424B3
This
preliminary prospectus supplement relates to an effective
registration statement under the Securities Act of 1933, but it
is not complete and may be changed. This preliminary prospectus
supplement is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted.
|
Filed Pursuant to Rule (424)(b)(3)
Registration No. 333-158781
SUBJECT TO
COMPLETION, DATED JUNE 16, 2009
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS, DATED
APRIL 24, 2009
$389,687,000
2009-1
PASS THROUGH TRUST
PASS THROUGH CERTIFICATES,
SERIES 2009-1
The Continental Airlines Class A Pass Through
Certificates,
Series 2009-1,
are being offered under this prospectus supplement. The
certificates represent interests in a trust to be established in
connection with this offering. The proceeds from the sale of
certificates will initially be held in escrow, and interest on
the escrowed funds will be payable semiannually on January 8 and
July 8, commencing January 8, 2010. The trust will use
the escrowed funds to acquire equipment notes. The equipment
notes will be issued by Continental Airlines and will be secured
by 12 Boeing aircraft currently owned by Continental and five
new Boeing aircraft scheduled for delivery from July to
September, 2009. Payments on the equipment notes held in the
trust will be passed through to the holders of certificates of
the trust.
Interest on the equipment notes will be payable
semiannually on each January 8 and July 8 after issuance.
Principal payments on the equipment notes are scheduled on
January 8 and July 8 in certain years, beginning on
January 8, 2010.
Goldman Sachs Bank USA will provide a liquidity facility
for the certificates in an amount sufficient to make three
semiannual interest payments.
The certificates will not be listed on any national
securities exchange.
Investing in the certificates involves risks. See
Risk Factors on
page S-16.
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Principal
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Interest
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Final Expected
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Price to
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Amount
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Rate
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Distribution Date
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Public(1)
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$
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389,687,000
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%
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July 8, 2016
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100
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%
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(1) |
Plus accrued interest, if any, from the date of issuance.
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The underwriters will purchase all of the certificates if any
are purchased. The aggregate proceeds from the sale of the
certificates will be $389,687,000. Continental will pay the
underwriters a commission of
$ . Delivery of the
certificates in book-entry form only will be made on or
about ,
2009.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Joint Structuring Agents & Joint Bookrunners
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|
MORGAN
STANLEY |
GOLDMAN, SACHS & CO. |
Joint Bookrunner
CALYON SECURITIES
The date of this prospectus supplement is
June , 2009.
PRESENTATION
OF INFORMATION
These offering materials consist of two documents: (a) this
Prospectus Supplement, which describes the terms of the
certificates that we are currently offering, and (b) the
accompanying Prospectus, which provides general information
about our pass through certificates, some of which may not apply
to the certificates that we are currently offering. The
information in this Prospectus Supplement replaces any
inconsistent information included in the accompanying Prospectus.
We have given certain capitalized terms specific meanings for
purposes of this Prospectus Supplement. The Index of
Terms attached as Appendix I to this Prospectus
Supplement lists the page in this Prospectus Supplement on which
we have defined each such term.
At various places in this Prospectus Supplement and the
Prospectus, we refer you to other sections of such documents for
additional information by indicating the caption heading of such
other sections. The page on which each principal caption
included in this Prospectus Supplement and the Prospectus can be
found is listed in the Table of Contents below. All such cross
references in this Prospectus Supplement are to captions
contained in this Prospectus Supplement and not in the
Prospectus, unless otherwise stated.
S-2
TABLE OF
CONTENTS
Prospectus
Supplement
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Page
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S-5
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S-5
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S-6
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S-7
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S-8
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S-9
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S-13
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S-16
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S-16
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S-20
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S-24
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S-25
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S-26
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S-26
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S-26
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S-27
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S-29
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S-30
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S-31
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S-32
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S-32
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S-33
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S-33
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S-36
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S-40
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S-40
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S-40
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S-40
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S-43
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S-43
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S-43
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S-43
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S-44
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S-45
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S-46
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S-46
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S-46
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S-49
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S-50
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S-50
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S-51
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S-51
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S-52
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S-53
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S-54
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S-55
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S-55
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S-55
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S-56
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S-56
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S-57
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S-58
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S-58
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S-59
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S-59
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S-59
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S-60
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S-60
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S-61
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S-61
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S-61
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S-63
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S-63
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S-63
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S-67
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S-68
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S-68
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S-68
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S-68
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S-70
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S-70
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S-70
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S-71
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S-72
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S-73
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S-75
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S-76
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S-76
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S-76
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Appendix I
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Appendix II
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Appendix III
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Appendix IV
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S-3
Prospectus
You should rely only on the information contained in this
document or to which we have referred you. We have not
authorized anyone to provide you with information that is
different. This document may be used only where it is legal to
sell these securities. The information in this document may be
accurate only on the date of this document.
S-4
PROSPECTUS
SUPPLEMENT SUMMARY
This summary highlights selected information from this
Prospectus Supplement and the accompanying Prospectus and may
not contain all of the information that is important to you. For
more complete information about the Certificates and
Continental, you should read this entire Prospectus Supplement
and the accompanying Prospectus, as well as the materials filed
with the Securities and Exchange Commission that are considered
to be part of this Prospectus Supplement and the Prospectus. See
Incorporation of Certain Documents by Reference in
this Prospectus Supplement and the Prospectus.
Summary
of Terms of Certificates
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Aggregate Face Amount
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$389,687,000
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Interest Rate
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%
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Ratings:
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Moodys
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Baa2
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Standard & Poors
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A-
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Initial Loan to Aircraft Value (cumulative)(1)
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54.0%
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Highest Loan to Aircraft Value (cumulative)(2)
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54.0%
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Expected Principal Distribution Window (in years)
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0.5 - 7.0
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Initial Average Life (in years from Issuance Date)
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5.9
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Regular Distribution Dates
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January 8 and July 8
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Final Expected Distribution Date
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July 8, 2016
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Final Maturity Date
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January 8, 2018
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Minimum Denomination
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$1,000
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Section 1110 Protection
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Yes
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Liquidity Facility Coverage
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3 semiannual
interest payments
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(1)
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This percentage is calculated as of
January 8, 2010, the first Regular Distribution Date. In
calculating these percentages, we have assumed that the
financings of all aircraft hereunder are completed prior to such
date and that the aggregate appraised value of such aircraft is
$706,843,478 as of such date. The appraised value is only an
estimate and reflects certain assumptions. See Description
of the Aircraft and the Appraisals The
Appraisals.
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(2)
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See Loan to
Aircraft Value Ratios.
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S-5
Equipment
Notes and the Aircraft
The 17 Aircraft to be financed pursuant to this Offering will
consist of 12 Boeing aircraft currently owned by Continental and
five new Boeing
737-924ER
aircraft. The 12 currently owned aircraft consist of three
Boeing
777-224ER
aircraft, two Boeing
757-224
aircraft, three Boeing
737-824
aircraft and four Boeing
737-724
aircraft. The five Boeing
737-924ER
Aircraft will be newly delivered from Boeing and will be
selected by Continental from among seven Boeing
737-924ER
aircraft scheduled for delivery from July to September, 2009.
See Description of the Aircraft and the
Appraisals The Appraisals for a description of
the seven Boeing
737-924ER
aircraft from which Continental will select the five aircraft of
such model that may be financed under this Offering. Set forth
below is certain information about the Equipment Notes expected
to be held in the Trust and the aircraft expected to secure such
Equipment Notes (assuming for purposes of the chart below that
the first five Boeing
737-924ER
aircraft of the seven Boeing
737-924ER
aircraft from which Continental may choose are financed
hereunder):
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Principal Amount
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Registration
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Manufacturers
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Delivery
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of Equipment
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Appraised
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Aircraft Type(1)
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Number
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Serial Number
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Month
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Notes
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Value(2)
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Boeing
777-224ER
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N77006
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29476
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December 1998
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$
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41,734,000
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$
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75,880,000
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Boeing
777-224ER
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N78009
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29479
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April 1999
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41,366,000
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75,210,000
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Boeing
777-224ER
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N78013
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29861
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September 1999
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43,478,000
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79,050,000
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Boeing
757-224
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N34131
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28971
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June 1998
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13,992,000
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25,440,000
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Boeing
757-224
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N33132
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29281
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June 1998
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13,262,000
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24,113,333
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Boeing
737-924ER
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N37437
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33532
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July 2009
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28,258,000
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53,800,000
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Boeing
737-924ER
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N78438
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33533
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July 2009
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28,258,000
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53,800,000
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Boeing
737-924ER
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N57439
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33534
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August 2009
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28,258,000
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53,800,000
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Boeing
737-924ER
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N45440
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33535
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August 2009
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28,258,000
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53,800,000
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Boeing
737-924ER
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N53441
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30131
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August 2009
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28,258,000
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53,800,000
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Boeing
737-824
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N26232
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28942
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June 1999
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14,834,000
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26,970,000
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Boeing
737-824
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N35236
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28801
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September 1999
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15,510,000
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28,200,000
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Boeing
737-824
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N14240
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28952
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October 1999
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15,510,000
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28,200,000
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Boeing
737-724
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N24729
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28945
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July 1999
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12,225,000
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22,226,667
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Boeing
737-724
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N16732
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28948
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August 1999
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11,913,000
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|
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21,660,000
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Boeing
737-724
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N14735
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28950
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September 1999
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12,181,000
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22,146,667
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Boeing
737-724
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N24736
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28803
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September 1999
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12,392,000
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22,530,000
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(1)
|
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The indicated registration number,
manufacturers serial number and delivery month for each
Boeing
737-924ER
aircraft reflect our current expectations, although these may
differ for the actual aircraft financed hereunder. The deadline
for purposes of financing an Aircraft pursuant to this Offering
is December 31, 2009. The financing of each currently-owned
Aircraft pursuant to this Offering is expected to be effected
after the existing security interest on such Aircraft has been
discharged, and the financing of each Boeing
737-924ER
Aircraft is expected to be effected at delivery of such Aircraft
by Boeing to Continental. The actual delivery date for any
Boeing
737-924ER
aircraft may be subject to delay or acceleration. See
Description of the Aircraft and the Appraisals
Timing of Financing the Aircraft. Continental has certain
rights to substitute other Boeing
737-924ER
aircraft if the scheduled delivery date of any of the seven
Boeing
737-924ER
aircraft eligible to be financed pursuant to this Offering is
delayed for more than 30 days after the month scheduled for
delivery or beyond the delivery deadline. See Description
of the Aircraft and the Appraisals Substitute
Aircraft.
