Continental Airlines 2004 Annual Report

Continental Airlines 2004 Annual Report

Continental Airlines was founded over 60 years ago by Walter T. Varney and his partner Louis Mueller as Varney Speed Lines. On July 15, 1934, the carrier's first flight was flown on a 530-mile route between Pueblo, Colorado to El Paso, Texas with stops in Las Vegas, Santa Fe and Albuquerque, New Mexico. Mueller gained control over the carrier on the same year and in 1936, he sold 40 percent of the company shares to Robert F. Six. In July 1, 1937, Mr. Robert F. Six changed the name of Varney Speed Lines to Continental Airlines and moved the Continental's headquarters from El Paso, Texas to Denver, Colorado.

During the 1940's and 1950's, Continental Airlines was able to expand its fleet of aircraft and profits through its participation in World War II by providing the modified B-17 Flying Fortresses and B-29 Super Fortresses as the air transportation to the military. In 1953, Continental Airlines merged with southwest based Pioneer Airlines. This merger allowed Continental Airlines to operate 16 new air routes between Texas and New Mexico. By the end of the 1950's, Continental Airlines had expanded its routes to include Chicago and Los Angeles and was operating their first true jet (a Boeing 707-120) seven days a week, 16 hours a day.

By the early 1960's, Continental Airlines moved its headquarters to Los Angeles, California and was providing air transportation for US Military troops to the Orient during the Vietnam War. As the result of Continental's Pacific experience, Continental formed Air Micronesia, picking up air routes between Spain and Honolulu. With the passing of Airline Deregulation Act of 1978 airline carriers were provided with new freedoms to expand their route systems and the flexibility to develop innovative pricing structures. This flexibility allowed the carrier to further grow into new markets. In 1982, Continental merges with Texas International Airlines under the management of Frank Lorenzo. Continental retained its name and expanded its route structure, offering service to North and South America, Asia, and Australia with a fleet of 112 aircraft.

In 1983, Continental filed Chapter 11 with losses of $218,000,000. Rebuilding the company began immediately and by the end of 1984, Continental recorded a $50 million profit. In 1986 Continental emerged from Chapter 11. On the same year Continental took over the Frontier Airlines and began flying its routes. This was a boost for the carrier. However, with the rise in the cost of fuel due to the invasion of Kuwait, Continental again in late 1990, filed for bankruptcy for a second time. In 1993, Continental purchased over 90 new Boeing aircraft which included 737's, 757's, 767's and 777's with the investment made into Continental Airlines by Air Canada and Air Partners. In addition, Continental President and CEO Gordon Bethune recognized one of his most valuable resources was his employees. He initiated the "Fly To Win, Fund The Future, Make Reliability and Working Together" program. This program is designed to improve on departure and arrival time of his aircraft, improve baggage handling, customer service and improve employee moral through employee incentive program. This program was very successful; it brought the airline carrier out of the red and allowed the carrier to make record breaking profits. With this program, it motivated other major carriers to develop similar programs as the public was now demanding air carriers to as well improve their performance with departure and arrival time of aircraft, improve baggage handling, customer service and improve employee moral.

Using the firm's Consolidated Balance Sheet, Income Statement, and Consolidated Statement of Cash Flow, the annual report indicates all figures used are in the millions with exception of per share data. In my analysis, Continental Airlines recorded total assets of $10,545. On the asset page of the Balance Sheet are listed all the property and equipment owned by Continental Airlines as well as any claims against others that remain to be collected. Continental Airlines has $1,055 in cash and equivalents available in the bank. The short term investment of Continental Airlines has $403. These funds maybe be needed on short notice and it is important that these securities be readily available. The figures listed by Continental Airlines for ******* receivables are $472 which is a found money owed to the firm but not yet received. The current value of spare parts, tools used to maintain aircraft, ground service equipment, and the value of all general supplies of the firm is $214 as recorded. Continental Airlines did not get an income tax refund. If the company were to liquidate, the firm has a prepaid asset of $473. These are their properties that have been paid for such as things like personal computers, copiers, property insurance, building rents, and etc... The value of their working assets which is referred to as current assets for the year ended December 31, 2004, are $2,828. The booked values of Continental Airlines' own fixed assets are $6,344. The booked value of their routes and operating rights are $851. The other assets that cannot be classified as current assets or operating investments are $522. As mentioned earlier, the dollar book value of Continental Airlines' assets as of December 31, 2004, was $10,545.

Continental Airlines recorded total current liabilities of $3,259. This includes the firm's liabilities owed to creditors that have to be paid out in the current fiscal period. Continental Airlines' current maturity of long-term debt and capital leases that is due in the current period is $670. These are the installment payments or bonds that will have to be made in the current year. The firm's ******* payable is $766 for the period of year 2004. The accrued payroll that not has been disbursed to the employee is $281. And this is due in this current period. The money received by Continental Airlines from passengers for flight that they have not taken is $1,157. Keep in mind that this is still subject for cancellation. Adding up all the money that Continental Airlines will have to pay out in the current period is $3,259.

The value of these long-term debt and capital lease for Continental Airlines is $5,167. These are the bonds and loan commitments that due over many years and not payable in the current year. Also including in this long-term obligation is the contractual commitments of the firm to equipment. The recorded figures for Continental Airlines for this period are $382 in deferred income taxes, $1,132 in accrued pension liability, and $339 in miscellaneous liabilities. The firm's total liabilities are $10,279. This is computed by adding up current liabilities, long-term debt, capital lease obligations,