Continental Airlines ( ) appears set to close 2006 with a financial whimper. Shares of the Houston-based carrier fell 5.6% on Dec.
12 after the company said it expected modest revenue growth and that its bookings for the next six weeks look flat. After the filing, several analysts downgraded their income targets for Continental and suggested the industry could see a weak end to what had been a robust year of recovery. The nation s No.
5 carrier in terms of passenger revenue, Continental said its consolidated December revenue per available seat mile (RASM) would be 2.5% to 4.5% higher, below the 4.
6% increase seen in November. Given the seasonal lull after holiday trips, some analysts thought current views on the industry s fourth-quarter profitability were overly ambitious. We continue to believe that Street estimates on Continental for the fourth quarter (mean of 23 cents with a range of flat to 50 cents) are too high and our low-end fourth-quarter forecast is now going lower, Bear Stearns ( ) airline analyst David Strine wrote in a client note Dec.
12. Strine expects Continental to lose 5 cents per share in the fourth quarter. The lackluster outlook sent the airline sector lower.
Continental shares settled at $42.88 on the New York Stock Exchange. The stock has traded between $16.
74 and $45.76 over the past year. Rival AMR Corp.
( ), the parent of American Airlines, fell 4.5% to $32, and United Airlines parent UAL ( ) fell 2.9% to $43.
23. US Airways Group ( ) dipped 3.4% to $59.
46, while JetBlue Airways ( ) fell 3% to $13.77. AirTran Holdings ( ) fell 3.
1% to $12.35; Alaska Air Group ( ) dipped 3% to $37.98; and Southwest Airlines ( ) was off 2.
2% to $15.51. Merrill Lynch ( ) analyst Michael Linenberg also cut his income outlook on Continental, which he now expects to break even for the last quarter of 2006.
Previously, Linenberg expected the company to earn 25 cents per share. For the year, he revised his EPS forecast to $2.98 from $3.
20. Noting that unit revenue has fallen throughout the quarter, Linenberg estimates that December revenue will rise about 4%. This was not unexpected as unit revenue comps become more difficult for the latter part of 2006," Linenberg said.
"Furthermore, absent any mergers next year and resulting capacity reduction, we anticipate industry unit revenue to be flat to down 1% for 2007." Two other analysts, Susan Donofrio of Cathay Financial and Jamie Baker of J.P.
Morgan Securities, also switched their views on Continental, with both expecting red ink, according to Bloomberg News. Donofrio expects a loss of 20 cents a share, while Baker expects a 10 cents loss. In other airline news Tuesday, the federal Pension Benefit Guaranty Corp.
, which insures pension plans, said it had sold 9.3 million shares of UAL Corp., the nation s second-biggest airline.
The agency still holds 3.3 million shares, or about 3% of the company. The PBGC received more than 11 million company shares after it assumed the carrier s pension liabilities during UAL s nearly four-year Chapter 11 reorganization.
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