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(2)
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The appraised value of each
Aircraft set forth above is the lesser of the average and median
values of such Aircraft as appraised by three independent
appraisal and consulting firms. In the case of the Boeing
737-924ER
Aircraft, such appraisals indicate appraised base value,
projected as of the scheduled delivery month of the applicable
Aircraft, and in the case of the other Aircraft, such appraisals
indicate appraised base value, adjusted for the maintenance
status of the applicable Aircraft. These appraisals are based
upon varying assumptions and methodologies. An appraisal is only
an estimate of value and should not be relied upon as a measure
of realizable value. See Risk Factors Risk
Factors Relating to the Certificates and the
Offering The Appraisals Are Only Estimates of
Aircraft Value. The appraised value of each other Boeing
737-924ER
aircraft that Continental may choose to finance pursuant to this
Offering is higher than or equal to the appraised value of each
of the Aircraft of the same model listed above. See
Description of the Aircraft and the Appraisals
The Appraisals.
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S-6
Loan to
Aircraft Value Ratios
The following table sets forth loan to Aircraft value ratios
(LTVs) for the Certificates as of January 8,
2010, the first Regular Distribution Date, and each Regular
Distribution Date thereafter. The table should not be considered
a forecast or prediction of expected or likely LTVs but simply a
mathematical calculation based on one set of assumptions. See
Risk Factors Risk Factors Relating to the
Certificates and the Offering The Appraisals Are
Only Estimates of Aircraft Value.
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|
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Assumed
|
|
|
|
|
Regular
|
|
Aggregate
|
|
|
|
|
Distribution Date
|
|
Aircraft Value(1)
|
|
Outstanding Balance(2)
|
|
LTV(3)
|
|
January 8, 2010
|
|
$
|
706,843,478
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|
|
$
|
381,809,938
|
|
|
|
54.0
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%
|
July 8, 2010
|
|
|
693,060,289
|
|
|
|
373,935,209
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|
|
|
54.0
|
|
January 8, 2011
|
|
|
679,277,101
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|
|
|
366,060,480
|
|
|
|
53.9
|
|
July 8, 2011
|
|
|
665,493,912
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|
|
|
355,419,244
|
|
|
|
53.4
|
|
January 8, 2012
|
|
|
651,710,723
|
|
|
|
344,775,758
|
|
|
|
52.9
|
|
July 8, 2012
|
|
|
637,927,535
|
|
|
|
334,132,272
|
|
|
|
52.4
|
|
January 8, 2013
|
|
|
624,144,346
|
|
|
|
323,488,785
|
|
|
|
51.8
|
|
July 8, 2013
|
|
|
610,361,158
|
|
|
|
312,845,299
|
|
|
|
51.3
|
|
January 8, 2014
|
|
|
596,208,168
|
|
|
|
301,998,423
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|
|
|
50.7
|
|
July 8, 2014
|
|
|
581,501,310
|
|
|
|
290,846,918
|
|
|
|
50.0
|
|
January 8, 2015
|
|
|
564,665,928
|
|
|
|
278,524,726
|
|
|
|
49.3
|
|
July 8, 2015
|
|
|
547,633,343
|
|
|
|
266,094,072
|
|
|
|
48.6
|
|
January 8, 2016
|
|
|
530,600,758
|
|
|
|
253,663,418
|
|
|
|
47.8
|
|
July 8, 2016
|
|
|
513,568,173
|
|
|
|
0
|
|
|
|
0.0
|
|
|
|
|
(1)
|
|
We have assumed that all Aircraft
will be financed under this Offering prior to January 8,
2010, and that the initial appraised value of each Aircraft,
determined as described under Equipment Notes
and the Aircraft, declines by approximately 3% per year
for the first 15 years after the year of delivery of such
Aircraft and 4% per year for any subsequent year prior to the
final expected Regular Distribution Date. Other rates or methods
of depreciation may result in materially different LTVs. We
cannot assure you that the depreciation rate and method used for
purposes of the table will occur or predict the actual future
value of any Aircraft. See Risk Factors Risk
Factors Relating to the Certificates and the
Offering The Appraisals Are Only Estimates of
Aircraft Value.
|
|
(2)
|
|
In calculating the outstanding
balances of the Certificates, we have assumed that the Trust
will acquire the Equipment Notes for all Aircraft. Outstanding
balances as of each Regular Distribution Date are shown after
giving effect to distributions expected to be made on such
distribution date.
|
|
(3)
|
|
The LTVs were obtained for each
Regular Distribution Date by dividing (i) the expected
outstanding balance of the Certificates after giving effect to
the distributions expected to be made on such distribution date,
by (ii) the assumed value of all of the Aircraft on such
date based on the assumptions described above. For purposes of
these calculations, it has been assumed that the first five
Boeing
737-924ER
aircraft of the seven Boeing
737-924ER
aircraft from which Continental may choose are financed
hereunder. The outstanding balances and LTVs will change if the
Trust does not acquire Equipment Notes with respect to all the
Aircraft. The LTVs will change if the Trust acquires Equipment
Notes with respect to the other Boeing
737-924ER
aircraft that Continental may choose.
|
S-7
Cash Flow
Structure
Set forth below is a diagram illustrating the structure for the
offering of the Certificates and certain cash flows.
|
|
|
(1)
|
|
Each Aircraft will be subject to a
separate Indenture.
|
|
|
|
(2)
|
|
The Liquidity Facility will be
sufficient to cover three consecutive semiannual interest
payments with respect to the Certificates, except that the
Liquidity Facility will not cover interest on the Deposits.
|
|
|
|
(3)
|
|
The proceeds of the offering of the
Certificates will initially be held in escrow and deposited with
the Depositary, pending financing of each Aircraft pursuant to
this Offering. The Depositary will hold such funds as
interest-bearing Deposits. The Trust will withdraw funds from
the Deposits to purchase Equipment Notes from time to time as
each Aircraft is financed. The scheduled payments of interest on
the Equipment Notes and on the Deposits, taken together, will be
sufficient to pay accrued interest on the outstanding
Certificates. If any funds remain as Deposits at the Delivery
Period Termination Date, such funds will be withdrawn by the
Escrow Agent and distributed to the holders of the Certificates,
together with accrued and unpaid interest thereon. No interest
will accrue with respect to the Deposits after they have been
fully withdrawn.
|
S-8
The
Offering
|
|
|
Certificates Offered |
|
Class A Pass Through Certificates, Series 2009-1, which will
represent fractional undivided interests in the Trust. |
|
Use of Proceeds |
|
The proceeds from the sale of the Certificates will initially be
held in escrow and deposited with the Depositary, pending
financing of each Aircraft under this Offering. The Trust will
withdraw funds from the escrow to acquire Equipment Notes as
these Aircraft are financed. The Equipment Notes will be issued
to generate cash for Continentals general corporate
purposes from 12 Boeing aircraft currently owned by Continental
and to finance the purchase by Continental of five new Boeing
aircraft. |
|
Subordination Agent, Trustee, Paying Agent and Loan Trustee
|
|
Wilmington Trust Company. |
|
Escrow Agent |
|
Wells Fargo Bank Northwest, National Association. |
|
Depositary |
|
The Bank of New York Mellon. |
|
Liquidity Provider |
|
Goldman Sachs Bank USA. The Liquidity Providers payment
obligations will be guaranteed by The Goldman Sachs Group, Inc. |
|
Trust Property |
|
The property of the Trust will include: |
|
|
|
Equipment Notes acquired by the Trust.
|
|
|
|
All monies receivable under the Liquidity Facility.
|
|
|
|
Funds from time to time deposited with the Trustee
in accounts relating to the Trust, including payments made by
Continental on the Equipment Notes held in the Trust.
|
|
Regular Distribution Dates |
|
January 8 and July 8, commencing on January 8, 2010. |
|
Record Dates |
|
The fifteenth day preceding the related Distribution Date. |
|
Distributions |
|
The Trustee will distribute all payments of principal, premium
(if any) and interest received on the Equipment Notes held in
the Trust to the holders of the Certificates, subject to prior
payment of certain amounts then due to the Liquidity Provider or
the Trustee. |
|
|
|
Scheduled payments of principal and interest made on the
Equipment Notes will be distributed on the applicable Regular
Distribution Dates. |
|
|
|
Payments of principal, premium (if any) and interest made on the
Equipment Notes resulting from any early redemption of such
Equipment Notes will be distributed on a special distribution
date after not less than 15 days notice from the
Trustee to Certificateholders. |
|
Control of Loan Trustee |
|
The holders of at least a majority of the outstanding principal
amount of Equipment Notes issued under each Indenture will be
entitled to direct the Loan Trustee under such Indenture in
taking action as long as no Indenture Default is continuing
thereunder. If an Indenture Default is continuing, subject to
certain conditions, the Controlling Party will
direct the Loan Trustee under such Indenture (including in
exercising remedies, such as accelerating such Equipment Notes
or foreclosing the lien on the Aircraft securing such Equipment
Notes). |
S-9
|
|
|
|
|
The Controlling Party will be: |
|
|
|
The Trustee.
|
|
|
|
Under certain circumstances, and notwithstanding the
foregoing, the Liquidity Provider.
