Continental Airlines posts wider net loss

BANGALORE (Reuters) - Continental Airlines Inc posted a wider quarterly loss, hurt mainly by a non-cash charge, and said rising fuel prices, competition, labor and other costs may affect its financial condition in 2008.

The airline posted a fourth-quarter net loss of $32 million, or 33 cents a share, compared with a loss of $26 million, or 29 cents a share, a year ago.

The fourth-largest U.S. carrier said it recorded a special non-cash charge of $104 million in its fourth quarter for the increase in its deferred tax asset valuation allowance.

News of the quarterly loss comes when the fledgling recovery of the U.S. airline industry is threatened by record oil prices and a slump in the economy.

The prospect of a new downturn has spurred some carriers to consider mergers, with the aim of cutting costs and reducing capacity.

Continental, based in Houston, Texas, has said it prefers to remain independent, but sees consolidation in the industry adversely affecting its competitive position.

The declining value of the U.S. dollar versus foreign currencies could also hit the company as international travel costs would go up for U.S. residents, Continental said in its annual report with the U.S. Securities and Exchange Commission.

Continental's stock, which has jumped about 34 percent in 2008, trades at just more than 6 times forward earnings, while the Airlines sector trades at a multiple of about 15.

The company's shares had lost about 46 percent of their value in 2007.

PENSION PLANS

The company said 2007 results included a $31 million non-cash settlement charge related to its pension plan to retired pilots.

The airline said it expects to contribute about $257 million to its defined benefit pension plans during 2008, but said it has the flexibility to fund only a minimum requirement of about $140 million for the year.

Continental expects expenses of about $90 million related to its defined benefit plan in 2008.

Last month, the company posted a pretax profit of $71 million for the fourth quarter as higher fares and more international flights helped offset soaring fuel costs.

Continental did not report a net figure when it released the pretax results because at the time it had not finalized a special non-cash pension charge.

Continental, which operates mainly through its hub operations at New York Liberty, Houston Bush, Cleveland Hopkins and Guam, said it plans to grow its mainline capacity between 2 percent and 3 percent in 2008.

Shares of the company were trading up 8 cents at $29.94 Thursday on the New York Stock Exchange.

(Additional reporting by Shivani Singh; Editing by Pratish Narayanan)