We have a positive fundamental outlook for the airline industry. In 2009, the S&P Airlines Index increased 27.43%, versus a 29.03% rise for the S&P 500
The airline industry is highly cyclical, and the level of demand for air travel is correlated to the strength of the U.S. and global economies. According to the S&P, it is expected that an improving U.S. economy continues to drive improving air travel demand over the next few months beginning at the end of 2009. At the end of 2009, the reported traffic statistics at many major carriers showed improving demand and revenues . Therefore, it is reasonable that the U.S. airline industry could be undergoing the start of fundamental industry demand ...view middle of the document...
The company’s future growth could be restricted due to factors such as competitive pressure and rising fuel costs. Based on the data from Bloomberg, Continental Airlines have done better than S&P 500 and their peer companies during the last year in terms of stock returns. In addition, Bloomberg expectations also suggest that Continental is going to have one on the best performance in the last twelve month based on EBITDA and Net income expected growth.
Strong Market Presence
First of all, Continental Airlines have a strong market presence. According to the 2009 10-K of Continental Airlines, they are the world's fifth largest airline as measured by the number of scheduled miles flown by revenue passengers in 2009. As of December 31, 2009, CAL flew to 118 domestic and 124 international destinations and offered additional connecting service through alliances with domestic and foreign carriers. CAL directly served 28 Trans-Atlantic destinations, 11 Canadian cities, seven South American cities and four Trans-Pacific destinations from the U.S. mainland as of December 31, 2009. In addition, CAL provides service to more destinations in Mexico and Central America than any other U.S. airline, serving 39 cities. Through the Guam hub, CMI provides extensive service in the western Pacific, including service to more Japanese cities than any other U.S. carrier. Strong market presence provides the company with a competitive edge over other players in the market.
Strong Regional Operating System
Secondly, the company regional operations are conducted by other operators on behalf, primarily under capacity purchase agreements. The company is provided with regional jet aircraft under the name "Continental Express" by ExpressJet and Chautauqua and those using turboprop aircraft are under the name "Continental Connection" by Commute Air and Colgan. As of December 31, 2009, CAL’s regional operators served 102 destinations in the United States, 26 cities in Mexico and eight cities in Canada. This regional service complements their operations by carrying traffic that connects onto CAL’s mainline jets and allows more frequent flights to smaller cities than could be provided economically with mainline jet aircraft. The strong operator’s network of the company could provide it the scope to serve more number of passengers and increase its regional customer base.
Efficient Hub System
Thirdly, the company provides both domestic and international airline services. The company operates its domestic route system through three major hubs including New York metropolitan area at Newark Liberty International Airport in Houston, George Bush Intercontinental Airport in Texas, and Cleveland in Ohio. As of December 31 2009, the company operated 75% of the average daily departures from New York Liberty, 84% of the average daily departures from Houston Bush and 65% of the average daily departures from Cleveland Hopkins, in each case based on scheduled passenger...