|
|
|
|
In exercising remedies during the nine months after the earlier
of (a) the acceleration of the Equipment Notes issued
pursuant to any Indenture or (b) the bankruptcy of
Continental, the Equipment Notes and the Aircraft subject to the
lien of such Indenture may not be sold for less than certain
specified minimums. |
|
Liquidity Facility |
|
Under the Liquidity Facility, the Liquidity Provider will, if
necessary, make advances in an aggregate amount sufficient to
pay interest on the Certificates on up to three successive
semiannual Regular Distribution Dates at the applicable interest
rate. Drawings under the Liquidity Facility cannot be used to
pay any amount in respect of the Certificates other than
interest and will not cover interest payable on amounts held in
escrow as Deposits with the Depositary. |
|
|
|
Upon each drawing under the Liquidity Facility to pay interest
on the Certificates, the Subordination Agent will reimburse the
Liquidity Provider for the amount of such drawing. Such
reimbursement obligation and all interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity
Facility and certain other agreements will rank senior to the
Certificates in right of payment. |
|
Escrowed Funds |
|
Funds in escrow for the Certificateholders will be held by the
Depositary as Deposits relating to the Trust. The Trustee may
withdraw these funds from time to time to purchase Equipment
Notes prior to the deadline established for purposes of this
Offering. On each Regular Distribution Date, the Depositary will
pay interest accrued on the Deposits at a rate per annum equal
to the interest rate applicable to the Certificates. The
Deposits cannot be used to pay any other amount in respect of
the Certificates. |
|
Unused Escrowed Funds |
|
All of the Deposits held in escrow may not be used to purchase
Equipment Notes by the deadline established for purposes of this
Offering. This may occur because of delays in the financing of
Aircraft or other reasons. See Description of the
Certificates Obligation to Purchase Equipment
Notes. If any funds remain as Deposits after such
deadline, the funds held as Deposits will be withdrawn by the
Escrow Agent and distributed, with accrued and unpaid interest,
to the Certificateholders after at least 15 days
prior written notice. See Description of the Deposit
Agreement Unused Deposits. |
|
Obligation to Purchase Equipment Notes
|
|
The Trustee will be obligated to purchase the Equipment Notes
issued with respect to each Aircraft pursuant to the Note
Purchase Agreement. Continental will enter into a secured debt
financing with respect to each Aircraft pursuant to financing
agreements substantially in the forms attached to the Note
Purchase Agreement. The terms of such financing agreements must
not vary the Required Terms set forth in the Note Purchase
Agreement. In addition, Continental must certify to the Trustee
that any substantive modifications do not materially and
adversely affect the Certificateholders. Continental must also
obtain |
S-10
|
|
|
|
|
written confirmation from each Rating Agency that the use of
financing agreements modified in any material respect from the
forms attached to the Note Purchase Agreement will not result in
a withdrawal, suspension or downgrading of the rating of the
Certificates. The Trustee will not be obligated to purchase
Equipment Notes if, at the time of issuance, Continental is in
bankruptcy or certain other specified events have occurred. See
Description of the Certificates Obligation to
Purchase Equipment Notes. |
|
Issuances of Additional Class of Certificates
|
|
After the Delivery Period Termination Date, an additional single
class of pass through certificates of a separate pass through
trust may be issued from time to time. These pass through
certificates will evidence fractional undivided ownership
interests in a new series of subordinated equipment notes with
respect to some or all of the Aircraft. The holders of any such
additional pass through certificates will have the right to
purchase all of the Certificates under certain circumstances
after a bankruptcy of Continental at the outstanding principal
balance of the Certificates plus accrued and unpaid interest and
other amounts due to Certificateholders, but without a premium.
Consummation of any such issuance of additional pass through
certificates will be subject to satisfaction of certain
conditions, including receipt of confirmation from the Rating
Agencies that it will not result in a withdrawal, suspension or
downgrading of the Certificates. See Possible Issuance of
Additional Junior Certificates. |
|
Equipment Notes |
|
|
|
(a) Issuer |
|
Continental. |
|
(b) Interest |
|
The Equipment Notes will accrue interest at the rate per annum
for the Certificates set forth on the cover page of this
Prospectus Supplement. Interest will be payable on January 8 and
July 8 of each year, commencing on the first such date after
issuance of such Equipment Notes. Interest is calculated on the
basis of a
360-day year
consisting of twelve
30-day
months. |
|
|
|
(c) Principal |
|
Principal payments on the Equipment Notes are scheduled on
January 8 and July 8 in certain years, commencing on
January 8, 2010. |
|
|
|
(d) Redemption |
|
Aircraft Event of Loss. If an Event of Loss occurs with
respect to an Aircraft, all of the Equipment Notes issued with
respect to such Aircraft will be redeemed, unless Continental
replaces such Aircraft under the related financing agreements.
The redemption price in such case will be the unpaid principal
amount of such Equipment Notes, together with accrued interest,
but without any premium. |
|
|
|
Optional Redemption. Continental may elect to redeem all
of the Equipment Notes issued with respect to an Aircraft prior
to maturity, provided that all outstanding Equipment Notes with
respect to all other Aircraft are simultaneously redeemed. The
redemption price in such case will be the unpaid principal
amount of such Equipment Notes, together with accrued interest
and Make-Whole Premium. |
|
(e) Security |
|
The Equipment Notes issued with respect to each Aircraft will be
secured by a security interest in such Aircraft. |
S-11
|
|
|
(f) Cross-collateralization |
|
The Equipment Notes held in the Trust will be
cross-collateralized. This means that any proceeds from the
exercise of remedies with respect to an Aircraft will be
available to cover shortfalls then due under Equipment Notes
issued with respect to the other Aircraft. In the absence of any
such shortfall, excess proceeds will be held by the relevant
Loan Trustee as additional collateral for such other Equipment
Notes. |
|
(g) Cross-default |
|
There will be cross-default provisions in the Indentures. This
means that if the Equipment Notes issued with respect to one
Aircraft are in default, the Equipment Notes issued with respect
to the remaining Aircraft will also be in default, and remedies
will be exercisable with respect to all Aircraft. |
|
(h) Section 1110 Protection |
|
Continentals outside counsel will provide its opinion to
the Trustee that the benefits of Section 1110 of the U.S.
Bankruptcy Code will be available with respect to the Equipment
Notes. |
|
Certain Federal Income Tax Consequences
|
|
Each person acquiring an interest in Certificates generally
should report on its federal income tax return its pro rata
share of income from the Deposits and income from the Equipment
Notes and other property held by the Trust. See Certain
U.S. Federal Income Tax Consequences. |
|
Certain ERISA Considerations |
|
Each person who acquires a Certificate will be deemed to have
represented that either: (a) no employee benefit plan
assets have been used to purchase or hold such Certificate or
(b) the purchase and holding of such Certificate are exempt
from the prohibited transaction restrictions of ERISA and the
Code pursuant to one or more prohibited transaction statutory or
administrative exemptions. See Certain ERISA
Considerations. |
|
|
|
Rating of the Certificates |
|
It is a condition to the issuance of the Certificates that they
be rated not less than Baa2 by Moodys and A- by
Standard & Poors. |
|
|
|
|
|
A rating is not a recommendation to purchase, hold or sell
Certificates, since such rating does not address market price or
suitability for a particular investor. There can be no assurance
that such ratings will not be lowered, suspended or withdrawn by
a Rating Agency after the Certificates have been issued. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard &
|
|
|
|
|
Moodys
|
|
Poors
|
|
Threshold Rating for the Depositary
|
|
Short Term
|
|
|
P-1
|
|
|
|
A-1+
|
|
|
|
|
Depositary Rating |
|
The Depositary meets the Depositary Threshold Rating requirement. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard &
|
|
|
|
|
Moodys
|
|
Poors
|
|
Threshold Rating for the Liquidity Provider
|
|
Short Term
|
|
|
P-1
|
|
|
|
A-1
|
|
|
|
|
Liquidity Provider Rating |
|
The Goldman Sachs Group, Inc., an affiliate of the Liquidity
Provider, meets the Liquidity Threshold Rating requirement and
will guarantee the payment obligations of the Liquidity Provider
under the Liquidity Facility. |
S-12
SUMMARY
FINANCIAL AND OPERATING DATA
The following tables summarize certain consolidated financial
data and certain operating data with respect to Continental. The
following selected consolidated financial data for the three
months ended March 31, 2009 and 2008 are derived from the
consolidated financial statements of Continental including the
notes thereto included in Continentals Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009, and incorporated by
reference in this Prospectus Supplement and should be read in
conjunction with those financial statements. The following
selected consolidated financial data for the years ended
December 31, 2008, 2007 and 2006 are derived from the
audited consolidated financial statements of Continental
including the notes thereto included in Continentals
Current Report on
Form 8-K
dated April 24, 2009, and incorporated by reference in this
Prospectus Supplement and should be read in conjunction with
those financial statements. The following selected consolidated
financial data for the years ended December 31, 2005 and
2004 are derived from the selected financial data contained in
Continentals Current Report on
Form 8-K
dated April 24, 2009, and incorporated by reference in this
Prospectus Supplement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
Ended March 31,
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In millions except per share data and ratios)
|
|
|
Statement of Operations Data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
$
|
2,962
|
|
|
$
|
3,570
|
|
|
$
|
15,241
|
|
|
$
|
14,232
|
|
|
$
|
13,128
|
|
|
$
|
11,208
|
|
|
$
|
9,899
|
|
Operating expenses
|
|
|
3,017
|
|
|
|
3,636
|
|
|
|
15,555
|
|
|
|
13,545
|
|
|
|
12,660
|
|
|
|
11,247
|
|
|
|
10,137
|
|
Operating income (loss)
|
|
|
(55
|
)
|
|
|
(66
|
)
|
|
|
(314
|
)
|
|
|
687
|
|
|
|
468
|
|
|
|
(39
|
)
|
|
|
(238
|
)
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
|
(136
|
)
|
|
|
(127
|
)
|
|
|
(586
|
)
|
|
|
439
|
|
|
|
361
|
|
|
|
(75
|
)
|
|
|
(393
|
)
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(136
|
)
|
|
|
(82
|
)
|
|
|
(586
|
)
|
|
|
439
|
|
|
|
335
|
|
|
|
(75
|
)
|
|
|
(393
|
)
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
$
|
(1.10
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(5.54
|
)
|
|
$
|
4.53
|
|
|
$
|
4.05
|
|
|
$
|
(1.06
|
)
|
|
$
|
(5.96
|
)
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1.10
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(5.54
|
)
|
|
$
|
4.53
|
|
|
$
|
3.76
|
|
|
$
|
(1.06
|
)
|
|
$
|
(5.96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
$
|
(1.10
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(5.54
|
)
|
|
$
|
4.05
|
|
|
$
|
3.51
|
|
|
$
|
(1.08
|
)
|
|
$
|
(6.02
|
)
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1.10
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(5.54
|
)
|
|
$
|
4.05
|
|
|
$
|
3.28
|
|
|
$
|
(1.08
|
)
|
|
$
|
(6.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Earnings to Fixed Charges(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.42
|
|
|
|
1.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-13
|
|
|
(1)
|
|
Includes the following special
income (expense) items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
Ended March 31,
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In millions)
|
|
|
Operating (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension settlement/curtailment charges
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(52
|
)
|
|
$
|
(31
|
)
|
|
$
|
(59
|
)
|
|
$
|
(83
|
)
|
|
$
|
|
|
Aircraft-related charges, net of gains on sales of aircraft
|
|
|
(4
|
)
|
|
|
8
|
|
|
|
(40
|
)
|
|
|
22
|
|
|
|
18
|
|
|
|
16
|
|
|
|
(87
|
)
|
Severance
|
|
|
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Route impairment and other
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
|
|
(4
|
)
|
|
|
14
|
|
|
|
|
|
|
|
(52
|
)
|
Nonoperating (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sale of investments
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
37
|
|
|
|
92
|
|
|
|
204
|
|
|
|
|
|
Loss on fuel hedge contracts with Lehman Brothers
|
|
|
|
|
|
|
|
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-down of auction rate securities, net of put right received
|
|
|
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax credit (expense) related to NOL utilization
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
(114
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
For purposes of calculating this
ratio, earnings consist of income before income taxes and
cumulative effect of changes in accounting principles adjusted
for undistributed income of companies in which Continental has a
minority equity interest plus interest expense (net of
capitalized interest), the portion of rental expense
representative of interest expense and amortization of
previously capitalized interest. Fixed charges consist of
interest expenses, the portion of rental expense representative
of interest expense, the amount amortized for debt discount,
premium and issuance expense and interest previously
capitalized. For the three months ended March 31, 2009 and
2008, and the years ended December 31, 2008, 2005 and 2004,
earnings were inadequate to cover fixed charges and the coverage
deficiency was $135 million, $131 million,
$702 million, $109 million and $496 million,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
March 31,
|
|
As of December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
|
(In millions)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrestricted cash, cash equivalents and short-term investments
|
|
$
|
2,648
|
|
|
$
|
2,643
|
|
|
$
|
2,803
|
|
|
$
|
2,484
|
|
|
$
|
1,957
|
|
|
$
|
1,458
|
|
Total assets
|
|
|
12,772
|
|
|
|
12,686
|
|
|
|
12,105
|
|
|
|
11,308
|
|
|
|
10,529
|
|
|
|
10,511
|
|
Long-term debt and capital lease obligations
|
|
|
5,360
|
|
|
|
5,353
|
|
|
|
4,337
|
|
|
|
4,820
|
|
|
|
5,010
|
|
|
|
5,113
|
|
Stockholders equity
|
|
|
153
|
|
|
|
123
|
|
|
|
1,569
|
|
|
|
386
|
|
|
|
273
|
|
|
|
209
|
|
S-14
Selected
Operating Data
Continental has two reportable segments: mainline and regional.
