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Continental Airlines Vs.Southwest Airlines
Finance 5000
Spring 2009
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Continental Airlines
• Headquarters: Houston, TX
• Symbol: CAL
•
Exchange: NASDAQ• Stock Price (21APR) $15
• http://www.continental.com/web/en-
US/content/company/investor/docs/continental_10k_2008.pdf
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• Destinations served: 282
– (144 domestic; 138 international)1
•
Annual passengers: 67 million
2
• Daily passengers: 183,000 average
• Daily departures: 3,100
•Employees: 45,000
• Fleet size: 634
Continental Airlines
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• Serves more international destinations thanany other US carrier.
• Continental operates a fleet of 351 mainline jets.
•
70 percent of fleet is Boeing 737 seriesaircraft, allowing for greater efficiencies intraining and simplified maintenance
Continental Airlines
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Southwest Airlines
• Headquarters: Dallas, TX
•
Symbol: LUV• Exchange: NASDAQ
• Stock $ (21APR) $7.53
• Employees 35,000
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• Destinations served: 67
– Domestic Flights Only
•
Annual passengers: 1.1 million• Daily departures: 3,300
• Employees: 35,000
•
Fleet size: 536
Southwest Airlines
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Southwest Airlines
• Southwest currently operates 536 Boeing 737
jets. Average age 9 years
• Consistently received the lowest ratio of
complaints per passengers boarded of all
Major U.S. carriers
• Ranked as the largest U.S. carrier in terms of
passengers carried
•
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COMPARISON
CONTINENTAL SOUTHWEST
• Destinations served: 282 International 67 cities in 34 states
• Annual passengers: 67 million 101.9 Million
• Daily departures: 3,100 3,300
• Employees: 45,000 35,000
• Fleet size: 634 536
•
Average Fleet age 10.2 9
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Balance SheetContinental Southwest
Current Assets
Cash and Equivalents $ 2,355,000 $ 1,368,000
Short Term Investments 478,000 435,000
Net Receivables 669,000 574,000
Inventory 235,000 203,000
Other Current Assets 610,000 313,000
TOTAL CURRENT ASSETS $4,347,000 $14,308,000
Long Term Investments
Fixed 7,327,000 11,040,000
Intangible 804,000 84,000Other 208,000 291,000
Current Liabilities
Accounts Payable 3,955,000 2,643,000
Short Term Debt 519,000 163,000
TOTAL CURRENT LIABILITIES 4,474,000 2,806,000
Long Term Debt 5,371,000 3,498,000
Other Liabilities and deferred charges 2,736,000 3,051,000TOTAL LIABILITIES $12,581,000 $9,355,000
Stock Holders Equity
Common Stock 1,000 808,000
Capital Surplus 1,997,000 1,215,000
Retained Earnings (137,000) 4,919,000
Treasury Stock 0.00 (1,005,000)
Other Equity (1,756,000) (984,000)
Total Equity $105,000 $4,953,000
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IncomeStatementContinental Southwest
Total Revenue $ 15,241,000 $ 11,023,000
Cost of Revenue 12,782,000 8,590,000
Gross Profit 2,459,000 2,433,000
Operating Expenses
Sales, Admin, Gen 2,154,000 1,385,000
Non-recurring Items 181,000 0.00
Other Operating Items 438,000 599,000
Operating Income (314,000) 449,000
Additional Income (38,000) (66,000)
Earnings before Interest and Tax (352,000) 383,000
Interest Expense 332,000 105,000Earnings before Tax (684,000) 278,000
Income Tax (99,000) 100,000
Net Income Operations (585,000) 178,000
Net income (585,000) 178,000
Net Income Applicable to (585,000) 178,000
Shareholders
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Cash Flows
Continental Southwest
Net income $(585,000) $178,000Cash Flows Operating Activities
Depreciation 438,000 587,000
Net Income Adjustments 188,000 74,000
Changes in Operating Activities
Accounts Receivable 147,000 71,000
Inventory 5,000
Other Operating Activities (167,000) (610,000)
Liabilities (350,000) (1,821,000)
Net Cash Flow-Operating $(324,000) $(1,521,000)Cash Flows-Investing Activities
Capital Expenditures (504,000) (923,000)
Investments 286,000 (55,000)
Other Investing Activities 202,000 0.00
Net Cash Flows – Investing $(16,000) $(978,000)
Cash Flows _ Financing ActivitiesDividends Paid (13,000)
Sale and Purchase of Stock 376,000 63,000
Net Borrowings 1,000 1,609,000
Other Financial Activities 0.00 (5,000)
Net Cash Flows – Financing $377,000 $1,654,000
Net Cash Flow $37,000 $(845,000)
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Financial Ratios
Continental Southwest
Liquidity Ratios
Current Ratio 97% 103%
Quick Ratio 78% 85%
Cash Ratio 63% 64%
Inventory Turnover 6,486% 5,530%
Profitability Ratios
Gross Margin 16% 22%
Operating Margin -2% 4%
Pre-Tax Margin -4% 3%
Profit Margin -4% 2%Pre-Tax ROE -651% 6%
After Tax ROE -557% 4%
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Risk Analysis
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