Fitch affirms Continental Airlines

Fitch Ratings said it affirmed the CCC issuer default rating of Continental Airlines Inc. and the company's CC senior unsecured rating with a recovery rating of 6. Continental's senior unsecured rating applies to roughly $700 million of outstanding debt.

The outlook is stable.

The affirmation of Continental's ratings and the retention of the stable outlook reflect the ongoing liquidity pressures that the airline is likely to face over the next year, even in the context of an improving domestic revenue environment, the agency said.

With very high lease-adjusted leverage, heavy debt maturities over the next two years and virtually no remaining unencumbered assets to support future secured debt issuance, Continental could face renewed cash flow pressures if the industry operating environment does not improve markedly in 2006.

While a pull-back in domestic capacity should lay the foundation for better passenger yield trends next year, Fitch said Continental and all the U.S. legacy airlines face the continuing risk of further jet fuel price spikes that could undermine better unit revenue trends.

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