airline consolidation. “You just never know with these guys,” he said.

Bethune’s reticence to be fully tied to one opinion is in stark contrast to his diatribe last month on the need to relax foreign ownership legislation in the U.S. (WAN, June 23, 2000). But this may be understandable. If Bethune has misread industry movements, he may find his airline a member of the AMR Group [AMR] behemoth, courtesy of American Airlines apparent bid for Northwest. However unlikely this merger is, Continental’s deal with Northwest leaves no contractual obligations for Northwest to sell if it is acquired or merges with another airline. “It’s up to the DOJ what to do,” said Bethune during a July 18 analyst meeting.

Continental Airlines 2Q results

2Q, 2000 y-o-y % change 2Q, 1999

Revenue (US$ million) 2.571 17.9 2,181

Operating Income (US$m) 279 13 247

Operating Expenses(US$m) 2,292 18.5 1,934

of which: fuel 663 118.1 304

salaries 1,377 11.2 1,238

maintenance 330 10.7 298

Fuel gallons used

(million) 763 1.2 754

RPMs (millions) 31,496 9.9 28,656

ASMs (millions) 42,334 7.5 39,388

Average Yield per RPM (cents) 13.21 2.9 12.84

Load Factor (%) 74.4 1.6 pts 72.8

Fleet 363 0.8 360

Source: Continental Airlines

COPYRIGHT 2000 Phillips Publishing International, Inc.

COPYRIGHT 2001 Gale Group