The mainline segment consists of flights to cities using larger
jets while the regional segment currently consists of flights
with a capacity of 78 or fewer seats. As of March 31, 2009,
the regional segment was operated by ExpressJet Airlines,
Chautauqua Airlines, CommutAir and Colgan Airlines under
capacity purchase agreements with Continental.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
Mainline Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passengers (thousands)(1)
|
|
|
10,562
|
|
|
|
12,197
|
|
|
|
48,682
|
|
|
|
50,960
|
|
|
|
48,788
|
|
|
|
44,939
|
|
|
|
42,743
|
|
Revenue passenger miles (millions)(2)
|
|
|
17,690
|
|
|
|
19,923
|
|
|
|
82,806
|
|
|
|
84,309
|
|
|
|
79,192
|
|
|
|
71,261
|
|
|
|
65,734
|
|
Available seat miles (millions)(3)
|
|
|
23,352
|
|
|
|
25,278
|
|
|
|
102,527
|
|
|
|
103,139
|
|
|
|
97,667
|
|
|
|
89,647
|
|
|
|
84,672
|
|
Cargo ton miles (millions)
|
|
|
200
|
|
|
|
261
|
|
|
|
1,005
|
|
|
|
1,037
|
|
|
|
1,075
|
|
|
|
1,018
|
|
|
|
1,026
|
|
Passenger load factor(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
|
|
75.8
|
%
|
|
|
78.8
|
%
|
|
|
80.8
|
%
|
|
|
81.7
|
%
|
|
|
81.1
|
%
|
|
|
79.5
|
%
|
|
|
77.6
|
%
|
Domestic
|
|
|
79.7
|
%
|
|
|
81.9
|
%
|
|
|
83.3
|
%
|
|
|
83.9
|
%
|
|
|
83.6
|
%
|
|
|
81.2
|
%
|
|
|
77.4
|
%
|
International
|
|
|
72.1
|
%
|
|
|
75.6
|
%
|
|
|
78.2
|
%
|
|
|
79.4
|
%
|
|
|
78.2
|
%
|
|
|
77.5
|
%
|
|
|
77.9
|
%
|
Passenger revenue per available seat mile (cents)
|
|
|
9.41
|
|
|
|
10.60
|
|
|
|
11.10
|
|
|
|
10.47
|
|
|
|
9.96
|
|
|
|
9.32
|
|
|
|
8.82
|
|
Total revenue per available seat mile (cents)
|
|
|
10.83
|
|
|
|
11.93
|
|
|
|
12.51
|
|
|
|
11.65
|
|
|
|
11.17
|
|
|
|
10.46
|
|
|
|
9.83
|
|
Average yield per revenue passenger mile (cents)(5)
|
|
|
12.43
|
|
|
|
13.45
|
|
|
|
13.75
|
|
|
|
12.80
|
|
|
|
12.29
|
|
|
|
11.73
|
|
|
|
11.37
|
|
Average fare per revenue passenger
|
|
$
|
209.94
|
|
|
$
|
221.87
|
|
|
$
|
232.26
|
|
|
$
|
214.06
|
|
|
$
|
201.81
|
|
|
$
|
188.67
|
|
|
$
|
177.90
|
|
Cost per available seat mile, including special charges (cents)
|
|
|
10.56
|
|
|
|
11.79
|
|
|
|
12.44
|
|
|
|
10.83
|
|
|
|
10.56
|
|
|
|
10.22
|
|
|
|
9.84
|
|
Special charges (credits) per available seat mile (cents)
|
|
|
0.02
|
|
|
|
(0.03
|
)
|
|
|
0.15
|
|
|
|
0.01
|
|
|
|
0.03
|
|
|
|
0.07
|
|
|
|
0.16
|
|
Average price per gallon of fuel, including fuel taxes
|
|
$
|
1.83
|
|
|
$
|
2.80
|
|
|
$
|
3.27
|
|
|
$
|
2.18
|
|
|
$
|
2.06
|
|
|
$
|
1.78
|
|
|
$
|
1.19
|
|
Fuel gallons consumed (millions)
|
|
|
333
|
|
|
|
375
|
|
|
|
1,498
|
|
|
|
1,542
|
|
|
|
1,471
|
|
|
|
1,376
|
|
|
|
1,333
|
|
Aircraft in fleet at end of period(6)
|
|
|
354
|
|
|
|
372
|
|
|
|
350
|
|
|
|
365
|
|
|
|
366
|
|
|
|
356
|
|
|
|
349
|
|
Average length of aircraft flight (miles)
|
|
|
1,502
|
|
|
|
1,457
|
|
|
|
1,494
|
|
|
|
1,450
|
|
|
|
1,431
|
|
|
|
1,388
|
|
|
|
1,325
|
|
Average daily utilization of each aircraft (hours)(7)
|
|
|
10:22
|
|
|
|
11:11
|
|
|
|
11:06
|
|
|
|
11:34
|
|
|
|
11:07
|
|
|
|
10:31
|
|
|
|
9:55
|
|
Regional Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passengers (thousands)(1)
|
|
|
3,846
|
|
|
|
4.243
|
|
|
|
18,010
|
|
|
|
17,970
|
|
|
|
18,331
|
|
|
|
16,076
|
|
|
|
13,739
|
|
Revenue passenger miles (millions)(2)
|
|
|
2,100
|
|
|
|
2,357
|
|
|
|
9,880
|
|
|
|
9,856
|
|
|
|
10,325
|
|
|
|
8,938
|
|
|
|
7,417
|
|
Available seat miles (millions)(3)
|
|
|
2,971
|
|
|
|
3,098
|
|
|
|
12,984
|
|
|
|
12,599
|
|
|
|
13,251
|
|
|
|
11,973
|
|
|
|
10,410
|
|
Passenger load factor(4)
|
|
|
70.7
|
%
|
|
|
76.1
|
%
|
|
|
76.1
|
%
|
|
|
78.2
|
%
|
|
|
77.9
|
%
|
|
|
74.7
|
%
|
|
|
71.3
|
%
|
Passenger revenue per available seat mile (cents)
|
|
|
14.11
|
|
|
|
17.54
|
|
|
|
18.14
|
|
|
|
17.47
|
|
|
|
17.15
|
|
|
|
15.67
|
|
|
|
15.09
|
|
Average yield per revenue passenger mile (cents)(5)
|
|
|
19.96
|
|
|
|
23.05
|
|
|
|
23.83
|
|
|
|
22.33
|
|
|
|
22.01
|
|
|
|
20.99
|
|
|
|
21.18
|
|
Aircraft in fleet at end of period(6)
|
|
|
280
|
|
|
|
269
|
|
|
|
282
|
|
|
|
263
|
|
|
|
282
|
|
|
|
266
|
|
|
|
245
|
|
Consolidated Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passengers (thousands)(1)
|
|
|
14,408
|
|
|
|
16,440
|
|
|
|
66,692
|
|
|
|
68,930
|
|
|
|
67,119
|
|
|
|
61,015
|
|
|
|
56,482
|
|
Revenue passenger miles (millions)(2)
|
|
|
19,790
|
|
|
|
22,280
|
|
|
|
92,686
|
|
|
|
94,165
|
|
|
|
89,517
|
|
|
|
80,199
|
|
|
|
73,151
|
|
Available seat miles (millions)(3)
|
|
|
26,323
|
|
|
|
28,376
|
|
|
|
115,511
|
|
|
|
115,738
|
|
|
|
110,918
|
|
|
|
101,620
|
|
|
|
95,082
|
|
Passenger load factor(4)
|
|
|
75.2
|
%
|
|
|
78.5
|
%
|
|
|
80.2
|
%
|
|
|
81.4
|
%
|
|
|
80.7
|
%
|
|
|
78.9
|
%
|
|
|
76.9
|
%
|
Passenger revenue per available seat mile (cents)
|
|
|
9.94
|
|
|
|
11.36
|
|
|
|
11.89
|
|
|
|
11.23
|
|
|
|
10.82
|
|
|
|
10.07
|
|
|
|
9.51
|
|
Average yield per revenue passenger mile (cents)(5)
|
|
|
13.23
|
|
|
|
14.47
|
|
|
|
14.82
|
|
|
|
13.80
|
|
|
|
13.41
|
|
|
|
12.76
|
|
|
|
12.36
|
|
|
|
|
(1)
|
|
The number of revenue passengers
measured by each flight segment flown.
|
|
(2)
|
|
The number of scheduled miles flown
by revenue passengers.
|
|
(3)
|
|
The number of seats available for
passengers multiplied by the number of scheduled miles those
seats are flown.
|
|
(4)
|
|
Revenue passenger miles divided by
available seat miles.
|
|
(5)
|
|
The average passenger revenue
received for each revenue passenger mile flown.
|
|
(6)
|
|
Excludes aircraft that were removed
from service. Regional aircraft include aircraft operated by all
carriers under capacity purchase agreements with Continental,
but exclude any aircraft operated by ExpressJet Airlines outside
the scope of the ExpressJet capacity purchase agreement with
Continental.
|
|
(7)
|
|
The average number of hours per day
that an aircraft flown in revenue service is operated (from gate
departure to gate arrival).
|
S-15
RISK
FACTORS
Risk
Factors Relating to the Company
Fuel
prices or disruptions in fuel supplies could have a material
adverse effect on us
Expenditures for fuel and related taxes represent one of the
largest costs of operating our business. These costs include
fuel costs on flights flown for us under capacity purchase
agreements. Our operations depend on the availability of jet
fuel supplies, and our results are significantly impacted by
changes in jet fuel prices, which have been extremely volatile
in the last 18 months. Jet fuel prices decreased
precipitously in the last six months of 2008 after increasing
significantly in 2007 and achieving record levels in mid-2008.
