UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 0-9781
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2099724
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
(Address of principal executive offices)
(Zip Code)
713-324-2950
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No _____
_______________
As of April 14, 2000, 11,217,849 shares of Class A common stock and
50,665,262 shares of Class B common stock were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
<CAPTION>
Three Months
Ended March 31,
2000 1999
(Unaudited)
<S> <C> <C>
Operating Revenue:
Passenger . . . . . . . . . . . . . . . $2,137 $1,920
Cargo and mail. . . . . . . . . . . . . 84 67
Other . . . . . . . . . . . . . . . . . 56 55
2,277 2,042
Operating Expenses:
Wages, salaries and related costs . . . 665 616
Aircraft fuel . . . . . . . . . . . . . 343 150
Aircraft rentals. . . . . . . . . . . . 206 184
Maintenance, materials and repairs. . . 159 143
Commissions . . . . . . . . . . . . . . 133 143
Other rentals and landing fees. . . . . 129 114
Depreciation and amortization . . . . . 95 85
Other . . . . . . . . . . . . . . . . . 493 454
2,223 1,889
Operating Income . . . . . . . . . . . . 54 153
Nonoperating Income (Expense):
Interest expense. . . . . . . . . . . . (63) (53)
Interest income . . . . . . . . . . . . 21 15
Interest capitalized. . . . . . . . . . 12 13
Other, net. . . . . . . . . . . . . . . (1) 13
(31) (12)
</TABLE>
(continued on next page)
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
<CAPTION>
Three Months
Ended March 31,
2000 1999
(Unaudited)
<S> <C> <C>
Income before Income Taxes and
Cumulative Effect of Accounting
Changes . . . . . . . . . . . . . . . . $ 23 $ 141
Income Tax Provision . . . . . . . . . . (9) (56)
Income before Cumulative Effect of
Accounting Changes. . . . . . . . . . . 14 85
Cumulative Effect of Accounting
Changes, net of income
taxes of $19. . . . . . . . . . . . . . - (33)
Net Income . . . . . . . . . . . . . . . $ 14 $ 52
Earnings per Common Share:
Income Before Cumulative Effect of
Accounting Changes . . . . . . . . . . $ 0.21 $ 1.25
Cumulative Effect of Accounting
Changes, net of tax. . . . . . . . . . - (0.48)
Net Income. . . . . . . . . . . . . . . $ 0.21 $ 0.77
Earnings per Common Share Assuming
Dilution:
Income Before Cumulative Effect of
Accounting Changes. . . . . . . . . . $ 0.21 $ 1.13
Cumulative Effect of Accounting
Changes, net of tax . . . . . . . . . - (0.42)
Net Income . . . . . . . . . . . . . . $ 0.21 $ 0.71
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . $1,327 $1,198
Short-term investments. . . . . . . . . . 79 392
Accounts receivable, net. . . . . . . . . 607 506
Spare parts and supplies, net . . . . . . 244 236
Deferred income taxes . . . . . . . . . . 145 145
Prepayments and other . . . . . . . . . . 186 129
Total current assets . . . . . . . . . . 2,588 2,606
Property and Equipment:
Owned property and equipment:
Flight equipment . . . . . . . . . . . . 3,713 3,593
Other. . . . . . . . . . . . . . . . . . 859 814
4,572 4,407
Less: Accumulated depreciation. . . . . 870 808
3,702 3,599
Purchase deposits for flight equipment 418 366
Capital leases:
Flight equipment. . . . . . . . . . . . . 284 300
Other . . . . . . . . . . . . . . . . . . 88 88
372 388
Less: Accumulated amortization . . . . . 173 180
199 208
Total property and equipment . . . . . . 4,319 4,173
Other Assets:
Routes, gates and slots, net. . . . . . . 1,118 1,131
Investments . . . . . . . . . . . . . . . 104 71
Other assets, net . . . . . . . . . . . . 250 242
Total other assets . . . . . . . . . . . 1,472 1,444
Total Assets. . . . . . . . . . . . . . $8,379 $8,223
</TABLE>
(continued on next page)
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
<CAPTION>
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
(Unaudited)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt. . . $ 367 $ 278
Current maturities of capital leases. . . 39 43
Accounts payable. . . . . . . . . . . . . 810 856
Air traffic liability . . . . . . . . . . 1,301 1,042
Accrued payroll and pensions. . . . . . . 256 299
Accrued other liabilities . . . . . . . . 270 257
Total current liabilities. . . . . . . . 3,043 2,775
Long-Term Debt . . . . . . . . . . . . . . 2,846 2,855
Capital Leases . . . . . . . . . . . . . . 192 200
Deferred Credits and Other Long-Term
Liabilities:
Deferred income taxes. . . . . . . . . . 599 590
Accruals for aircraft retirements and
excess facilities . . . . . . . . . . . 60 69
Other. . . . . . . . . . . . . . . . . . 166 141
Total deferred credits and other
long-term liabilities. . . . . . . . . 825 800
Commitments and Contingencies
Common Stockholders' Equity:
Class A common stock - $.01 par,
50,000,000 shares authorized;
11,231,349 and 11,320,849 shares
issued and outstanding in 2000 and
1999, respectively . . . . . . . . . . . - -
Class B common stock - $.01 par,
200,000,000 shares authorized;
63,923,431 shares issued in 2000
and 1999, respectively . . . . . . . . . 1 1
Additional paid-in capital . . . . . . . 862 871
Retained earnings . . . . . . . . . . . . 1,128 1,114
Accumulated other comprehensive income. . 3 (1)
Treasury stock - 13,312,524 and 9,763,684
Class B shares in 2000 and 1999,
respectively, at cost. . . . . . . . . . (521) (392)
Total common stockholders' equity. . . . 1,473 1,593
Total Liabilities and Stockholders'
Equity . . . . . . . . . . . . . . . . $8,379 $8,223
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<CAPTION>
Three Months
Ended March 31,
2000 1999
(Unaudited)
<S> <C> <C>
Net Cash Provided by Operating
Activities . . . . . . . . . . . . . .$ 116 $ 126
Cash Flows from Investing Activities:
Purchase deposits paid in connection
with future aircraft deliveries. . . . (101) (260)
Purchase deposits refunded in
connection with aircraft delivered . . 53 223
Capital expenditures. . . . . . . . . . (108) (150)
Proceeds from sale of short-term
investments. . . . . . . . . . . . . . 313 -
Proceeds from sale of investments . . . - 20
Other . . . . . . . . . . . . . . . . . 3 12
Net cash provided (used) by
investing activities. . . . . . . . . 160 (155)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term
debt, net. . . . . . . . . . . . . . . 110 168
Payments on long-term debt and
capital lease obligations. . . . . . . (121) (112)
Purchase of Class B common stock. . . . (144) (39)
Other . . . . . . . . . . . . . . . . . 8 10
Net cash (used) provided by
financing activities. . . . . . . . . (147) 27
Net Increase (Decrease) in Cash and
Cash Equivalents. . . . . . . . . . . . 129 (2)
Cash and Cash Equivalents - Beginning
of Period . . . . . . . . . . . . . . . 1,198 1,399
Cash and Cash Equivalents - End of
Period. . . . . . . . . . . . . . . . . $1,327 $1,397
Investing and Financing Activities
Not Affecting Cash:
Property and equipment acquired
through the issuance of debt. . . . .$ 78 $ 237
Conversion of trust originated
preferred securities. . . . . . . . .$ - $ 111
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
CONTINENTAL AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In the opinion of management, the unaudited consolidated financial
statements included herein contain all adjustments necessary to
present fairly the financial position, results of operations and
cash flows for the periods indicated. Such adjustments are of a
normal, recurring nature. The accompanying consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto contained in the Annual
Report of Continental Airlines, Inc. (the "Company" or
"Continental") on Form 10-K for the year ended December 31, 1999
(the "1999 10-K").
Certain reclassifications have been made in the prior year's
financial statements to conform to the current year presentation.
