Moody's ups Continental outlook to stable

Moody's Investor Services said it affirmed all debt ratings of Continental Airlines, Inc. (B3 corporate family rating), all tranches of the enhanced equipment trust certificates supported by payments from Continental and the SGL-3 speculative grade liquidity rating. The outlook has been changed to stable from negative.

The stable outlook reflects Moody's expectation of continued improvements to Continental's key credit metrics, such as leverage and interest coverage, in fiscal year 2006, due primarily to operating performance improvements. Operating cash flows grew in fiscal year 2005, and Moody's predicted that further growth in the company's cash flows in fiscal year 2006 should be sufficient to meet all cash demands without meaningfully increasing its debt.

Continental's ratings reflect its status as the sixth-largest global airline, the agency said. Continental was one of the few U.S. passenger airlines to achieve net income during seasonally-stronger periods of 2005, although the company reported a substantial net loss for the full year due to higher fuel costs.

The ratings are constrained by the company's substantial leverage: its debt to EBITDA declined in 2005, but remains high at 8.5x.

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