Although we experienced some success in raising ticket prices
and adding or increasing other fees during part of 2008, we were
unable to increase our revenue sufficiently to keep pace with
the escalating fuel prices and suffered a substantial loss in
2008. If fuel prices rise significantly from their current
levels, we may be unable to increase fares or other fees
sufficiently in the current financial environment to offset
fully our increased fuel costs.
We routinely hedge a portion of our future fuel requirements to
protect against rising fuel costs. However, there can be no
assurance that, at any given point in time, our hedge contracts
will provide any particular level of protection against
increased fuel costs or that our counterparties will be able to
perform under our hedge contracts, such as in the case of a
counterpartys bankruptcy. Additionally, a deterioration in
our financial condition could negatively affect our ability to
enter into new hedge contracts in the future.
Significant declines in fuel prices (such as those experienced
in the last six months of 2008) may increase the costs
associated with our fuel hedging arrangements to the extent we
have entered into swaps or collars. Swaps and the put option
sold as part of a collar obligate us to make payments to the
counterparty upon settlement of the contracts if the price of
the commodity hedged falls below the agreed-upon amount.
Declining crude oil prices have resulted in us being required to
post significant amounts of collateral to cover potential
amounts owed with respect to contracts that have not yet
settled. Additionally, lower fuel prices may result in increased
industry capacity and lower fares, especially to the extent that
reduced fuel costs justify increased utilization by airlines of
less fuel efficient aircraft that are unprofitable during
periods of higher fuel prices.
Fuel prices could increase dramatically and supplies could be
disrupted as a result of international political and economic
circumstances, such as increasing international demand resulting
from a global economic recovery, conflicts or instability in the
Middle East or other oil producing regions and diplomatic
tensions between the United States and oil producing nations, as
well as OPEC production decisions, disruptions of oil imports,
environmental concerns, weather, refinery outages or maintenance
and other unpredictable events.
Further volatility in jet fuel prices or disruptions in fuel
supplies, whether as a result of natural disasters or otherwise,
could have a material adverse effect on our results of
operations, financial condition and liquidity.
We
have decided to change our global airline alliance, which could
involve significant transition and integration
risks
During 2008, we entered into framework agreements with United
Air Lines, Inc. (United), Lufthansa and Air Canada,
each a member of Star Alliance, pursuant to which we are winding
down and exiting our participation in our current alliance,
SkyTeam, and plan to join United, Lufthansa and Air Canada (and
other member airlines) in Star Alliance. This change from
SkyTeam to Star Alliance could involve significant transition
and integration risks, both because we are required to end our
participation in SkyTeam and wind down our existing SkyTeam
relationships prior to our being able to participate in Star
Alliance and because we may incur costs
and/or a
loss of revenue (or a delay in anticipated increased revenue
from the new alliance) in connection with these changes. The
significant transition and integration risks include:
|
|
|
|
|
our inability to terminate our existing agreements with
individual SkyTeam members and to commence participation in Star
Alliance in the transition period we have anticipated;
|
S-16
|
|
|
|
|
significant revenue dilution as we wind down our participation
in SkyTeam
and/or
insufficient or delay in receipt of revenue from our
participation in Star Alliance, including an inability to
maintain our key customer and business relationships as we
transition to Star Alliance;
|
|
|
|
our incurrence, as a result of the wind down of our SkyTeam
relationships, of costs in excess of our expectations
and/or costs
of an unanticipated nature, the amount and timing of which
cannot be estimated at this time, but which could be material
individually or in the aggregate;
|
|
|
|
an inability to join or a delay in joining Star Alliance due to
lack of applicable approvals or difficulty in satisfying
entrance requirements, including the requirement that we enter
into certain bilateral agreements with each member of Star
Alliance; and
|
|
|
|
difficulties integrating our technology processes with Star
Alliance members.
|
In addition, the full implementation of some of the arrangements
contemplated by our framework agreements requires the approval
of domestic and foreign regulatory agencies. These agencies may
deny us necessary approvals, delay certain approvals or, in
connection with granting any such approvals, impose
requirements, limitations or costs on us or on Star Alliance
members, or require us or them to divest slots, gates, routes or
other assets. Such actions may impair the value to us of
entering the alliance or make participation in the alliance by
us or them unattractive and, in certain cases, could prevent us
from consummating the transactions contemplated by the framework
agreements.
If any of these risks or costs materialize, they could have a
material adverse effect on our business, results of operations
and financial condition.
The
troubled global capital markets coupled with our high leverage
may affect our ability to satisfy our significant financing
needs or meet our obligations
As is the case with many of our principal competitors, we have a
high proportion of debt compared to our capital. We have a
significant amount of fixed obligations, including debt,
aircraft leases and financings, leases of airport property and
other facilities and pension funding obligations. At
March 31, 2009, we had approximately $5.9 billion of
long-term debt and capital lease obligations, including
$2.6 billion that will come due by the end of 2011.
In addition, we have substantial non-cancelable commitments for
capital expenditures, including the acquisition of new aircraft
and related spare engines. To meet these obligations, we must
access the global capital markets
and/or
achieve and sustain profitability. Due to the troubled global
capital markets, however, we may be unable to obtain financing
or otherwise access the capital markets on favorable terms.
Credit
rating downgrades could have a material adverse effect on our
liquidity
Reductions in our credit ratings may increase the cost and
reduce the availability of financing to us in the future. We do
not have any debt obligations that would be accelerated as a
result of a credit rating downgrade. However, we would have to
post additional collateral under our credit card processing
agreements with Chase Bank USA, N.A. (Chase) and
American Express and under our workers compensation
program if our debt rating falls below specified levels.
Failure
to meet our financial covenants would adversely affect our
liquidity
Our credit card processing agreement with Chase (the Chase
processing agreement) contains financial covenants which
require, among other things, that we post additional cash
collateral if we fail to maintain (1) a minimum level of
unrestricted cash, cash equivalents and short-term investments,
(2) a minimum ratio of unrestricted cash, cash equivalents
and short-term investments to current liabilities of 0.25 to 1.0
or (3) a minimum senior unsecured debt rating of at least
Caa3 and CCC− from Moodys and Standard &
Poors, respectively. If a covenant trigger under the Chase
processing agreement results in our posting additional
collateral under that agreement, we would also be required to
post additional collateral under our credit card processing
agreement with American Express.
S-17
The amount of additional cash collateral that we may be required
to post in the event of our failure to comply with the financial
covenants described above, which is based on our then-current
air traffic liability exposure (as defined in each agreement),
could be significant.
Depending on our unrestricted cash, cash equivalents and
short-term investments balance at the time, the posting of a
significant amount of cash collateral could cause our
unrestricted cash and short-term investments balance to fall
below the minimum balance of $1.0 billion required under
our $350 million secured term loan facility, resulting in a
default under that facility. The posting of such additional
collateral under these circumstances
and/or the
acceleration of amounts borrowed under our secured term loan
facility (or other remedies pursued by the lenders thereunder)
would likely have a material adverse effect on our financial
condition.
We are currently in compliance with all of the covenants under
these agreements.
Our
obligations for funding our defined benefit pension plans are
affected by factors beyond our control
We have defined benefit pension plans covering substantially all
of our U.S. employees other than employees of Chelsea Food
Services and CMI. The timing and amount of our funding
requirements under these plans depend upon a number of factors,
including labor negotiations and changes to pension plan
benefits as well as factors outside of our control, such as the
number of retiring employees, asset returns, interest rates and
changes in pension laws. Changes to these and other factors,
such as liquidity requirements, that can significantly increase
our funding requirements could have a material adverse effect on
our financial condition.
Delays
in scheduled aircraft deliveries may adversely affect our
international growth
Our future success depends, in part, on continuing our
profitable international growth. Because all of our long-range
aircraft are already fully utilized, we will need to acquire
additional long-range aircraft to continue our projected
international growth. Although we have contractual commitments
to purchase the long-range aircraft that we currently believe
will be necessary for our international growth, significant
delays in their deliveries have occurred, adversely affecting
our planned international growth. If significant delays in the
deliveries of these new aircraft continue to occur, we would
need to either further curtail our international growth or try
to make alternate arrangements to acquire aircraft, possibly on
less financially favorable terms, including higher ownership and
operating costs.
Labor
disruptions could adversely affect our operations
Although we enjoy generally good relations with our employees,
we can provide no assurance that we will be able to maintain
these good relations in the future or avoid labor disruptions,
including a strike. Many of our collective bargaining agreements
have amendable dates that began in December 2008, including
those with the unions representing our pilots and mechanics. We
are currently in talks with representatives of the applicable
unions. We cannot predict the outcome of these negotiations, and
any labor disruption, including a strike, that results in a
prolonged significant reduction in flights would have a material
adverse effect on our results of operations and financial
condition.
Our
labor costs may not be competitive
Labor costs constitute a significant percentage of our total
operating costs. All of the major
hub-and-spoke
carriers with whom we compete have achieved significant labor
cost reductions, whether in or out of bankruptcy. We believe
that our wages, salaries and benefits cost per available seat
mile, measured on a stage length adjusted basis, is higher than
that of many of our competitors. These higher labor costs may
adversely affect our ability to achieve and sustain
profitability while competing with other airlines that have
achieved lower relative labor costs. Additionally, we cannot
predict the outcome of our ongoing negotiations with our
unionized workgroups, although significant increases in the pay
and benefits resulting from new collective bargaining agreements
could have a material adverse effect on us.
