Event Brief of Q2 2004 Continental Airlines Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

CORPORATE PARTICIPANTS

. Ned Walker, Continental Airlines, Inc., SVP - Worldwide Corporate

Communications . Sarah Zaozirny, Continental Airlines, Inc., Director - IR . Gordon Bethune, Continental Airlines, Inc., Chairman & CEO . Larry Kellner, Continental Airlines, Inc., President & COO

. Jeff Misner, Continental Airlines, Inc., SVP & CFO . Jim Compton, Continental Airlines, Inc., SVP - Marketing

OVERVIEW

2Q04 net loss was $17m or $0.26 loss per share. The results included a special charge of $19m after-tax, due to the retirement of leased MD-80 airplanes. Excluding the airplane retirement charge, net profit was $2m for 2Q04 or $0.03 EPS. Record high fuel prices continue to have a negative impact. Q&A Focus: Competition, fares, and market conditions.

FINANCIAL DATA

A. Key Data From Call 1. 2Q04 net loss was $17m or $0.26 loss per share. 2. Cash and short-term investments at the end of 2Q04 = $1.69b.

3. 2Q04 cash CapEx = $8m, including net purchase deposits. 4. Full-year cash CapEx guidance = approx. $115m, including net purchase deposits.

PRESENTATION SUMMARY

S1. Opening Comments (G.B.) 1. 2Q04 Highlights: 1. 2Q04 net loss was $17m or $0.26 loss per share. 1. The results included a special charge of $19m after-tax, due to the retirement of leased MD-80 airplanes.

2. Excluding the airplane retirement charge, net profit was $2m

for 2Q04 or $0.03 EPS. 3. While these results were certainly better than the Co.'s earlier expectations for the qtr. and should compare favorably to the performance of the peers as well, CAL isn't

satisfying reporting breakeven results in a seasonally strong 2Q of the year. 4. With the continued weak domestic revenue, exorbitant fuel prices, and heavy burden of taxes and fees on the industry,

the economics just don't work. 2. Beginning 2Q04, CAL will disclose all taxes and fees remitted to various governmental entities that are charged on passenger tickets. 3. For 2Q04, the taxes and fees totaled $265m. 4. During 2Q04, CAL attempted four fare increases to mitigate a portion of the 29% YoverY increases in fuel prices, but all were rescinded for competitive reasons.

5. The domestic fare environment continues to erode with the

growth of low-cost carriers, the simplification of the fare

structure, and the peer group's inability to act rationally.

6. On a positive note, the Co. saw some encouraging results from

its recent revenue initiatives. 1. Although it is still very early a positive response to leisure-oriented business first (Phonetic) product this summer. 2. Response has been demonstrated through higher front cabin load factors YoverY. 3. Additionally, CAL has seen a good response domestically to the reduced seven-day advance purchase and walk-up fares for one-way coach and first-class travel. 1. These reduced fares are currently offered in 44% of CAL's

hub markets. 2. Business Initiatives: 1. CAL has made a lot of progress on the cost saving side with a number of targeted initiatives. 2. On fuel burn program, which includes fuel-tankering and working with the government to reduce minimum reserve

requirements on certain flights, and has been very successful.

3. CAL achieved over $1m in savings with the fuel-tankering

program alone. 4. In April, CAL had announced an agreement with Aviation Partners Boeing to install blended winglets on 11 757-200 airplanes and 11 737-800 airplanes. 1. The winglets are expected to provide an additional 5% savings in fuel burn and will be installed on the 800s by the end of this year and on the 757s beginning next year. 5. During 2Q04, the Co. added service to several new international destinations including Edinburgh, Scotland; Oslo, Norway; and Punta Cana, Dominican Republic. 6. CAL added new service to Houston and Port of Spain, Trinidad; Roatan, Honduras; and Montego Bay, Jamaica. 1. CAL is pleased with the initial performance of all these markets.

7. The Co. resumed the second frequencies from New York to Paris

and New York to Rome, which were discontinued last spring

during the capacity pulldown associated with the War in Iraq.

8. CAL resumed its seasonal nonstop service from Cleveland to

London and added a second daily frequency from New York to

Birmingham, England during 2Q04. 9. CAL took delivery of three 737-800 and the final 737-500 airplane during 2Q04. 10. The Co. retired ten of the older MD-80 to end the qtr. with 352 planes in the operating fleet. 11. Over 2H04, CAL expects to take delivery of an additional five Boeing 737-800 airplanes and will retire the remaining ten MD-80 airplanes by January.

3. Award: 1. In May, CAL was named 2004 OAG Airline of the Year.

S2. 1Q04 Financial Review (L.K.) 1. Financial Highlights: 1. 2Q04 was a very tough qtr. for CAL operationally with storms affecting much of the system. 2. For 2Q04, CAL achieved the DOT on-time performance of 74.3%. 3. The Co. finished the qtr. with a system mileage completion factor of 99.7%. 1. CAL also had very good bag handling performances. 4. In the traffic side for 2Q04, mainline load factor increased 1.6 points YoverY to 78.1%. 1. That was almost all on the international side as domestic

load factor only increased 0.3 points to 78.6%. 5. Traffic demand continues to be strong, but yield continues to be a challenge for the Co. 6. Break down of the domestic market on a geographic basis: 1. Newark Liberty saw capacity in 2Q04 up 10.5% YoverY and traffic was up 10.2%, so basically flat. 2. In the Transcon, which is a subset of the Newark Liberty market, capacity was up 16.2% YoverY and traffic increased 12.2%. 3. Houston capacity, which includes both the mainline and regional, was up 6.3% and traffic was up 8%. 1. Load factor gain was 1.2 points YoverY. 4. Cleveland capacity was up 6.5% YoverY and traffic was up about 7%. 1. A small gain in load factor. 2. RASM: 1. CAL did better than it expected in May. 1. It was both RASM performance and cost performance.

2. CAL is happy with June and July (month-to-date) performances.

2. YoverY mainline system RASM for 2Q04 was up slightly to

$0.089, an increase of 0.5%. 1. It was all driven by higher load factors as yields for the qtr. was down 1.6% YoverY. 3. Transcon RASM for 2Q04 was still down significantly, 13% YoverY, but not as bad as it was in 1Q04 when CAL had over 20% YoverY decrease in RASM. 1. In April, the RASM was down 14%. 2. In May, RASM was back down 23%. 3. In June, RASM was only down about 7.5%. 4. In July month-to-date, RASM is only running down about 5%. 5. In April, 73.9% load factor in the Transcon.

6. In May, load factor fell back to 70.2%. 7. In June, load factor was 83.5%. 8. In July month-to-date, load factor is 89.6%. 1. During the periods were there are lots of demand, the Co. was able to effectively revenue manage and make some improvements in RASM. 2. However, CAL is concerned as the Co. moves back to the

fall with the amount of capacity in the marketplace it will see tough RASM comparisons again. 3. Business Mix: 1. Overall, revenue passenger miles were down as a percentage 0.4 points to 11.6% for business miles. 1. As a percent of total passenger revenue, business mix was 31.6% down 3.4 points YoverY. 2. Looking forward, CAL thinks that capacity in the domestic side in 3Q04 will be up about 0.4-0.5%. 3. Bookings are on par with last year, and load factor will be flat to a year ago with yields likely down.

4. September will be a tough challenge. 5. CAL feels pretty good about July and especially the first half of …