<PAGE>
NOTE 1 - EARNINGS PER SHARE
The following table sets forth the computations of basic and
diluted earnings per share (in millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Numerator:
Income before cumulative effect of
accounting changes . . . . . . . . . $ 14 $ 85
Cumulative effect of accounting
changes, net of income taxes . . . . - (33)
Numerator for basic earnings per
share - income available to
common stockholders . . . . . . . . . 14 52
Effect of dilutive securities:
6-3/4% convertible subordinated
notes. . . . . . . . . . . . . . . . - 2
Numerator for diluted earnings per
share - income available to common
stockholders after assumed
conversions. . . . . . . . . . . . . $ 14 $ 54
Denominator:
Denominator for basic earnings
per share - weighted-average
shares . . . . . . . . . . . . . . . 63.4 68.5
Effect of dilutive securities:
Employee stock options . . . . . . . 0.8 1.3
Preferred Securities of Trust. . . . - 0.3
6-3/4% convertible subordinated
notes . . . . . . . . . . . . . . . - 7.6
Dilutive potential common
shares. . . . . . . . . . . . . . . 0.8 9.2
Denominator for diluted
earnings per share - adjusted
weighted-average and assumed
conversions. . . . . . . . . . . . . 64.2 77.7
</TABLE>
<PAGE>
NOTE 2 - COMPREHENSIVE INCOME
The Company includes unrealized gains or losses on available-for-
sale securities, changes in minimum pension liabilities and changes
in the fair value of derivative financial instruments which qualify
for hedge accounting in other comprehensive income. During the
first quarter of 2000 and 1999, total comprehensive income amounted
to $18 million and $80 million, respectively. The significant
difference between net income and total comprehensive income during
the first quarter of 1999 was primarily attributable to the $25
million increase in fair value (net of applicable income taxes and
hedge ineffectiveness) related to petroleum swap contracts held by
the Company as of March 31, 1999.
NOTE 3 - CUMULATIVE EFFECT OF ACCOUNTING CHANGES
Frequent Flyer Program. The Company sells mileage credits in its
frequent flyer program ("OnePass") to participating partners, such
as hotels, car rental agencies and credit card companies. During
1999, as a result of Staff Accounting Bulletin No. 101 - "Revenue
Recognition in Financial Statements," the Company changed the
method it uses to account for the sale of these mileage credits.
This change, which totaled $27 million, net of tax, was applied
retroactively to January 1, 1999. Under the new accounting method,
revenue from the sale of mileage credits is deferred and recognized
when transportation is provided. Previously, the resulting
revenue, net of the incremental cost of providing future air
travel, was recorded in the period in which the credits were sold.
This change reduced net income for the three months ended March 31,
1999 by $5 million ($7 million pre-tax). The quarterly information
for 1999 presented herein reflects this change.
Start-Up Costs. Continental adopted Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities ("SOP 98-5)") in the
first quarter of 1999. SOP 98-5 amended Statement of Position 88-
1, "Accounting for Developmental and Preoperating Costs, Purchases
and Exchanges of Take-Off and Landing Slots, and Airframe
Modifications" by requiring preoperating costs related to the
integration of new types of aircraft to be expensed as incurred and
requiring all unamortized start-up costs (e.g., pilot training
costs related to induction of new aircraft) to be expensed upon
adoption. This resulted in the Company recording a $6 million
cumulative effect of a change in accounting principle, net of tax,
in the first quarter of 1999.
<PAGE>
NOTE 4 - AIRCRAFT PURCHASE COMMITMENTS
As shown in the following table, Continental's aircraft fleet
consisted of 364 jets, 67 regional jets and 83 turboprop aircraft
at March 31, 2000. Continental's purchase commitments as of March
31, 2000 are also shown below.
<TABLE>
<CAPTION>
Aircraft Total
Type Aircraft Owned Leased Orders Options
<S> <C> <C> <C> <C> <C>
777-200 14 4 10 2 9
767-400ER - - - 26 -
767-200ER - - - 10 11
757-200 40 12 28 1 -
737-900 - - - 15 15
737-800 42 12 30 26 43
737-700 36 12 24 - 32
737-500 66 15 51 - -
737-300 65 14 51 - -
DC10-30 27 6 21 - -
727-200 5 2 3 - -
MD-80 69 17 52 - -
364 94 270 80 110
ERJ-145 58 - 58 91 50
ERJ-135 9 - 9 41 25
67 - 67 132 75
ATR-72 2 2 -
ATR-42-500 4 - 4
ATR-42-320 31 4 27
EMB-120 21 11 10
Beech 1900-D 25 - 25
83 17 66
Total 514 111 403
</TABLE>
The Company anticipates taking delivery of 28 Boeing jet aircraft
in 2000 (two of which were delivered during the first quarter of
2000) and the remainder of its firm orders through November 2005.
The Company's wholly owned subsidiary, Continental Express, Inc.
("Express") anticipates taking delivery of 18 Embraer ERJ-145
("ERJ-145") regional jets (two of which were delivered in the first
quarter of 2000) and 12 Embraer ERJ-135 ("ERJ-135") regional jets
(three of which were delivered in the first quarter of 2000) in
2000 and the remainder of its firm orders through the fourth
quarter of 2003.
In March 2000, the Company completed an offering of $743 million of
pass-through certificates to be used to finance (through either
leveraged leases or secured debt financings) the debt portion of
the acquisition cost of 21 aircraft. Two of these aircraft were
delivered in February 2000 and the remaining aircraft are scheduled
for delivery from June 2000 to December 2000.
As of March 31, 2000, the estimated aggregate cost of the Company's
firm commitments for Boeing aircraft is approximately $4.2 billion.
Continental currently plans to finance its new Boeing aircraft with
a combination of enhanced pass through trust certificates, lease
equity and other third-party financing, subject to availability and
market conditions. As of March 31, 2000, Continental had
approximately $865 million in financing arranged for such future
Boeing deliveries. In addition, Continental has commitments or
letters of intent for backstop financing for approximately 22% of
the anticipated remaining acquisition cost of such Boeing
deliveries. In addition, at March 31, 2000, Continental had firm
commitments to purchase 32 spare engines related to the new Boeing
aircraft for approximately $211 million which will be deliverable
through March 2005. However, further financing will be needed to
satisfy the Company's capital commitments for other aircraft and
aircraft-related expenditures such as engines, spare parts,
simulators and related items. There can be no assurance that
sufficient financing will be available for all aircraft and other
capital expenditures not covered by firm financing commitments.
Deliveries of new Boeing aircraft are expected to continue to
increase aircraft rental, depreciation and interest costs while
generating cost savings in the areas of maintenance, fuel and pilot
training.
As of March 31, 2000, the estimated aggregate cost of Express' firm
commitments for ERJ-145 and ERJ-135 aircraft is approximately $1.9
billion. Embraer has agreed to arrange lease financing by third
parties of the firm ERJ-135 and ERJ-145 aircraft to be delivered to
Express, subject to Express' option to purchase ERJ-135 aircraft.
NOTE 5 - OTHER
In March 2000, Continental Airlines' flight attendants ratified a
54-month collective bargaining agreement between the Company and
the International Association of Machinists and Aerospace Workers
(the "IAM"). In September 1999, Express and the IAM began
collective bargaining negotiations to amend the Express flight
attendants' contract (which became amendable in November 1999).
The Company believes that mutually acceptable agreements can be
reached with such employees, although the ultimate outcome of the
negotiations is unknown at this time.
The Company holds a membership interest in The SITA Foundation
("SITA"), an organization which provides data communication
services to the airline industry. SITA's primary asset is its
ownership in Equant N.V. ("Equant"). In February 1999, SITA sold
a portion of its interest in Equant in a secondary public offering
and distributed the pro rata proceeds to certain of its members
(including Continental) that elected to participate in the
offering. Continental recorded a gain of $20 million ($12 million
after tax) related to this transaction. The gain is included in
other nonoperating income (expense) in the accompanying
consolidated statement of operations for the three months ended
March 31, 1999.
NOTE 6 - SUBSEQUENT EVENTS
The Federal Aviation Administration has designated John F. Kennedy
International Airport ("Kennedy") and LaGuardia Airport
("LaGuardia") in New York, O'Hare International Airport in Chicago
("O'Hare") and Ronald Reagan Washington National Airport in
Washington, D.C. ("Reagan National") as "high density traffic
airports" and has limited the number of departure and arrival slots
at those airports. In April 2000, legislation was signed
eliminating slot restrictions beginning in 2001 at O'Hare and in
2007 at LaGuardia and Kennedy. As a result of the passage of this
legislation, the carrying amount of the slots could be deemed to be
impaired. The Company will perform an evaluation in the second
quarter in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121").
