Ailing Continental Air Reportedly Weighed Bankruptcy
Continental Airlines decided against filing bankruptcy papers that lawyers had hastily prepared over the weekend, but the debt-ladened carrier may still sell off some assets to raise cash, according to published reports.
Unidentified sources quoted in today’s editions of the New York Times and the Wall Street Journal said a team of lawyers worked through the weekend to prepare Chapter 11 papers to be filed in U.S. Bankruptcy Court on Monday morning. But the board apparently was split on how to deal with the carrier’s financial woes.
Continental spokesman Art Kent denied the reports, saying, “The company has no intention of filing for bankruptcy protection.”
The Journal said Houston-based Continental is considering other options to raise cash, including selling some of its aircraft, international routes and possibly even one of its hubs.
The reports surfaced a day after Continental realigned its senior management team by cutting five top executives in an effort to trim costs.
“With radically higher fuel costs, Continental must become a stronger competitor in the global marketplace,” said Hollis Harris, Continental’s chairman and chief executive officer. “We have reaffirmed our intention to become a preferred airline among frequent travelers around the world.”
For the first half of the year, Continental, which until June was known as Texas Air Corp., lost $8.7 million, compared to a loss of $365 million in the year-ago period. In June, the carrier’s liabilities totaled $1.6 billion.
Third-quarter results, which have not yet been reported, are expected to show that Continental suffered losses during the normally busy summer travel season and has been hurt by higher fuel prices since the Iraqi invasion of Kuwait.
Frank Lorenzo, who recently stepped down as chairman of Continental but remains on the board, reportedly opposes a Chapter 11 filing by the airline, as does Jan Carlzon, chairman of Scandinavian Airlines System, which owns 16.8% of Continental stock. A filing would reduce the value of SAS’ holdings.
