NEW YORK ( Reuters) - Continental Airlines Inc. (CAL.N), the No. 4 U.S. carrier, posted a smaller-than-expected fourth-quarter loss on Thursday as rising labor costs were partly offset by higher fares and fuller planes.þþContinental's results are a further sign of recovery in the industry, as it rides a surge in demand for air travel. On Wednesday, American Airlines parent AMR Corp. (AMR.N) and low-cost leader Southwest Airlines Co. (LUV.N) posted fourth-quarter profits.þþWith oil prices falling and demand robust, Continental believes it can overcome its growing wage costs and get back into the black.þþ``We believe that we are well positioned to return to sustained profitability,'' said Larry Kellner on a conference call with reporters and analysts. ``We think that, based on current market conditions, 2007 will be another big year for us.''þþContinental stock was up 2 percent in afternoon trade. On Wednesday, the shares, which up 65 percent over the last three months, hit their highest level since February 2001.þþIts net loss narrowed to $26 million, or 29 cents a share, from $43 million, or 53 cents a share, a year earlier. Excluding a charge of $22 million for lump-sum payments to retiring pilots, the loss was 4 cents a share.þþWall Street analysts, on average, expected a fourth-quarter loss of 15 cents a share, before charges, according to Reuters Estimates. þþSLOW INDUSTRY RECOVERYþþThe U.S. airline industry -- battered in recent years by low-fare competition and high costs -- managed to initiate several lasting fare hikes over the past year, helping some carriers to post profits for the first time in more than five years.þþBut Continental's loss, burdened by an 11.9 percent increase in labor costs to $716 million, showed U.S. airlines are still not completely recovered from a prolonged slump.þþ``It would have been better had they been able to eke out a profit like AMR,'' said Ray Neidl, an analyst with Calyon Securities. ``All legacy carriers need to be diligent about (controlling costs). On the revenue side, things look positive.''þþOperating revenue rose 11 percent to $3.16 billion as the carrier's load factor -- a measure of the percentage of seats filled by paying passengers -- increased to a fourth-quarter record 79.8 percent. Higher ticket prices helped the company boost unit revenue by 4.3 percent.þþThe fourth quarter is generally a tough period for airlines because, aside from the frantic travel over the Thanksgiving and Christmas holidays, demand is soft.þþThings are looking good for the industry so far this year. Oil prices have fallen about 16 percent since the beginning of 2007, which should lower the cost of jet fuel -- a major expense for airlines.þþ``For Continental, the story is 2007,'' said Jim Corridore, an equities analyst with Standard & Poor's. ``With oil down sharply, they should do well.''þþContinental plans to increase capacity by about 5 percent this year as it adds two new Boeing 777 planes to its fleet. The Houston-based carrier is one of the few traditional airlines to expand the number of seats available for sale.þþIt expects its load factor to increase 1 to 2 points in the first quarter.þþBut there is also cause for concern. Continental expects unit costs to increase 2.5 percent in the first quarter because of higher labor and maintenance expenses, and said prices could come under pressure in the Northeast U.S., where it intends to defend its Newark, New Jersey, hub from competition from low-cost rival JetBlue Airways Corp. (JBLU.O).þþThe quarterly results came as the industry braces for long-awaited consolidation among traditional airlines. US Airways Group Inc. (LCC.N) has made a hostile bid for larger, bankrupt rival Delta Air Lines Inc. (DALRQ.PK).þþAnalysts and other industry observers expect the deal to spark other mergers if it succeeds.þþContinental, which has repeatedly said it would prefer to remain independent, has held preliminary talks with UAL Corp.'s United Airlines (UAUA.O), people familiar with the situation have said.þþContinental's shares rose 95 cents to $50.95 on the New York Stock Exchange.þþ
Source: NY Times