The assessment could result in the recording of an impairment
charge for the amount that the carrying value of the slots exceeds
the fair value of the slots, the acceleration of amortization over
the remaining useful life, or some combination thereof. At March
31, 2000, the net book value of slots at O'Hare and LaGuardia was
$51 million and $11 million, respectively. The Company has no
slots at Kennedy.
Among other things, the legislation encourages the development of
air service to smaller communities from slot-controlled airports.
Express was recently awarded slot exemptions to permit it to
provide extensive service at LaGuardia using regional jets.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion may contain forward-looking statements.
In connection therewith, please see the risk factors set forth in
the Company's 1999 10-K which identify important factors such as
the Company's high leverage and significant financing needs, its
historical operating results, the significant cost of aircraft
fuel, labor costs, certain tax matters, the Japanese economy and
currency risk, the significant ownership interest of Northwest
Airlines in the Company and risks relating to the Company's
strategic alliance with Northwest Airlines, competition and
industry conditions, regulatory matters and the seasonal nature of
the airline business, that could cause actual results to differ
materially from those in the forward-looking statements.
Continental's results of operations are impacted by seasonality
(the second and third quarters are generally stronger than the
first and fourth quarters) as well as numerous other factors,
including those listed above, that are not necessarily seasonal.
Rising jet fuel prices significantly impacted results of operations
in the first quarter of 2000. In addition, industry capacity and
growth in the transatlantic markets (including block space
arrangements where Continental is obligated to purchase capacity at
a fixed price) have resulted in lower yields and revenue per
available seat mile in those markets, which trend is expected to
continue. Continental will continue to critically review its
growth plans in light of industry conditions and will adjust or
redeploy resources, including aircraft capacity, as necessary. In
addition, management believes the Company is well positioned to
respond to market conditions in the event of a sustained economic
downturn due to its flexible fleet plan, a strong cash balance, a
$225 million unused revolving credit facility and a well developed
alliance network.
RESULTS OF OPERATIONS
The following discussion provides an analysis of the Company's
results of operations and reasons for material changes therein for
the three months ended March 31, 2000 as compared to the
corresponding period in 1999.
The Company recorded consolidated net income of $14 million for the
first quarter of 2000 as compared to consolidated net income of $52
million for the three months ended March 31, 1999. Net income for
the first quarter of 1999 included a charge for the cumulative
effect of accounting changes ($33 million, net of taxes) related to
the write-off of pilot training costs and a change in the method of
accounting for the sale of mileage credits to participating
partners in the Company's frequent flyer program.
Passenger revenue increased 11.3%, $217 million, during the quarter
ended March 31, 2000 as compared to the same period in 1999, which
was principally due to new transatlantic and Latin American
destinations served as well as an improvement in yield and load
factor for domestic markets.
Cargo and mail revenue increased 25.4%, $17 million, in the first
quarter of 2000 compared to the first quarter of 1999 primarily due
to increased international volumes resulting from new markets.
Wages, salaries and related costs increased 8.0%, $49 million,
during the quarter ended March 31, 2000 as compared to the same
period in 1999, primarily due to a 5.7% increase in average full-
time equivalent employees to support increased flying and higher
wage rates resulting from the Company's decision to increase
employee wages to industry standards by the year 2000.
Aircraft fuel expense increased 128.7%, $193 million, in the three
months ended March 31, 2000 as compared to the same period in the
prior year. The average jet fuel price per gallon increased 120.4%
from 38.62 cents in the first quarter of 1999 to 85.13 cents in the
first quarter of 2000. In addition, the quantity of jet fuel used
increased 1.6%, principally reflecting increased capacity offset
significantly by the increased fuel efficiency of the Company's
younger fleet.
Aircraft rentals increased 12.0%, $22 million, due to the delivery
of new aircraft.
Maintenance, materials and repairs increased 11.2%, $16 million,
during the quarter ended March 31, 2000 as compared to the same
period in 1999 due to the volume and timing of engine overhauls as
part of the Company's ongoing maintenance program. This increase
is partially offset by a reduction in maintenance on newer
aircraft.
Commissions expense decreased 7.0%, $10 million, during 2000 as
compared to 1999 due to lower rates resulting from international
commission caps and a lower volume of commissionable sales,
partially offset by increased passenger revenue.
Other rentals and landing fees increased 13.2%, $15 million,
primarily due to higher facilities rent and landing fees resulting
from increased operations.
Depreciation and amortization expense increased 11.8%, $10 million,
in the first quarter of 2000 compared to the first quarter of 1999
due principally to the addition of new aircraft and related spare
parts.
Other operating expense increased 8.6%, $39 million, in the three
months ended March 31, 2000 as compared to the same period in the
prior year, as a result of increases in passenger and aircraft
servicing expense, reservations and sales expense and other
miscellaneous expense, resulting primarily from an increase in
enplanements and revenue passenger miles.
Interest expense increased 18.9%, $10 million, due to an increase
in long-term debt resulting from the purchase of new aircraft,
partially offset by interest savings of $4 million due to the
conversion of the Company's 6-3/4% Convertible Subordinated Notes
into Class B common stock in the second quarter of 1999.
Interest income increased 40.0%, $6 million, due to higher average
balances of cash, cash equivalents and short-term investments and
due to higher rates.
The Company's other nonoperating income (expense) in 1999 included
a $20 million gain on the sale of a portion of the Company's
indirect interest in Equant, partially offset by foreign currency
losses of $6 million, principally the Brazilian Real.
<PAGE>
Certain Statistical Information
An analysis of statistical information for Continental's jet
operations, excluding regional jet operations, for the periods
indicated is as follows:
<TABLE>
<CAPTION>
Three Months Ended Net
March 31, Increase/
2000 1999 (Decrease)
<S> <C> <C> <C>
Revenue passenger miles
(millions) (1). . . . . . . . . .15,005 13,737 9.2 %
Available seat miles
(millions) (2). . . . . . . . . .20,951 19,225 9.0 %
Passenger load factor (3). . . . . 71.6% 71.5% 0.1 pts.
Breakeven passenger load
factor (4). . . . . . . . . . . . 69.2% 63.4% 5.8 pts.
Passenger revenue per available
seat mile (cents). . . . . . . . 9.33 9.29 0.4 %
Total revenue per available
seat mile (cents) . . . . . . . . 10.13 10.02 1.1 %
Operating cost per available
seat mile (cents) . . . . . . . . 9.78 9.17 6.7 %
Average yield per revenue
passenger mile (cents) (5) . . . 13.03 13.00 0.2 %
Average fare per revenue
passenger . . . . . . . . . . . .$174.49 $165.75 5.3 %
Revenue passengers (thousands) . .11,201 10,778 3.9 %
Average length of aircraft
flight (miles) . . . . . . . . . 1,131 1,083 4.4 %
Average daily utilization of
each aircraft (hours) (6). . . . 10:34 10:11 3.8 %
Actual aircraft in fleet at
end of period (7) . . . . . . . . 364 365 (0.3)%
</TABLE>
Continental has entered into block-space arrangements with certain
other carriers whereby one or both of the carriers is obligated to
purchase capacity on the other. The table above excludes 622
million and 699 million available seat miles, and related revenue
passenger miles and enplanements, operated by Continental but
purchased and marketed by the other carrier, and includes 264
million and 232 million available seat miles, and related revenue
passenger miles and enplanements, operated by other carriers but
purchased and marketed by Continental for the three months ended
March 31, 2000 and March 31, 1999, respectively.
__________________
(1) The number of scheduled miles flown by revenue passengers.
(2) The number of seats available for passengers multiplied by
the number of scheduled miles those seats are flown.
(3) Revenue passenger miles divided by available seat miles.
(4) The percentage of seats that must be occupied by revenue
passengers in order for the airline to break even on an
income before income taxes basis, excluding nonrecurring
charges, nonoperating items and other special items.
<PAGE>
(5) The average revenue received for each mile a revenue
passenger is carried.
(6) The average number of hours per day that an aircraft flown in
revenue service is operated (from gate departure to gate
arrival).
(7) Excludes six all-cargo 727 aircraft at CMI in 1999.