S-18
If we
experience problems with certain of our third party regional
operators, our operations could be materially adversely
affected
All of our regional operations are conducted by third party
operators on our behalf, primarily under capacity purchase
agreements. Due to our reliance on third parties to provide
these essential services, we are subject to the risks of
disruptions to their operations, which may result from many of
the same risk factors disclosed in this Prospectus Supplement.
In addition, we may also experience disruption to our regional
operations if we terminate the capacity purchase agreement with
one or more of our current operators and transition the services
to another provider. As our regional segment provides revenue to
us directly and indirectly (by providing flow traffic to our
hubs), a significant disruption to our regional operations could
have a material adverse effect on our results of operations and
financial condition.
Interruptions
or disruptions in service at one of our hub airports could have
a material adverse effect on our operations
We operate principally through our hub operations at
metropolitan New Yorks Newark Liberty International
Airport, Houstons George Bush International Airport,
Clevelands Hopkins International Airport and Guams
A.B. Won Pat International Airport. Substantially all of our
flights either originate from or fly into one of these
locations, contributing to a large amount of origin and
destination traffic. A significant interruption or
disruption in service at one of our hubs resulting from air
traffic control delays, weather conditions or events, growth
constraints, relations with third party service providers,
failure of computer systems, labor relations, fuel supplies,
terrorist activities or otherwise could result in the
cancellation or delay of a significant portion of our flights
and, as a result, our business could be materially adversely
affected.
We
could experience adverse publicity and declining revenues as a
result of an accident involving our aircraft or the aircraft of
our regional carriers
Any accident involving an aircraft that we operate or an
aircraft that is operated under our brand by one of our regional
carriers could have a material adverse effect on us if such
accident created a public perception that our operations or
those of our regional carriers are less safe or reliable than
other airlines, resulting in passengers being reluctant to fly
on our aircraft or those of our regional carriers. In addition,
any such accident could expose us to significant tort liability.
Although we currently maintain liability insurance in amounts
and of the type we believe to be consistent with industry
practice to cover damages arising from any such accidents, and
our regional carriers carry similar insurance and generally
indemnify us for their operations on our behalf, if our
liability exceeds the applicable policy limits or the ability of
a carrier to indemnify us, we could incur substantial losses
from an accident.
A
significant failure or disruption of the computer systems on
which we rely could adversely affect our business
We depend heavily on computer systems and technology to operate
our business, such as flight operations systems, communications
systems, airport systems and reservations systems (including
continental.com and third party global distribution systems).
These systems could suffer substantial or repeated disruptions
due to events beyond our control, including natural disasters,
power failures, terrorist attacks, equipment or software
failures, computer viruses or hackers. Any such disruptions
could materially impair our flight and airport operations and
our ability to market our services, and could result in
increased costs, lost revenue and the loss or compromise of
important data. Although we have taken measures in an effort to
reduce the adverse effects of certain potential failures or
disruptions, if these steps are not adequate to prevent or
remedy the risks, our business may be materially adversely
affected.
Our
net operating loss carryforwards may be limited
At December 31, 2008, we had estimated net operating loss
carryforwards (NOLs) of $3.8 billion for
federal income tax purposes that expire beginning in 2009 and
continuing through 2028. Section 382 of the Internal
Revenue Code (Section 382) imposes limitations
on a corporations ability to utilize NOLs if it
experiences an
S-19
ownership change. In general terms, an ownership
change may result from transactions increasing the ownership of
certain stockholders in the stock of a corporation by more than
50 percentage points over a three-year period.
In the event of an ownership change, utilization of our NOLs
would be subject to an annual limitation under Section 382
determined by multiplying the value of our stock at the time of
the ownership change by the applicable long-term tax-exempt rate
(which is 5.40% for December 2008). Any unused annual limitation
may be carried over to later years.
For purposes of Section 382, increases in share holdings
by, or that result in a person becoming, a holder of 5% or more
of the outstanding shares of our common stock are aggregated for
purposes of determining whether an ownership change
has occurred. Because our common stock has been trading at low
market prices, the cost of acquiring a sufficient number of
shares of our common stock to become a holder of 5% or more of
the outstanding shares, and the cost of acquiring additional
shares by existing holders, has decreased significantly from
historical levels, increasing the possibility that we could
experience an ownership change. Although we cannot
currently predict whether or when such an ownership
change may occur, an ownership change as of
December 31, 2008 would have resulted in a
$119 million limit to our annual NOL utilization, before
consideration of any built-in gains. The imposition of this
limitation on our ability to use our NOLs to offset future
taxable income could cause us to pay U.S. federal income
taxes earlier than if such limitation were not in effect and
could cause such NOLs to expire unused, reducing or eliminating
the benefit of such NOLs. In addition, depending on the market
value of our common stock at the time of any such ownership
change, we may be required to recognize a significant non-cash
tax charge, the amount of which we cannot estimate at this time.
Risk
Factors Relating to the Airline Industry
The
global recession could continue to result in less demand for air
travel
The U.S. and global economies are currently in a recession.
The airline industry is highly cyclical, and the level of demand
for air travel is correlated to the strength of the
U.S. and global economies. For 2008, a year in which the
U.S. gross domestic product experienced its largest
contraction in 25 years, traffic for the seven largest
U.S. carriers, measured in miles flown by revenue
passengers, fell approximately 2% as compared to 2007, the first
such annual decline in five years. This decline in demand has
disproportionately reduced the volume of high yield traffic in
the premium cabins on international flights, as many business
and leisure travelers are either curtailing their international
travel or purchasing lower yield economy tickets. A prolonged
recession in the U.S. or global economies that continues to
contribute to the loss of business and leisure traffic,
particularly the loss of high yield international traffic in our
first class and BusinessFirst cabins, could have a material
adverse effect on our results of operations and financial
condition.
The
airline industry is highly competitive and susceptible to price
discounting
The U.S. airline industry is characterized by substantial
price competition, especially in domestic markets. Carriers use
discount fares to stimulate traffic during periods of slack
demand, or when they begin service to new cities or have excess
capacity, to generate cash flow and to establish, increase or
preserve market share. Some of our competitors have greater
financial resources (including a larger percentage or more
favorable fuel hedges against price increases)
and/or lower
cost structures than we do, some of which is the result of
bankruptcies
and/or
mergers. In recent years, the domestic market share held by
low-cost carriers has increased significantly and is expected to
continue to increase. The increased market presence of low-cost
carriers, which engage in substantial price discounting, has
diminished the ability of the network carriers to maintain
sufficient fare levels in domestic markets to achieve sustained
profitability. We cannot predict whether or for how long these
trends will continue.
In addition to price competition, airlines also compete for
market share by increasing the size of their route system and
the number of markets they serve. Several of our domestic
competitors have increased their international capacity,
including service to some destinations that we currently serve.
Additionally, the open skies agreement between the
United States and the European Union, which became effective on
March 30, 2008, is resulting in increased competition from
European and U.S. airlines in these international markets,
and may give rise to additional consolidation or better
integration opportunities among European carriers. The increased
competition in
S-20
these international markets, particularly to the extent our
competitors engage in price discounting, may have a material
adverse effect on our results of operations, financial condition
or liquidity.
Expanded
government regulation could further increase our operating costs
and restrict our ability to conduct our business
Airlines are subject to extensive regulatory and legal
compliance requirements that result in significant costs and can
adversely affect us. Additional laws, regulations, airport rates
and charges and growth constraints have been proposed from time
to time that could significantly increase the cost of airline
operations or reduce revenue. In addition, to address concerns
about airport congestion, the Federal Aviation Administration
(FAA) has designated certain airports, including New
York Liberty, Kennedy and LaGuardia as high density
traffic airports, and has imposed operating restrictions
at these three airports, including recent additional capacity
reductions at LaGuardia. In addition, the FAA has designated New
York Liberty and Kennedy as Level 3 Coordinated Airports
under the International Air Transport Association Worldwide
Scheduling Guidelines, which requires us to participate in
seasonal FAA procedures for capacity allocation and schedule
coordination for New York Liberty and to have slots to operate
at that airport. Although we do not believe that these current
operating restrictions will have a material adverse effect on
our operations at New York Liberty, we cannot predict the impact
of future capacity constraints or allocations or other
restrictions on our operations that might be imposed by the FAA,
Congress or other regulators, which might have a material
adverse effect on us.
Additional restrictions on airline routes and takeoff and
landing slots have been or may be proposed that could affect
rights of ownership and transfer. For example, although
currently not effective because of a court order and the FAA has
proposed withdrawal, the FAA has issued rules that continue the
FAA requirement to have a slot for arrival or departure at New
York Liberty, Kennedy and LaGuardia through 2019. These rules
provide that the FAA would withdraw and auction to the highest
bidder annually through 2013 a portion of each airlines
slots at New York Liberty, Kennedy and LaGuardia. Joined by our
airline trade association, the Air Transport Association, and
the Port Authority of New York and New Jersey, which operates
New York Liberty, Kennedy and LaGuardia, we have challenged the
legality of the FAA withdrawal of slots from airlines for
non-operational reasons and the slot auction in the
U.S. Court of Appeals for the D.C. Circuit. The court has
ordered the FAA not to implement the rules while our challenge
is pending, so the rules have not become effective and no slot
withdrawals or auctions have occurred under such rules.
Moreover, the FAA has proposed to withdraw these rules and has
invited public comment on its proposal. We cannot provide any
assurances that we will prevail in this challenge, but we expect
the FAA will adopt its proposal to withdraw these rules, which
will obviate the need to challenge them further. Withdrawal and
auctioning to the highest bidder of our slots could have a
material adverse effect on us by causing us to incur substantial
costs to successfully bid for them or by reducing our slot
portfolio, requiring us to terminate flights associated with
these slots and increasing our costs to operate at these
airports.
The FAA from time to time issues directives and other
regulations relating to the maintenance and operation of
aircraft that require significant expenditures or operational
restrictions. Some FAA requirements cover, among other things,
retirement of older aircraft, security measures, collision
avoidance systems, airborne windshear avoidance systems, noise
abatement and other environmental concerns, aircraft operation
and safety and increased inspections and maintenance procedures
to be conducted on older aircraft.
