Rising fuel costs sap Continental

Continental Airlines Inc., the nation’s fourth-largest carrier, posted a second-quarter loss of $3 million as fare increases failed to keep pace with rising jet fuel costs.

The deficit of 3 cents a share compared with net income a year earlier of $228 million, or $2.03 a share, the Houston airline said Thursday.

Excluding one-time gains and costs, Continental had an operating loss of $25 million, less than analysts expected.

Continental is among the big U.S. airlines cutting seating capacity, grounding planes and paring payrolls to blunt this year’s 49% jump in fuel prices. The reductions will trim operating expenses and let carriers drop their cheapest tickets.

Continental’s fuel cost, its largest expense, rose 66% from a year earlier to $1.36 billion.

Higher fares were “not enough to offset the skyrocketing fuel bills, and that will be the main concern for the second half of the year,” said Ray Neidl, a Calyon Securities analyst in New York.

Sales gained 9% to $4 billion.

Continental shares rose 77 cents to $9.96. It was the first time in a month that shares gained on back-to-back days.

“We’re experiencing the worst financial environment for U.S. carriers since 9/11 due to record-high fuel prices, a weak dollar and a generally uncertain economic environment,” Chief Executive Larry Kellner said.

The Houston-based carrier said it also might permanently ground 30 37-seat regional jets being flown for it by ExpressJet Holdings Inc.