LIQUIDITY AND CAPITAL COMMITMENTS
As of March 31, 2000 and December 31, 1999, the Company had
$1.3 billion and $1.2 billion in cash and cash equivalents,
respectively. Net cash provided by operating activities decreased
$10 million during the three months ended March 31, 2000 compared
to the same period in the prior year primarily due to a decrease in
operating income and changes in working capital. Net cash provided
by investing activities increased $315 million for the three months
ended March 31, 2000 compared to the same period in the prior year,
primarily as a result of proceeds from the sale of short-term
investments received in the first quarter of 2000. Net cash used
by financing activities for the three months ended March 31, 2000
compared to the same period in the prior year increased $174
million primarily due to an increase in the purchase of Class B
common stock and a decrease in proceeds from the issuance of long-
term debt.
In March 2000, the Company completed an offering of $743 million of
pass-through certificates to be used to finance (through either
leveraged leases or secured debt financings) the debt portion of
the acquisition cost of 21 aircraft. Two of these aircraft were
delivered in February 2000, and the remaining aircraft are
scheduled for delivery from June 2000 to December 2000.
Deferred Tax Assets. The Company had, as of December 31, 1999,
deferred tax assets aggregating $611 million, including $266
million of net operating losses ("NOLs") and a valuation allowance
of $263 million. The Company has consummated several transactions
which resulted in the recognition of NOLs of the Company's
predecessor. To the extent the Company were to determine in the
future that additional NOLs of the Company's predecessor could be
recognized in the accompanying consolidated financial statements,
such benefit would reduce the value ascribed to routes, gates and
slots.
As a result of NOLs, the Company will not pay United States federal
income taxes (other than alternative minimum tax) until it has
recorded approximately an additional $700 million of taxable income
following December 31, 1999. Section 382 of the Internal Revenue
Code ("Section 382") imposes limitations on a corporation's ability
to utilize NOLs if it experiences an "ownership change." In
general terms, an ownership change may result from transactions
increasing the ownership of certain stockholders in the stock of a
corporation by more than 50 percentage points over a three-year
period.
<PAGE>
On November 20, 1998, an affiliate of Northwest Airlines, Inc.
completed its acquisition of certain equity of the Company
previously held by Air Partners, L.P. and its affiliates, together
with certain Class A common stock of the Company held by certain
other investors, totaling 8,661,224 shares of Class A common stock
(the "Air Partners Transaction"). The Company does not believe
that the Air Partners Transaction resulted in an ownership change
for purposes of Section 382.
Purchase Commitments. Continental has substantial commitments for
capital expenditures, including for the acquisition of new
aircraft. See Note 4.
Continental expects its cash outlays for 2000 capital expenditures,
exclusive of fleet plan requirements, to aggregate approximately
$200 million, primarily relating to software application and
automation infrastructure projects, aircraft modifications and
mandatory maintenance projects, passenger terminal facility
improvements and office, maintenance, telecommunications and ground
equipment. Continental's capital expenditures during the three
months ended March 31, 2000 aggregated $52 million, exclusive of
fleet plan expenditures.
The Company expects to fund its future capital commitments through
internally generated funds together with general Company financings
and aircraft financing transactions. However, there can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by firm
financing commitments.
Employees. In September 1997, the Company announced a plan to
bring all employees to industry standard wages no later than the
end of the year 2000. Wage increases began in 1997, and will
continue to be phased in through 2000. The Company is also in the
process of formulating a plan to bring employees to industry
standard benefits over a multi-year period.
In March 2000, Continental Airlines' flight attendants ratified a
54-month collective bargaining agreement between the Company and
the IAM. The Company estimates that increased costs associated
with the collective bargaining agreement will be approximately $50
million in 2000. In September 1999, Express and the IAM began
collective bargaining negotiations to amend the Express flight
attendants' contract (which became amendable in November 1999).
The Company believes that mutually acceptable agreements can be
reached with such employees, although the ultimate outcome of the
negotiations is unknown at this time.
Other. In April 2000, legislation was signed eliminating slot
restrictions beginning in 2001 at O'Hare and in 2007 at LaGuardia
and Kennedy. As a result of the passage of this legislation, the
carrying amount of the slots could be deemed to be impaired. The
Company will perform an evaluation in the second quarter in
accordance with SFAS 121. The assessment could result in the
recording of an impairment charge for the amount that the carrying
value of the slots exceeds the fair value of the slots, the
acceleration of amortization over the remaining useful life, or
some combination thereof. At March 31, 2000, the net book value of
slots at O'Hare and LaGuardia was $51 million and $11 million,
respectively. The Company has no slots at Kennedy.
Among other things, the legislation encourages the development of
air service to smaller communities from slot-controlled airports,
and Express was recently awarded slot exemptions to permit it to
provide extensive service at LaGuardia using regional jets.
Management believes that the Company's costs are likely to be
affected in the future by (i) higher aircraft ownership costs as
new aircraft are delivered, (ii) higher wages, salaries and related
costs as the Company compensates its employees comparable to
industry average, (iii) changes in the costs of materials and
services (in particular, the cost of fuel, which can fluctuate
significantly in response to global market conditions), (iv)
changes in distribution costs and structure, (v) changes in
governmental regulations and taxes affecting air transportation and
the costs charged for airport access, including new security
requirements, (vi) changes in the Company's fleet and related
capacity and (vii) the Company's continuing efforts to reduce costs
throughout its operations, including reduced maintenance costs for
new aircraft, reduced distribution expense from using Continental's
electronic ticket product, E-ticket, and the internet for bookings,
and reduced interest expense.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
See Item 7A. Quantitative and Qualitative Disclosures About Market
Risk in Continental's 1999 10-K.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 1, 2000, Continental was served with a federal grand
jury subpoena calling for Continental's production of documents
relating to de-icing operations at the Dallas/Fort Worth Airport
since 1992. Continental cannot currently determine either the
full scope of the grand jury's investigation or Continental's
role therein. Continental intends to cooperate with the
government's investigation.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 Supplemental Agreement No. 15, including side
letter, to Boeing Purchase Agreement No. 1951,
dated January 13, 2000.
10.2 Supplemental Agreement No. 16, including side
letters, to Boeing Purchase Agreement No. 1951,
dated March 17, 2000.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
(i) Report dated January 18, 2000 with respect to
Item 5. Other Events. No financial statements
were filed with the report, which included a
Press Release related to the Company's fourth
quarter results.
<PAGE>
(ii) Report dated February 8, 2000 with respect to
Item 5. Other Events. No financial statements
were filed with the report, which related to
amendments to: the Rights Agreement between the
Company and Harris Trust and Savings Bank, the
Northwest Airlines/Air Partners Voting Trust
Agreement between the Company and Northwest
Airlines Corporation, the Governance Agreement
among the Company, Northwest Airlines Corporation
and Northwest Airlines Holding Corporation and
the Supplemental Agreement among the Company,
Northwest Airlines Corporation and Northwest
Airlines Holding Corporation.
(iii) Report dated March 15, 2000 reporting Item 7.
"Financial Statements and Exhibits". No
financial statements were filed with the report,
which included an Exhibit Index related to the
Continental 2000-1 offering of pass through
certificates.
(iv) Report dated March 27, 2000 with respect to Item
5. Other Events. No financial statements were
filed with the report, which related to the
amendment and restatement of the Company's
Incentive Plan 2000 and the adoption of the
Continental Airlines, Inc. Officer Retention and
Incentive Award Program under such plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CONTINENTAL AIRLINES, INC.
(Registrant)
Date: April 20, 2000 by: /s/ Lawrence W. Kellner
Lawrence W. Kellner
Executive Vice President and
Chief Financial Officer
(On behalf of Registrant)
Date: April 20, 2000 /s/ Chris Kenny
Chris Kenny
Staff Vice President and Controller
(Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
OF
CONTINENTAL AIRLINES, INC.
10.1 Supplemental Agreement No. 15, including side letter, to
Boeing Purchase Agreement No. 1951, dated January 13,
2000. (1)
10.2 Supplemental Agreement No. 16, including side letters, to
Boeing Purchase Agreement No. 1951, dated March 17, 2000.
(1)
27.1 Financial Data Schedule.
_____________________
(1) The Company has applied to the Commission for confidential
treatment of a portion of this exhibit.
