SAN FRANCISCO (AFX) -- Continental Airlines reported a narrower first-quarter loss Thursday, as wage and benefit cuts reduced labor expenses and higher fares and traffic boosted revenue by 18%.
The world's No. 6 airline reported a net loss of $66 million, or 76 cents a share, narrower than the $186 million or $2.79 a share in red ink reported last year.
Excluding items related to pension payments, leased jets and accounting changes, the company would have lost $46 million, or 53 cents a share, during the just reported first quarter.
Revenue totaled $2.95 billion, up from $2.51 billion a year ago as rising airfares and added capacity, particularly on lucrative international routes, lifted passenger sales by 18% to $2.68 billion.
Analysts expected a loss of 62 cents a share, according to Thomson First Call.
Labor costs, which fell 6% from last year, were the biggest expense at $672 million,
Fuel costs rose 41% from last year to $661 million, the Houston-based company said.
Jet fuel averaged $1.90 a gallon during the quarter, Continental said, which was a 31% increase over what the company paid last year.
For the second quarter, the company expects that fuel prices will average $2.08 a gallon, executives said during a conference call after the results. The company also said that about 17% of its fuel needs are hedged at $63.50 a barrel.
Weighing on the group and jeopardizing profit projections for the year is $74 a barrel oil. A new peak in the commodity on Thursday hurt the airline sector and sent shares, including Continental, lower. Continental shares fell 4.5 percent to close at $24.81 on Thursday.
High energy prices are a factor for consumers as well, who face costlier fill-ups at the pump this summer. But executives said that demand hasn't been hurt by higher energy costs, but noted that the risk is there.
'There's no question that it should have an impact on demand. But to date, we have not the impact that we would have expected,' said Continental Chief Executive Larry Kellner during the conference call. 'I think being in Houston, the economy is a little stronger but there's no question that as the prices go up, would you expect to see some impact.'
Prudential Equity Group kept a $40 price target on the stock and an overweight rating. 'Revenues and expenses, excluding items, were generally in line with our expectations,' wrote Prudential analyst Bob McAdoo in a research note.
The Houston-based airline said in early April that traffic was stronger in the first three months of the year than last year, rising more than capacity gains. The biggest increases in capacity were in international markets across the Atlantic.
Continental said Wednesday that it will use Chautauqua Airlines to fly as some of its regional jets, replacing ExpressJet Airlines . This story was supplied by MarketWatch. For further information see www.marketwatch.com.