Continental Airlines expects loss

Continental's woes reflect an industry-wide picture

Shares in Continental Airlines have plummeted more than 10% after it warned it would make a "significant" loss for the first quarter of 2006.

The fifth largest US carrier, it issued the warning despite reporting a large reduction in fourth quarter losses.

Its losses for the last three months of 2005 totalled $43m (£24m) compared to $208m for the same time a year earlier.

The US airline industry has struggled in recent years, hit by higher fuel costs and tough competition.

No less than three of Continental's main competitors are in Chapter 11 bankruptcy protection - United, Delta and Northwest.

The undertone of this earnings release are a reminder that maybe in the long term things aren't going to turn great again Airlines analyst Chris Lozier

A fourth - US Airways - emerged from this status back in September.

Under Chapter 11 a US company is given temporary protection from its creditors and the ability to continue trading while it sorts out its finances.

Tough times

Continental's chief executive Larry Kellner warned on Tuesday that the company still faced an uphill struggle to fully turn around its fortunes, despite most of its staff agreeing to a cut in wages.

"As we head into 2006 we continue to face low cost carrier competition in our domestic markets, a weak domestic fare environment, high fuel costs, and we expect to report a significant loss in the first quarter of 2006," he said.

Airlines analysts Chris Lozier described the current state of the sector in the US as still being a "brutal industry to work in".

"The undertone of this earnings release [from Continental] are a reminder that maybe in the long term things aren't going to turn great again," added Mr Lozier.

Continental is the first major US airline to report its fourth quarter results.

Its revenues rose 16.7% to $2.8bn.

Northwest Airlines told a New York bankruptcy court on Tuesday that it had reached a tentative agreement with its machinists and aerospace workers union to accept a pay cut, but that talks with pilot and flight attendants unions appeared to be deadlocked.