EXHIBIT 10.1
Supplemental Agreement No. 15
to
Purchase Agreement No. 1951
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 737 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of
January 13, 2000, by and between THE BOEING COMPANY, a Delaware
corporation with its principal office in Seattle, Washington,
(Boeing) and CONTINENTAL AIRLINES, INC., a Delaware corporation
with its principal office in Houston, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement
No. 1951 dated July 23, 1996 (the Agreement), as amended and
supplemented, relating to Boeing Model 737-500, 737-600, 737-700,
737-800, and 737-900 aircraft (the Aircraft); and
WHEREAS, Boeing and Buyer have mutually agreed to the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT];
WHEREAS, Boeing and Buyer have mutually agreed to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and
WHEREAS, Boeing and Buyer have mutually agreed to amend the
Agreement to incorporate the effect of these and certain other
changes;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree to amend the Agreement as
follows:
1. Table of Contents and Articles:
1.1 Remove and replace, in its entirety, the "Table of
Contents", with the Table of Contents attached hereto, to reflect
the changes made by this Supplemental Agreement No. 15.
1.2 Remove and replace, in its entirely, page T-3 of Table
1 entitled "Aircraft Deliveries and Descriptions" that relates to
Model 737-800 Aircraft with new page T-3 attached hereto for the
Model 737-800 Aircraft reflecting the [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
2. Letter Agreements:
Add new Letter Agreement 6-1162-DMH-1035 [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT].
The Agreement will be deemed to be supplemented to the extent
herein provided as of the date hereof and as so supplemented will
continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY CONTINENTAL AIRLINES, INC.
By: /s/ D. M. Hurt By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page SA
Number Number
<S> <C> <C>
ARTICLES
1. Subject Matter of Sale . . . . . . . . . 1-1 SA 5
2. Delivery, Title and Risk
of Loss. . . . . . . . . . . . . . . . . 2-1
3. Price of Aircraft. . . . . . . . . . . . 3-1 SA 5
4. Taxes. . . . . . . . . . . . . . . . . . 4-1
5. Payment. . . . . . . . . . . . . . . . . 5-1
6. Excusable Delay. . . . . . . . . . . . . 6-1
7. Changes to the Detail Specification. . . 7-1 SA 5
8. Federal Aviation Requirements and
Certificates and Export License. . . . . 8-1 SA 5
9. Representatives, Inspection,
Flights and Test Data. . . . . . . . . . 9-1
10. Assignment, Resale or Lease. . . . . . . 10-1
11. Termination for Certain Events . . . . . 11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance. . . . . . . . . . . . . . 12-1
13. Buyer Furnished Equipment and
Spare Parts. . . . . . . . . . . . . . . 13-1
14. Contractual Notices and Requests . . . . 14-1
15. Miscellaneous. . . . . . . . . . . . . . 15-1
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page SA
Number Number
<S> <C> <C>
TABLES
1. Aircraft Deliveries and
Descriptions - 737-500 . . . . . . . . . T-1 SA 3
Aircraft Deliveries and
Descriptions - 737-700 . . . . . . . . . T-2 SA 13
Aircraft Deliveries and
Descriptions - 737-800 . . . . . . . . . T-3 SA 15
Aircraft Deliveries and
Descriptions - 737-600 . . . . . . . . . T-4 SA 4
Aircraft Deliveries and
Descriptions - 737-900 . . . . . . . . . T-5 SA 5
</TABLE>
EXHIBITS
A-1 Aircraft Configuration - Model 737-724 . SA 2
A-2 Aircraft Configuration - Model 737-824 . SA 2
A-3 Aircraft Configuration - Model 737-624 . SA 1
A-4 Aircraft Configuration - Model 737-524 . SA 3
A-5 Aircraft Configuration - Model 737-924 . SA 5
B Product Assurance Document . . . . . . . SA 1
C Customer Support Document - Code Two -
Major Model Differences. . . . . . . . . SA 1
C1 Customer Support Document - Code Three -
Minor Model Differences. . . . . . . . . SA 1
D Aircraft Price Adjustments - New
Generation Aircraft (1995 Base Price). . SA 1
D1 Airframe and Engine Price Adjustments -
Current Generation Aircraft. . . . . . . SA 1
D2 Aircraft Price Adjustments - New
Generation Aircraft (1997 Base Price). . SA 5
E Buyer Furnished Equipment
Provisions Document. . . . . . . . . . . SA 5
F Defined Terms Document . . . . . . . . . SA 5
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SA
Number
<S> <C>
LETTER AGREEMENTS
1951-1 Not Used. . . . . . . . . . . . . . . . .
1951-2R3 Seller Purchased Equipment. . . . . . . . SA 5
1951-3R9 Option Aircraft-Model 737-824 Aircraft. . SA 15
1951-4R1 Waiver of Aircraft Demonstration. . . . . SA 1
1951-5R2 Promotional Support - New Generation. . . SA 5
Aircraft
1951-6 Configuration Matters . . . . . . . . . .
1951-7R1 Spares Initial Provisioning . . . . . . . SA 1
1951-8R2 Escalation Sharing - New Generation
Aircraft. . . . . . . . . . . . . . . . . SA 4
1951-9R6 Option Aircraft-Model 737-724 Aircraft. . SA 13
1951-11R1 Escalation Sharing-Current Generation
Aircraft. . . . . . . . . . . . . . . . . SA 4
1951-12 Option Aircraft - Model 737-924 Aircraft. SA 5
1951-13 Configuration Matters - Model 737-924 . . SA 5
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SA
Number
<S> <C> <C>
RESTRICTED LETTER AGREEMENTS
6-1162-MMF-295 Performance Guarantees - Model
737-724 Aircraft. . . . . . . .
6-1162-MMF-296 Performance Guarantees - Model
737-824 Aircraft. . . . . . . .
6-1162-MMF-308R3 Disclosure of Confidential . . . SA 5
Information
6-1162-MMF-309R1 [CONFIDENTIAL MATERIAL OMITTED. . SA 1
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION]
6-1162-MMF-311R3 [CONFIDENTIAL MATERIAL OMITTED. . SA 5
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION]
6-1162-MMF-312R1 Special Purchase Agreement
Provisions. . . . . . . . . . . SA 1
6-1162-MMF-319 Special Provisions Relating to
the Rescheduled Aircraft. . . .
6-1162-MMF-378R1 Performance Guarantees - Model
737-524 Aircraft. . . . . . . . SA 3
6-1162-GOC-015 [CONFIDENTIAL MATERIAL OMITTED. . SA 2
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION]
6-1162-GOC-131R2 Special Matters . . . . . . . . . SA 5
6-1162-DMH-365 Performance Guarantees - Model
737-924 Aircraft. . . . . . . . SA 5
6-1162-DMH-624 [CONFIDENTIAL MATERIAL OMITTED. . SA 8
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION]
6-1162-DMH-680 Delivery Delay Resolution Program SA 9
6-1162-DMH-1020 [CONFIDENTIAL MATERIAL OMITTED. . SA 14
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION]
6-1162-DMH-1035 [CONFIDENTIAL MATERIAL OMITTED. . SA 15
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION]
</TABLE>
<PAGE>
TABLE OF CONTENTS
SUPPLEMENTAL AGREEMENTS DATED AS OF:
Supplemental Agreement No. 1 . . . . . . . October 10,1996
Supplemental Agreement No. 2 . . . . . . . March 5, 1997
Supplemental Agreement No. 3 . . . . . . . July 17, 1997
Supplemental Agreement No. 4 . . . . . . . October 10,1997
Supplemental Agreement No. 5 . . . . . . . May 21,1998
Supplemental Agreement No. 6 . . . . . . . July 30,1998
Supplemental Agreement No. 7 . . . . . . . November 12,1998
Supplemental Agreement No. 8 . . . . . . . December 7,1998
Supplemental Agreement No. 9 . . . . . . . February 18,1999
Supplemental Agreement No. 10. . . . . . . March 19,1999
Supplemental Agreement No. 11. . . . . . . May 14,1999
Supplemental Agreement No. 12. . . . . . . July 2,1999
Supplemental Agreement No. 13. . . . . . . October 13,1999
Supplemental Agreement No. 14. . . . . . . December 13,1999
Supplemental Agreement No. 15. . . . . . . January 13, 2000
<PAGE>
Table 1 to
Purchase Agreement 1951
Aircraft Deliveries and Descriptions
Model 737-800 Aircraft
CFM56-7B26 Engines
Detail Specification No. D6-38808-43 dated
Exhibit A-2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREAMENT]
<PAGE>
January 13, 2000
6-1162-DMH-1035
Continental Airlines, Inc.
1600 Smith Street
Houston, TX 77002
Subject: Letter Agreement 6-1162-DMH-1035 to
Purchase Agreement No. 1951 - [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated as
of July 23, 1996 as previously amended (the Agreement) between
The Boeing Company (Boeing) and Continental Airlines, Inc.