Many aspects of airlines operations also are subject to
increasingly stringent federal, state, local and foreign laws
protecting the environment, including the imposition of
additional taxes on airlines or their passengers. Future
regulatory developments in the United States and abroad could
adversely affect operations and increase operating costs in the
airline industry. The European Union has issued a directive to
member states to include aviation in its Greenhouse Gas
Emissions Trading Scheme by February 2010, which will require us
to have emissions allowances to operate flights to and from
member states of the European Union in January 2012 and
thereafter, including flights between the United States and the
European Union. The U.S. government and other non-EU
governments are expected to challenge the application of the EU
emissions trading scheme to their airlines; however, we may be
forced to comply with the EU emission trading scheme
requirements during a legal challenge. We may have to purchase
emissions allowances through the EU emissions trading scheme to
cover EU flights that exceed our free allotment, which could
result in substantial costs for us.
S-21
Other regulatory actions that may be taken in the future by the
U.S. government, foreign governments (including the
European Union), or the International Civil Aviation
Organization to address concerns about climate change and air
emissions from the aviation sector are unknown at this time.
Climate change legislation is anticipated in the United States,
but it is currently unknown how the potential legislation will
be applied to the aviation industry. The impact to us and our
industry from such actions is likely to be adverse and could be
significant, particularly if regulators were to conclude that
emissions from commercial aircraft cause significant harm to the
upper atmosphere or have a greater impact on climate change than
other industries. Potential actions may include the imposition
of requirements to purchase emission offsets or credits, which
could require participation in emission trading (such as
required in the European Union), substantial taxes on emissions
and growth restrictions on airline operations, among other
potential regulatory actions.
Further, the ability of U.S. carriers to operate
international routes is subject to change because the applicable
arrangements between the United States and foreign governments
may be amended from time to time, or because appropriate slots
or facilities are not made available. We cannot provide
assurance that current laws and regulations, or laws or
regulations enacted in the future, will not adversely affect us.
Additional
terrorist attacks or international hostilities may further
adversely affect our financial condition, results of operations
and liquidity
The terrorist attacks of September 11, 2001 involving
commercial aircraft severely and adversely affected our
financial condition, results of operations and liquidity and the
airline industry generally. Additional terrorist attacks, even
if not made directly on the airline industry, or the fear of
such attacks (including elevated national threat warnings or
selective cancellation or redirection of flights due to terror
threats such as the August 2006 terrorist plot targeting
multiple airlines, including us), could negatively affect us and
the airline industry. The potential negative effects include
increased security, insurance and other costs for us and lost
revenue from increased ticket refunds and decreased ticket
sales. Our financial resources might not be sufficient to absorb
the adverse effects of any further terrorist attacks or other
international hostilities involving the United States.
Additional
security requirements may increase our costs and decrease our
traffic
Since September 11, 2001, the Department of Homeland
Security (DHS) and the Transportation Security
Administration (TSA) have implemented numerous
security measures that affect airline operations and costs, and
they are likely to implement additional measures in the future.
Most recently, DHS has begun to implement the US-VISIT program
(a program of fingerprinting and photographing foreign visa
holders), announced that it will implement greater use of
passenger data for evaluating security measures to be taken with
respect to individual passengers, expanded the use of federal
air marshals on our flights (who do not pay for their seats and
thus displace revenue passengers and cause increased customer
complaints from displaced passengers), begun investigating a
requirement to install aircraft security systems (such as
devices on commercial aircraft as countermeasures against
portable surface-to-air missiles) and expanded cargo and baggage
screening. DHS also has required certain flights to be cancelled
on short notice for security reasons, and has required certain
airports to remain at higher security levels than other
locations. In addition, foreign governments also have begun to
institute additional security measures at foreign airports we
serve, out of their own security concerns or in response to
security measures imposed by the United States.
Moreover, the TSA has imposed measures affecting the contents of
baggage that may be carried on an aircraft. The TSA and other
security regulators could impose other measures as necessary to
respond to security threats that may arise in the future.
A large portion of the costs of these security measures is borne
by the airlines and their passengers, and we believe that these
and other security measures have the effect of decreasing the
demand for air travel and the overall attractiveness of air
transportation as compared to other modes of transportation.
Additional security measures required by the U.S. and
foreign governments in the future, such as further expanded
cargo screening, might increase our costs or decrease the demand
for air travel, adversely affecting our financial results.
S-22
The
airline industry is heavily taxed
The airline industry is subject to extensive government fees and
taxation that negatively impact our revenue. The
U.S. airline industry is one of the most heavily taxed of
all industries. These fees and taxes have grown significantly in
the past decade for domestic flights, and various U.S. fees
and taxes also are assessed on international flights. In
addition, the governments of foreign countries in which we
operate impose on U.S. airlines, including us, various fees
and taxes, and these assessments have been increasing in number
and amount in recent years. Certain of these fees and taxes must
be included in the fares we advertise or quote to our customers.
Due to the competitive revenue environment, many increases in
these fees and taxes have been absorbed by the airline industry
rather than being passed on to the passenger. Further increases
in fees and taxes may reduce demand for air travel and thus our
revenues.
Airlines
may continue to participate in industry consolidation or
alliances, which could have a material adverse effect on
us
We are facing stronger competition from carriers that have
participated in industry consolidation and from expanded airline
alliances and joint ventures.
Since its deregulation in 1978, the U.S. airline industry
has undergone substantial consolidation and additional
consolidation may occur in light of the recently completed
merger of Delta Air Lines, Inc. (Delta) and
Northwest Airlines, Inc. (Northwest), which changed
the competitive environment for us and the entire airline
industry. As a result of the announcement of the Delta/Northwest
merger agreement, we conducted a comprehensive review of our
strategic alternatives and announced in April 2008 that we had
determined that the best course for us was not to merge with
another airline at such time. Through consolidation, carriers
have the opportunity to significantly expand the reach of their
networks, which is of primary importance to business travelers,
and to achieve cost reductions by eliminating redundancy in
their networks and their management structures.
Through participation in airline alliances
and/or joint
ventures, carriers granted anti-trust immunity by the
appropriate regulatory authorities are able to coordinate their
routes, pool their revenues and costs and enjoy other mutual
benefits, such as frequent flier program reciprocity, achieving
many of the benefits of consolidation. For example, Air
France-KLM, Delta and Northwest have received anti-trust
immunity to form a new trans-Atlantic joint venture among those
airlines and to coordinate routes, fares, schedules and other
matters among those airlines, Alitalia and CSA Czech Airlines.
American Airlines, British Airways and Iberia have requested
anti-trust immunity for a similar trans-Atlantic joint venture,
which would also involve many of the same benefits.
There may be additional consolidation or changes in airline
alliances
and/or joint
ventures in the future, any of which could change the
competitive landscape for the airline industry and have a
material adverse effect on us.
Insurance
costs could increase materially or key coverage could become
unavailable
The September 11, 2001 terrorist attacks led to a
significant increase in insurance premiums and a decrease in the
insurance coverage available to commercial airlines.
Furthermore, our ability to continue to obtain certain types of
insurance remains uncertain. Since the terrorist attacks, the
U.S. government has provided war risk (terrorism) insurance
to U.S. commercial airlines to cover losses. War risk
insurance in amounts necessary for our operations, and at
premiums that are not excessive, is not currently available in
the commercial insurance market. If the government discontinues
this coverage in whole or in part, we may be able to obtain
comparable coverage in the commercial insurance market only, if
it is available at all, for substantially higher premiums and on
more restrictive terms. If we are unable to obtain adequate war
risk insurance, our business could be materially and adversely
affected.
Public
health threats affecting travel behavior could have a material
adverse effect on the industry
Public health threats, such as the bird flu, Severe Acute
Respiratory Syndrome (SARs) and other highly communicable
diseases, outbreaks of which have occurred in various parts of
the world in which we operate, could adversely impact our
operations and the worldwide demand for air travel. Any
quarantine of personnel or inability to access our facilities or
aircraft could adversely affect our operations. Travel
restrictions or operational problems
S-23
in any part of the world in which we operate, or any reduction
in the demand for air travel caused by public health threats in
the future, may materially adversely affect our operations and
financial results.
Our
results of operations fluctuate due to seasonality and other
factors associated with the airline industry
Due to greater demand for air travel during the summer months,
revenue in the airline industry in the second and third quarters
of the year is generally stronger than revenue in the first and
fourth quarters of the year for most U.S. air carriers. Our
results of operations generally reflect this seasonality, but
also have been impacted by numerous other factors that are not
necessarily seasonal, including excise and similar taxes,
weather and air traffic control delays, as well as the other
factors discussed above. As a result, our operating results for
a quarterly period are not necessarily indicative of operating
results for an entire year, and historical operating results are
not necessarily indicative of future operating results.
Risk
Factors Relating to the Certificates and the Offering
The
Appraisals Are Only Estimates of Aircraft Value
Three independent appraisal and consulting firms have prepared
appraisals of the Aircraft. Letters summarizing such appraisals
are annexed to this Prospectus Supplement as Appendix II.
Such appraisals are based on varying assumptions and
methodologies, which differ among the appraisers, and were
prepared without physical inspection of the Aircraft. Appraisals
that are based on other assumptions and methodologies may result
in valuations that are materially different from those contained
in such appraisals. See Description of the Aircraft and
the Appraisals The Appraisals.
An appraisal is only an estimate of value. It does not indicate
the price at which an Aircraft may be purchased from the
Aircraft manufacturer. Nor should an appraisal be relied upon as
a measure of realizable value. The proceeds realized upon a sale
of any Aircraft may be less than its appraised value. In
particular, the appraisals of the Boeing
737-924ER
aircraft are estimates of values as of future delivery dates.
The value of an Aircraft if remedies are exercised under the
applicable Indenture will depend on market and economic
conditions, the supply of similar aircraft, the availability of
buyers, the condition of the Aircraft and other factors.
Accordingly, there can be no assurance that the proceeds
realized upon any such exercise of remedies would be sufficient
to satisfy in full payments due on the Certificates.
Certificateholders
May Not Participate In Controlling the Exercise of Remedies in a
Default Scenario
If an Indenture Default is continuing, subject to certain
conditions, the Loan Trustee under such Indenture will be
directed by the Controlling Party in exercising
remedies under such Indenture, including accelerating the
applicable Equipment Notes or foreclosing the lien on the
Aircraft securing such Equipment Notes. See Description of
the Certificates Indenture Defaults and Certain
Rights Upon an Indenture Default.
The Controlling Party will be:
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The Trustee.
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Under certain circumstances, and notwithstanding the foregoing,
the Liquidity Provider.
