Week 9 Final

Evaluating Financial Health

Accounting 230 – Financial Reporting: Peeking Under the Financial Hood

Continental Airlines
Continental Airlines (Continental) was incorporated in 1980. Based out of Houston, Texas, Continental Airlines is fifth largest airline in the world. This is based on the 2009 number of scheduled miles flown by revenue passengers (SEC1). Continental and its smaller divisions offer more than 2,750 departures in the Americas, Europe and Asia. Continental currently employs more than 43,000 people. More than 67 million people per year choose continental as their chosen air carrier (Unknown2). With such a big company comes incredible opportunity for large amounts of profit to be made or lost.
Current Happenings
Recently, Continental merged with former competitor United. The merger took place May 3, 2010. This merger was created to provide customers with a higher quality of service, improve career opportunities within the company and to improve profitability and shareholder value over a longer term (Unknown2). The related costs associated with the merger, and other unique charges, was $24 million. The majority of these costs were related to financial advising fees, legal fees, and consultant fees, cost of communication and accounting fees. The merger is expected to bring between $800 million and $900 million in revenue annually (Unknown1).
Current Financial Performance – 2010
The second quarter for 2010 proved to be extremely profitable for Continental in comparison to the same quarter in 2009. Including the merger-related costs, a net income of $233 million was reported (Unknown1). Income from operations in the 2010 second quarter was up $482 million in comparison to the same quarter in 2009. This increased allowed for a 2010 second quarter operating income of $328 million (SEC2). The statement of operations showed that total