(Buyer) relating to Model 737 aircraft (the Aircraft).
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of the
matters treated herein, please so indicate by signature below.
Very truly yours,
THE BOEING COMPANY
By: /s/ David M. Hurt
Its: Attorney-In-Fact
ACCEPTED AND AGREED TO
as of this date: January 13, 2000
CONTINENTAL AIRLINES, INC.
By:____/s/ Brian Davis_________
Its: Vice President
EXHIBIT 10.2
Supplemental Agreement No. 16
to
Purchase Agreement No. 1951
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 737 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of
March 17, 2000, by and between THE BOEING COMPANY, a Delaware
corporation with its principal office in Seattle, Washington,
(Boeing) and CONTINENTAL AIRLINES, INC., a Delaware corporation
with its principal office in Houston, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement
No. 1951 dated July 23, 1996 (the Agreement), as amended and
supplemented, relating to Boeing Model 737-500, 737-600, 737-700,
737-800, and 737-900 aircraft (the Aircraft); and
WHEREAS, Boeing and Buyer have mutually agreed to the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and
WHEREAS, Buyer has requested to [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]; and
WHEREAS, Buyer has requested to [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]; and
WHEREAS, Boeing and Buyer have mutually agreed on a
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and
WHEREAS, Boeing and Buyer have mutually agreed that the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and
WHEREAS, Boeing and Buyer have mutually agreed to amend the
Agreement to incorporate the effect of these and certain other
changes;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
1. Table of Contents and Articles:
1.1 Remove and replace, in its entirety, the "Table of
Contents", with the Table of Contents attached hereto, to reflect
the changes made by this Supplemental Agreement No. 16.
1.2 Remove and replace, in its entirely, page T-3 of Table
1 entitled "Aircraft Deliveries and Descriptions" that relates to
Model 737-800 Aircraft with new page T-3 attached hereto for the
Model 737-800 Aircraft reflecting the [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
2. Letter Agreements:
2.1 Remove and replace, in its entirety, Letter Agreement
1951-3R8, Option Aircraft - Model 737-824 Aircraft" with Letter
Agreement 1951-3R9, "Option Aircraft - Model 737-824 Aircraft",
attached hereto, to reflect the [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
2.2 Remove and replace, in its entirety, Letter Agreement
1951-9R6, "Option Aircraft - Model 737-724 Aircraft" with Letter
Agreement 1951-9R7, "Option Aircraft - Model 737-724 Aircraft",
attached hereto, to reflect the [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
2.3 Add new Letter Agreement 6-1162-DMH-1054 [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT].
The Agreement will be deemed to be supplemented to the extent
herein provided as of the date hereof and as so supplemented will
continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY CONTINENTAL AIRLINES, INC.
By: /s/ D. M. Hurt By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page SA
Number Number
<S> <C> <C>
ARTICLES
1. Subject Matter of Sale . . . . . . . . . . 1-1 SA 5
2. Delivery, Title and Risk of Loss . . . . . 2-1
3. Price of Aircraft. . . . . . . . . . . . . 3-1 SA 5
4. Taxes. . . . . . . . . . . . . . . . . . . 4-1
5. Payment. . . . . . . . . . . . . . . . . . 5-1
6. Excusable Delay. . . . . . . . . . . . . . 6-1
7. Changes to the Detail Specification. . . . 7-1 SA 5
8. Federal Aviation Requirements and
Certificates and Export License. . . . . . 8-1 SA 5
9. Representatives, Inspection,
Flights and Test Data. . . . . . . . . . . 9-1
10. Assignment, Resale or Lease. . . . . . . . 10-1
11. Termination for Certain Events . . . . . . 11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance. . . . . . . . . . . . . . . 12-1
13. Buyer Furnished Equipment and
Spare Parts. . . . . . . . . . . . . . . . 13-1
14. Contractual Notices and Requests . . . . . 14-1
15. Miscellaneous. . . . . . . . . . . . . . . 15-1
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page SA
Number Number
<S> <C> <C>
TABLES
1. Aircraft Deliveries and
Descriptions - 737-500 . . . . . . . . . . T-1 SA 3
Aircraft Deliveries and
Descriptions - 737-700 . . . . . . . . . . T-2 SA 13
Aircraft Deliveries and
Descriptions - 737-800 . . . . . . . . . . T-3 SA 16
Aircraft Deliveries and
Descriptions - 737-600 . . . . . . . . . . T-4 SA 4
Aircraft Deliveries and
Descriptions - 737-900 . . . . . . . . . . T-5 SA 5
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
A-1 Aircraft Configuration - Model 737-724 . . SA 2
A-2 Aircraft Configuration - Model 737-824 . . SA 2
A-3 Aircraft Configuration - Model 737-624 . . SA 1
A-4 Aircraft Configuration - Model 737-524 . . SA 3
A-5 Aircraft Configuration - Model 737-924 . . SA 5
B Product Assurance Document . . . . . . . . SA 1
C Customer Support Document - Code Two -
Major Model Differences. . . . . . . . . . SA 1
C1 Customer Support Document - Code Three -
Minor Model Differences. . . . . . . . . . SA 1
D Aircraft Price Adjustments - New
Generation Aircraft (1995 Base Price). . . SA 1
D1 Airframe and Engine Price Adjustments -
Current Generation Aircraft. . . . . . . . SA 1
D2 Aircraft Price Adjustments - New
Generation Aircraft (1997 Base Price). . . SA 5
E Buyer Furnished Equipment
Provisions Document. . . . . . . . . . . . SA 5
F Defined Terms Document . . . . . . . . . . SA 5
</TABLE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
SA
Number
<S> <C> <C>
LETTER AGREEMENTS
1951-1 Not Used . . . . . . . . . . . . . . . . . . .
1951-2R3 Seller Purchased Equipment . . . . . . . . . . SA 5
1951-3R9 Option Aircraft-Model 737-824 Aircraft . . . . SA 16
1951-4R1 Waiver of Aircraft Demonstration . . . . . . . SA 1
1951-5R2 Promotional Support - New Generation . . . . . SA 5
Aircraft
1951-6 Configuration Matters. . . . . . . . . . . . .
1951-7R1 Spares Initial Provisioning. . . . . . . . . . SA 1
1951-8R2 Escalation Sharing - New Generation
Aircraft . . . . . . . . . . . . . . . . . . . SA 4
1951-9R7 Option Aircraft-Model 737-724 Aircraft . . . . SA 16
1951-11R1 Escalation Sharing-Current Generation
Aircraft . . . . . . . . . . . . . . . . . . . SA 4
1951-12 Option Aircraft - Model 737-924 Aircraft . . . SA 5
1951-13 Configuration Matters - Model 737-924. . . . . SA 5
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SA
Number
<S> <C> <C>
RESTRICTED LETTER AGREEMENTS
6-1162-MMF-295 Performance Guarantees - Model
737-724 Aircraft. . . . . . . . . . .
6-1162-MMF-296 Performance Guarantees - Model
737-824 Aircraft. . . . . . . . . . .
