S&P: Continental Airlines view negative

Standard & Poor's said it revised its outlook on Continental Airlines Inc. (B/B-3) to negative from stable and placed some enhanced equipment trust certificates that are secured by regional jets on CreditWatch with negative implications.

The agency said the negative outlook is based on the earnings and cash flow impact of rapidly increasing fuel prices and a weak U.S. economy. While Continental continues to report better operating results than its peer legacy carriers, including a relatively modest $80 million first-quarter net loss, there is a clear risk of deterioration in its financial profile due to the very difficult airline industry outlook, in S&P's view.

The CreditWatch listing of the trust certificates reflects concerns that collateral values of 50-seat regional jets, which are less fuel-efficient on a per-seat basis than most other planes, will come under pressure because of continued high fuel prices, S&P said.

Neither the outlook change nor the CreditWatch listing are related to the impact of the recently announced merger agreement between Delta Air Lines Inc. and Northwest Airlines Corp., although the agency does believe that Continental may enter into a merger of its own in response.

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