沃顿 高级公司理财学Contl09.ppt

Kihlstrom Finance 203: Continental Airlines * Kihlstrom Finance 203: Continental Airlines * Finance 203, Kihlstrom: Continental Airlines Notes * History Late 1980 - Texas Air, controlled by Frank Lorenzo, acquires 51% stake in Continental September 1983 - Continental files for Protection under Chapter 11 abrogates union contracts reduces labor force by 65% reduces operations by scaling back routes flown returns to profitability in less than a year Finance 203, Kihlstrom: Continental Airlines Notes * History (cont’d) 1986 - Continental emerges from bankruptcy highly levered: well above 80% debt to total assets versus industry average of less than 60% 1986 - Texas Air acquires Peoples Express and Eastern- primarily debt financed 1987 - Texas Air acquires all remaining outstanding shares of Continental Finance 203, Kihlstrom: Continental Airlines Notes * History (cont’d) 1990 - Texas Air Becomes Continental Holdings operations carried out by its two subsidiaries; Eastern Airlines and Continental Airlines consolidated revenues had grown from $1.4 billion in 1984 to$6.7 billion in 1989 total had grown from $1.3 billion in 1984 to$7.7 billion in 1989 Finance 203, Kihlstrom: Continental Airlines Notes * History (cont’d) Had become fifth largest US carrier Nevertheless had industry record losses in 1988 and 1989 of $719 million and $886 million, respectively Finance 203, Kihlstrom: Continental Airlines Notes * History (cont’d) In response to losses, Eastern sells assets 1988 - Northeast shuttle sold to Trump for $365 million 1989 - $471 million of assets sold to American Airlines 1989- sold and leased back 21 aircraft for a sale price of $252 million. Over 4 years had sold and leased back $750 million of aircraft Finance 203, Kihlstrom: Continental Airlines Notes * History (cont’d) March 1989 - Eastern, Continental’s subsidiary files for bankruptcy under Chapter 11 April 1990 - the court appoints a trustee for Eastern which is thereby removed from Continental’s c