6-1162-MMF-308R3 Disclosure of Confidential . . . . . SA 5
Information
6-1162-MMF-309R1 [CONFIDENTIAL MATERIAL OMITTED AND. . SA 1
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-MMF-311R3 [CONFIDENTIAL MATERIAL OMITTED AND. . SA 5
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-MMF-312R1 Special Purchase Agreement
Provisions. . . . . . . . . . . . . . SA 1
6-1162-MMF-319 Special Provisions Relating to
the Rescheduled Aircraft
6-1162-MMF-378R1 Performance Guarantees - Model
737-524 Aircraft. . . . . . . . . . . SA 3
6-1162-GOC-015 [CONFIDENTIAL MATERIAL OMITTED AND. . SA 2
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-GOC-131R2 Special Matters . . . . . . . . . . . SA 5
6-1162-DMH-365 Performance Guarantees - Model
737-924 Aircraft. . . . . . . . . . . SA 5
6-1162-DMH-624 [CONFIDENTIAL MATERIAL OMITTED AND. . SA 8
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-DMH-680 Delivery Delay Resolution Program . . SA 9
<PAGE>
6-1162-DMH-1020 [CONFIDENTIAL MATERIAL OMITTED AND. . SA 14
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-DMH-1035 [CONFIDENTIAL MATERIAL OMITTED AND. . SA 15
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-DMH-1054 [CONFIDENTIAL MATERIAL OMITTED AND. . SA 16
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
</TABLE>
<PAGE>
TABLE OF CONTENTS
SUPPLEMENTAL AGREEMENTS DATED AS OF:
Supplemental Agreement No. 1 . . . . . . . . October 10,1996
Supplemental Agreement No. 2 . . . . . . . . March 5, 1997
Supplemental Agreement No. 3 . . . . . . . . July 17, 1997
Supplemental Agreement No. 4 . . . . . . . . October 10, 1997
Supplemental Agreement No. 5 . . . . . . . . May 21, 1998
Supplemental Agreement No. 6 . . . . . . . . July 30, 1998
Supplemental Agreement No. 7 . . . . . . . . November 12, 1998
Supplemental Agreement No. 8 . . . . . . . . December 7, 1998
Supplemental Agreement No. 9 . . . . . . . . February 18, 1999
Supplemental Agreement No. 10. . . . . . . . March 19, 1999
Supplemental Agreement No. 11. . . . . . . . May 14, 1999
Supplemental Agreement No. 12. . . . . . . . July 2, 1999
Supplemental Agreement No. 13. . . . . . . . October 13, 1999
Supplemental Agreement No. 14. . . . . . . . December 13, 1999
Supplemental Agreement No. 15. . . . . . . . January 13, 2000
Supplemental Agreement No. 16. . . . . . . . March 17, 2000
<PAGE>
Table 1 to
Purchase Agreement 1951
Aircraft Deliveries and Descriptions
Model 737-800 Aircraft
CFM56-7B26 Engines
Detail Specification No. D6-38808-43 dated
Exhibit A-2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
1951-3R9
March 17, 2000
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
Subject: Letter Agreement No. 1951-3R9 to Purchase Agreement
No. 1951 - Option Aircraft - Model 737-824 Aircraft
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737-824
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-3R8 dated December
13, 1999.
All terms used and not defined herein shall have the same meaning
as in the Agreement.
In consideration of Buyer's purchase of the Aircraft, Boeing
hereby agrees to manufacture and sell up to [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] additional Model 737-824 Aircraft (the Option
Aircraft) to Buyer, on the same terms and conditions set forth in
the Agreement, except as otherwise described in Attachment A
hereto, and subject to the terms and conditions set forth below.
1. Delivery.
The Option Aircraft will be delivered to Buyer during or
before the months set forth in the following schedule:
Month and Year Number of
of Delivery Option Aircraft
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Price. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT].
3. Option Aircraft Deposit.
In consideration of Boeing's grant to Buyer of options to
purchase the Option Aircraft as set forth herein, Buyer will pay
a deposit to Boeing of [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] for each Option Aircraft
(the Option Deposit) on the date of this Letter Agreement. In
the event Buyer exercises an option herein for an Option
Aircraft, the amount of the Option Deposit for such Option
Aircraft will be credited against the first advance payment due
for such Option Aircraft pursuant to the advance payment schedule
set forth in Article 5 of the Agreement.
In the event that Buyer does not exercise its option to purchase
a particular Option Aircraft pursuant to the terms and conditions
set forth herein, Boeing shall be entitled to retain the Option
Deposit for such Option Aircraft.
4. Option Exercise.
To exercise its option to purchase the Option Aircraft,
Buyer shall give written notice thereof to Boeing on or before
the first business day of the month in each Option Exercise Date
shown below:
Option Aircraft Option Exercise Date
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
5. Contract Terms.
Within thirty (30) days after Buyer exercises an option to
purchase Option Aircraft pursuant to paragraph 4 above, Boeing
and Buyer will use their best reasonable efforts to enter into a
supplemental agreement amending the Agreement to add the
applicable Option Aircraft to the Agreement as a firm Aircraft
(the Option Aircraft Supplemental Agreement).
In the event the parties have not entered into such an Option
Aircraft Supplemental Agreement within the time period
contemplated herein, either party shall have the right,
exercisable by written or telegraphic notice given to the other
within ten (10) days after such period, to cancel the purchase of
such Option Aircraft.
6. Cancellation of Option to Purchase.
Either Boeing or Buyer may cancel the option to purchase an
Option Aircraft if any of the following events are not
accomplished by the respective dates contemplated in this Letter
Agreement, or in the Agreement, as the case may be:
(i) purchase of the Aircraft under the Agreement for
any reason not attributable to the cancelling party;
(ii) payment by Buyer of the Option Deposit with respect
to such Option Aircraft pursuant to paragraph 3 herein; or
(iii) exercise of the option to purchase such Option
Aircraft pursuant to the terms hereof.
Any cancellation of an option to purchase by Boeing which is
based on the termination of the purchase of an Aircraft under the
Agreement shall be on a one-for-one basis, for each Aircraft so
terminated.
Cancellation of an option to purchase provided by this letter
agreement shall be caused by either party giving written notice
to the other within ten (10) days after the respective date in
question. Upon receipt of such notice, all rights and
obligations of the parties with respect to an Option Aircraft for
which the option to purchase has been cancelled shall thereupon
terminate.
Boeing shall promptly refund to Buyer, without interest, any
payments received from Buyer with respect to the affected Option
Aircraft. Boeing shall be entitled to retain the Option Deposit
unless cancellation is attributable to Boeing's fault, in which
case the Option Deposit shall also be returned to Buyer without
interest.
7. Applicability.
Except as otherwise specifically provided, limited or
excluded herein, all Option Aircraft that are added to the
Agreement by an Option Aircraft Supplemental Agreement as firm
Aircraft shall benefit from all the applicable terms, conditions
and provisions of the Agreement.
If the foregoing accurately reflects your understanding of the
matters treated herein, please so indicate by signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ D. M. Hurt
Its Attorney In Fact
ACCEPTED AND AGREED TO this
Date: March 17, 2000
CONTINENTAL AIRLINES, INC.,
By /s/ Brian Davis
Its Vice President
Attachment
<PAGE>
Model 737-824 Aircraft
1. Option Aircraft Description and Changes.
1.1 Aircraft Description. The Option Aircraft are
described by Boeing Detail Specification D6-38808, Revision E,
dated September 15, 1995, as amended and revised pursuant to the
Agreement.
1.2 Changes. The Option Aircraft Detail Specification
shall be revised to include:
(1) Changes applicable to the basic Model 737-800
aircraft which are developed by Boeing between the date of the
Detail Specification and the signing of an Option Aircraft
Supplemental Agreement.
(2) Changes mutually agreed upon.
(3) Changes required to obtain a Standard
Certificate of Airworthiness.
1.3 Effect of Changes. Changes to the Detail
Specification pursuant to the provisions of the clauses above
shall include the effects of such changes upon Option Aircraft
weight, balance, design and performance.
2. Price Description.
2.1 Price Adjustments.
2.1.1 Base Price Adjustments. The base aircraft
price (pursuant to Article 3 of the Agreement) of the Option
Aircraft will be adjusted to Boeing's and the engine
manufacturer's then-current prices as of the date of execution of
the Option Aircraft Supplemental Agreement.
2.1.2 Special Features. The price for special
features incorporated in the Option Aircraft Detail Specification
will be adjusted to Boeing's then-current prices for such
features as of the date of execution of the Option Aircraft
Supplemental Agreement [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
2.1.3 Escalation Adjustments. The base airframe
and special features price will be escalated according to the
applicable airframe and engine manufacturer escalation provisions
contained in Exhibit D of the Agreement.
Buyer agrees that the engine escalation provisions will be
adjusted if they are changed by the engine manufacturer prior to
signing the Option Aircraft Supplemental Agreement. In such
case, the then-current engine escalation provisions in effect at
the time of execution of the Option Aircraft Supplemental
Agreement will be incorporated into such agreement.
2.1.4 Price Adjustments for Changes. Boeing may
adjust the basic price and the advance payment base prices for
any changes mutually agreed upon by Buyer and Boeing subsequent
to the date that Buyer and Boeing enter into the Option Aircraft
Supplemental Agreement.
2.1.5 BFE to SPE. An estimate of the total price
for items of Buyer Furnished Equipment (BFE) changed to Seller
Purchased Equipment (SPE) pursuant to the Detail Specification is
included in the Option Aircraft price build-up. The purchase
price of the Option Aircraft will be adjusted by the price
charged to Boeing for such items plus 10% of such price.
