Continental Airlines Trying to Raise $600 Million in New Capital

Continental Airlines said Tuesday that it is negotiating with potential investors in an attempt to raise $600 million in new capital.

The Houston-based carrier, which in December filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, said new cash would help it emerge from bankruptcy court proceedings by the end of the year.

Continental Chairman Hollis Harris said at a news conference in Houston that the talks were under way with three large companies and two investor groups.

Company spokesman Art Kent would only identify Scandinavian Airlines System, which already has a stake in Continental, as one of the entities involved in the discussions. SAS owns 16.8% of the stock but has an 18.4% voting interest. Under current law, foreigners can own up to 49% of the stock of a U.S. carrier, but voting shares must be limited to 25%.

SAS declined to comment on Continental’s most recent statement. However, SAS Chairman Jan Carlzon said in a statement last week in response to a Harris interview in a British newspaper that it is “altogether too early to say if SAS would contribute fresh capital.” The British paper quoted Harris as saying Continental was seeking a total of $3 billion in new capital and cash.

That Continental is in negotiations is “good news” for the carrier, said Thomas Longman, an analyst with Bear, Stearns & Co. “The fact that someone is willing to invest in the airline suggests that its fortunes are going to turn around. In fact, I have predicted that it will make a profit in the second quarter, but it will be close.”