3. Advance Payments.
3.1 Buyer shall pay to Boeing advance payments for the
Option Aircraft pursuant to the schedule for payment of advance
payments provided in the Purchase Agreement.
<PAGE>
1951-9R7
March 17, 2000
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
Subject: Letter Agreement No. 1951-9R7 to
Purchase Agreement No. 1951 - Option Aircraft -
Model 737-724 Aircraft
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737-724
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-9R6 dated October
13, 1999.
All terms used and not defined herein shall have the same meaning
as in the Agreement.
In consideration of Buyer's purchase of the Aircraft, Boeing
hereby agrees to manufacture and sell up to - [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] additional Model 737-724 Aircraft (the Option
Aircraft) to Buyer, on the same terms and conditions set forth in
the Agreement, except as otherwise described in Attachment A
hereto, and subject to the terms and conditions set forth below.
1. Delivery.
The Option Aircraft will be delivered to Buyer during or
before the months set forth in the following schedule:
Month and Year Number of
of Delivery Option Aircraft
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Price. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
3. Option Aircraft Deposit.
In consideration of Boeing's grant to Buyer of options to
purchase the Option Aircraft as set forth herein, Buyer will pay
a deposit to Boeing of [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] for each Option Aircraft
(the Option Deposit) on the date of this Letter Agreement. In
the event Buyer exercises an option herein for an Option
Aircraft, the amount of the Option Deposit for such Option
Aircraft will be credited against the first advance payment due
for such Option Aircraft pursuant to the advance payment schedule
set forth in Article 5 of the Agreement.
In the event that Buyer does not exercise its option to purchase
a particular Option Aircraft pursuant to the terms and conditions
set forth herein, Boeing shall be entitled to retain the Option
Deposit for such Option Aircraft.
4. Option Exercise.
To exercise its option to purchase the Option Aircraft,
Buyer shall give written notice thereof to Boeing on or before
the first business day of the month in each Option Exercise Date
shown below:
Option Aircraft Option Exercise Date
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
5. Contract Terms.
Within thirty (30) days after Buyer exercises an option to
purchase Option Aircraft pursuant to paragraph 4 above, Boeing
and Buyer will use their best reasonable efforts to enter into a
supplemental agreement amending the Agreement to add the
applicable Option Aircraft to the Agreement as a firm Aircraft
(the Option Aircraft Supplemental Agreement).
In the event the parties have not entered into such an Option
Aircraft Supplemental Agreement within the time period
contemplated herein, either party shall have the right,
exercisable by written or telegraphic notice given to the other
within ten (10) days after such period, to cancel the purchase of
such Option Aircraft.
6. Cancellation of Option to Purchase.
Either Boeing or Buyer may cancel the option to purchase an
Option Aircraft if any of the following events are not
accomplished by the respective dates contemplated in this Letter
Agreement, or in the Agreement, as the case may be:
(i) purchase of the Aircraft under the Agreement for
any reason not attributable to the cancelling party;
(ii) payment by Buyer of the Option Deposit with respect
to such Option Aircraft pursuant to paragraph 3 herein; or
(iii) exercise of the option to purchase such Option
Aircraft pursuant to the terms hereof.
Any cancellation of an option to purchase by Boeing which is
based on the termination of the purchase of an Aircraft under the
Agreement shall be on a one-for-one basis, for each Aircraft so
terminated.
Cancellation of an option to purchase provided by this letter
agreement shall be caused by either party giving written notice
to the other within ten (10) days after the respective date in
question. Upon receipt of such notice, all rights and
obligations of the parties with respect to an Option Aircraft for
which the option to purchase has been cancelled shall thereupon
terminate.
Boeing shall promptly refund to Buyer, without interest, any
payments received from Buyer with respect to the affected Option
Aircraft. Boeing shall be entitled to retain the Option Deposit
unless cancellation is attributable to Boeing's fault, in which
case the Option Deposit shall also be returned to Buyer without
interest.
7. Applicability.
Except as otherwise specifically provided, limited or
excluded herein, all Option Aircraft that are added to the
Agreement by an Option Aircraft Supplemental Agreement as firm
Aircraft shall benefit from all the applicable terms, conditions
and provisions of the Agreement.
If the foregoing accurately reflects your understanding of the
matters treated herein, please so indicate by signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ D. M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 17, 2000
CONTINENTAL AIRLINES, INC.,
By /s/ Brian Davis
Its Vice President
Attachment
<PAGE>
Model 737-724 Aircraft
1. Option Aircraft Description and Changes.
1.1 Aircraft Description. The Option Aircraft are
described by Boeing Detail Specification D6-38808-42, dated as of
January 6, 1997, as amended and revised pursuant to the
Agreement.
1.2 Changes. The Option Aircraft Detail Specification
shall be revised to include:
(1) Changes applicable to the basic Model 737-700
aircraft which are developed by Boeing between the date of the
Detail Specification and the signing of an Option Aircraft
Supplemental Agreement.
(2) Changes mutually agreed upon.
(3) Changes required to obtain a Standard
Certificate of Airworthiness.
1.3 Effect of Changes. Changes to the Detail
Specification pursuant to the provisions of the clauses above
shall include the effects of such changes upon Option Aircraft
weight, balance, design and performance.
2. Price Description.
2.1 Price Adjustments.
2.1.1 Base Price Adjustments. The base aircraft
price (pursuant to Article 3 of the Agreement) of the Option
Aircraft will be adjusted to Boeing's and the engine
manufacturer's then-current prices as of the date of execution of
the Option Aircraft Supplemental Agreement.
2.1.2 Special Features. The price for special
features incorporated in the Option Aircraft Detail Specification
will be adjusted to Boeing's then-current prices for such
features as of the date of execution of the Option Aircraft
Supplemental Agreement [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT].
2.1.3 Escalation Adjustments. The base airframe
and special features price will be escalated according to the
applicable airframe and engine manufacturer escalation provisions
contained in Exhibit D of the Agreement.
Buyer agrees that the engine escalation provisions will be
adjusted if they are changed by the engine manufacturer prior to
signing the Option Aircraft Supplemental Agreement. In such
case, the then-current engine escalation provisions in effect at
the time of execution of the Option Aircraft Supplemental
Agreement will be incorporated into such agreement.
2.1.4 Price Adjustments for Changes. Boeing may
adjust the basic price and the advance payment base prices for
any changes mutually agreed upon by Buyer and Boeing subsequent
to the date that Buyer and Boeing enter into the Option Aircraft
Supplemental Agreement.
2.1.5 BFE to SPE. An estimate of the total price
for items of Buyer Furnished Equipment (BFE) changed to Seller
Purchased Equipment (SPE) pursuant to the Detail Specification is
included in the Option Aircraft price build-up. The purchase
price of the Option Aircraft will be adjusted by the price
charged to Boeing for such items plus 10% of such price.
3. Advance Payments.
3.1 Buyer shall pay to Boeing advance payments for the
Option Aircraft pursuant to the schedule for payment of advance
payments provided in the Agreement.
<PAGE>
March 17, 2000
6-1162-DMH-1054
Continental Airlines, Inc.
1600 Smith Street
Houston, TX 77002
Subject: Letter Agreement 6-1162-DMH-1054 to Purchase
Agreement No. 1951 [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated as
of July 23, 1996 as previously amended (the Agreement) between
The Boeing Company (Boeing) and Continental Airlines, Inc.
(Buyer) relating to Model 737 aircraft (the Aircraft).
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of the
matters treated herein, please so indicate by signature below.
Very truly yours,
THE BOEING COMPANY
By:___/s/ D. M. Hurt_______
Its: Attorney-In-Fact
ACCEPTED AND AGREED TO
as of this date: March 17, 2000
CONTINENTAL AIRLINES, INC.
By:____/s/ Brian Davis_____
Its: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,327
<SECURITIES> 79
<RECEIVABLES> 607
<ALLOWANCES> 0
<INVENTORY> 244
<CURRENT-ASSETS> 2,588
<PP&E> 4,319
<DEPRECIATION> 1,043
<TOTAL-ASSETS> 8,379
<CURRENT-LIABILITIES> 3,043
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 1,472
<TOTAL-LIABILITY-AND-EQUITY> 8,379
<SALES> 2,277
<TOTAL-REVENUES> 2,277
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,223
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> 23
<INCOME-TAX> 9
<INCOME-CONTINUING> 14
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.21
</TABLE>