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As a result of the foregoing, if the Trustee is not the
Controlling Party with respect to an Indenture, the
Certificateholders will have no rights to participate in
directing the exercise of remedies under such Indenture.
The
Exercise of Remedies Over Equipment Notes May Result in
Shortfalls Without Further Recourse
During the continuation of any Indenture Default under an
Indenture, the Equipment Notes issued under such Indenture may
be sold in the exercise of remedies with respect to that
Indenture, subject to certain limitations. See Description
of the Intercreditor Agreement Intercreditor
Rights Limitations on Exercise of Remedies.
The market for Equipment Notes during any Indenture Default may
be very limited, and there can be no assurance as to the price
at which they could be sold. If any Equipment Notes are sold for
less than their outstanding principal
S-24
amount, Certificateholders will receive a smaller amount of
principal distributions under the relevant Indenture than
anticipated and will not have any claim for the shortfall
against Continental, the Liquidity Provider or the Trustee.
The
Ratings of the Certificates Are Not a Recommendation to Buy and
May Be Lowered or Withdrawn in the Future
It is a condition to the issuance of the Certificates that they
be rated not lower than Baa2 by Moodys and A− by
Standard & Poors. A rating is not a
recommendation to purchase, hold or sell Certificates, because a
rating does not address market price or suitability for a
particular investor. A rating may not remain unchanged for any
given period of time and may be lowered, suspended or withdrawn
entirely by a Rating Agency if in its judgment circumstances in
the future (including the downgrading of Continental, the
Depositary or the Liquidity Provider) so warrant.
The rating of the Certificates is based primarily on the default
risk of the Equipment Notes and the Depositary, the availability
of the Liquidity Facility for the benefit of holders of the
Certificates, the collateral value provided by the Aircraft
relating to the Equipment Notes, and the cross-collateralization
provisions applicable to the Indentures. These ratings address
the likelihood of timely payment of interest (at the Stated
Interest Rate and without any premium) when due on the
Certificates and the ultimate payment of principal distributable
under the Certificates by the Final Maturity Date. The ratings
do not address the possibility of certain defaults, optional
redemptions or other circumstances, which could result in the
payment of the outstanding principal amount of the Certificates
prior to the final expected Distribution Date.
Standard & Poors has indicated that its rating
applies to a unit consisting of Certificates representing the
Trust Property and Escrow Receipts initially representing
interests in $389,687,000 of Deposits. Amounts deposited under
the Escrow Agreement are not property of Continental and are not
entitled to the benefits of Section 1110 of the
U.S. Bankruptcy Code and any default arising under an
Indenture solely by reason of the cross-default in such
Indenture may not be of a type required to be cured under
Section 1110 of the U.S. Bankruptcy Code. Any cash
collateral held as a result of the cross-collateralization of
the Equipment Notes also would not be entitled to the benefits
of Section 1110 of the U.S. Bankruptcy Code. Neither
the Certificates nor the Escrow Receipts may be separately
assigned or transferred.
Escrowed
Funds May Be Returned If They Are Not Used to Buy Equipment
Notes
Under certain circumstances, all of the funds held in escrow as
Deposits may not be used to purchase Equipment Notes by the
deadline established for purposes of this Offering. See
Description of the Deposit Agreement Unused
Deposits. If any funds remain as Deposits after such
deadline, they will be withdrawn by the Escrow Agent and
distributed, with accrued and unpaid interest but without any
premium, to the Certificateholders. See Description of the
Deposit Agreement Unused Deposits.
There
May Be a Limited Market for Resale of Certificates
Prior to this Offering, there has been no public market for the
Certificates. Neither Continental nor the Trust intends to apply
for listing of the Certificates on any securities exchange or
otherwise. The Underwriters may assist in resales of the
Certificates, but they are not required to do so. A secondary
market for the Certificates may not develop. If a secondary
market does develop, it might not continue or it might not be
sufficiently liquid to allow you to resell any of your
Certificates.
USE OF
PROCEEDS
The proceeds from the sale of the Certificates being offered
hereby will be used to purchase Equipment Notes issued by
Continental during the Delivery Period to generate cash for
Continentals general corporate purposes from 12 Aircraft
that it currently owns and to finance Continentals
purchase of five new Boeing
737-924ER
Aircraft. Before the proceeds are used to buy Equipment Notes,
such proceeds from the sale of the Certificates will be
deposited with the Depositary on behalf of the Escrow Agent for
the benefit of the holders of the Certificates.
S-25
THE
COMPANY
Continental Airlines, Inc. (Continental or the
Company) is a major United States air carrier
engaged in the business of transporting passengers, cargo and
mail. Continental is the worlds fifth largest airline as
measured by the number of scheduled miles flown by revenue
passengers in 2008. Including Continentals wholly owned
subsidiary, Continental Micronesia, Inc. (CMI), and
regional flights operated on Continentals behalf under
capacity purchase agreements with other carriers, Continental
operates more than 2,300 daily departures. As of March 31,
2009, Continental served 121 domestic and 121 international
destinations and offered additional connecting service through
alliances with domestic and foreign carriers. Continental
directly served ten Canadian cities, 25 European cities, seven
South American cities, and six Asian cities from the
U.S. mainland as of March 31, 2009. In addition,
Continental provides service to more destinations in Mexico and
Central America than any other U.S. airline, serving
39 cities. Through its Guam hub, CMI provides extensive
service in the western Pacific, including service to more
Japanese cities than any other U.S. carrier. The
Companys executive offices are located at 1600 Smith
Street, Houston, Texas 77002. The Companys telephone
number is
(713) 324-2950
and its website is www.continental.com. Information contained on
the Companys website is not part of, and is not
incorporated in, this Prospectus Supplement.
DESCRIPTION
OF THE CERTIFICATES
The following summary describes the material terms of the
Certificates. The summary does not purport to be complete and is
qualified in its entirety by reference to all of the provisions
of the Basic Agreement, which was filed with the Securities and
Exchange Commission (the Commission) as an exhibit
to the Companys Current Report on
Form 8-K
dated September 25, 1997, and to all of the provisions of
the Certificates, the Trust Supplement, the Deposit
Agreement, the Escrow Agreement, the Intercreditor Agreement and
the trust supplement applicable to the Successor Trust, each of
which will be filed as an exhibit to a Current Report on
Form 8-K
to be filed by Continental with the Commission. The references
to Sections in parentheses in the following summary are to the
relevant Sections of the Basic Agreement unless otherwise
indicated.
General
Each Pass Through Certificate (collectively, the
Certificates) will represent a fractional undivided
interest in the Continental Airlines
2009-1
Class A Pass Through Trust (the Trust).
(Section 2.01) The Trust will be formed pursuant to a pass
through trust agreement between Continental and Wilmington
Trust Company, as trustee (the Trustee), dated
as of September 25, 1997 (the Basic Agreement),
and a supplement thereto (the Trust Supplement
and, together with the Basic Agreement, the Pass Through
Trust Agreement) relating to such Trust between
Continental and the Trustee, as trustee under the Trust.
The Trust Property of the Trust (the
Trust Property) will consist of:
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Subject to the Intercreditor Agreement, Equipment Notes acquired
under the Note Purchase Agreement and issued on a recourse basis
by Continental in a separate secured loan transaction in
connection with the financing by Continental of each Aircraft
during the Delivery Period. Equipment Notes held in the Trust
will be registered in the name of the Subordination Agent on
behalf of the Trust for purposes of giving effect to provisions
of the Intercreditor Agreement.
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The rights of the Trust to acquire Equipment Notes under the
Note Purchase Agreement.
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The rights of the Trust under the Escrow Agreement to request
the Escrow Agent to withdraw from the Depositary funds
sufficient to enable the Trust to purchase Equipment Notes after
the initial issuance date of the Certificates (the
Issuance Date) during the Delivery Period.
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The rights of the Trust under the Intercreditor Agreement
(including all monies receivable in respect of such rights).
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S-26
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All monies receivable under the Liquidity Facility.
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Funds from time to time deposited with the Trustee in accounts
relating to the Trust (such as interest and principal payments
on the Equipment Notes held in the Trust).
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The Certificates will be issued in fully registered form only
and will be subject to the provisions described below under
Book Entry; Delivery and Form. The
Certificates will be issued only in minimum denominations of
$1,000 or integral multiples thereof, except that one
Certificate may be issued in a different denomination.
(Section 3.01)
The Certificates represent interests in the Trust, and all
payments and distributions thereon will be made only from the
Trust Property. (Section 3.09) The Certificates do not
represent an interest in or obligation of Continental, the
Trustee or any of the Loan Trustees or any affiliate of any
thereof.
Pursuant to the Escrow Agreement, the Certificateholders as
holders of the Escrow Receipts affixed to each Certificate are
entitled to certain rights with respect to the Deposits.
Accordingly, any transfer of a Certificate will have the effect
of transferring the corresponding rights with respect to the
Deposits, and rights with respect to the Deposits may not be
separately transferred by holders of the Certificates (the
Certificateholders). Rights with respect to the
Deposits and the Escrow Agreement, except for the right to
request withdrawals for the purchase of Equipment Notes, will
not constitute Trust Property.
Payments
and Distributions
Payments of interest on the Deposits with respect to the Trust
and payments of principal, premium (if any) and interest on the
Equipment Notes or with respect to other Trust Property
will be distributed by the Paying Agent (in the case of the
Deposits) or by the Trustee (in the case of Trust Property)
to Certificateholders on the date receipt of such payment is
confirmed, except in the case of certain types of Special
Payments.
Interest
The Deposits and the Equipment Notes will accrue interest at the
applicable rate per annum for Certificates set forth on the
cover page of this Prospectus Supplement, payable on January 8
and July 8 of each year, commencing on January 8, 2010.
Such interest payments will be distributed to Certificateholders
on each such date until the final Distribution Date, subject in
the case of payments on the Equipment Notes to the Intercreditor
Agreement. Interest is calculated on the basis of a
360-day year
consisting of twelve
30-day
months.
Payments of interest applicable to the Certificates will be
supported by a Liquidity Facility to be provided by the
Liquidity Provider for the benefit of the holders of the
Certificates in an aggregate amount sufficient to pay interest
thereon at the Stated Interest Rate on up to three successive
Regular Distribution Dates (without regard to any future
payments of principal on the Certificates), except that the
Liquidity Facility will not cover interest payable by the
Depositary on the Deposits. The Liquidity Facility does not
provide for drawings or payments thereunder to pay for principal
of or premium, if any, on the Certificates or any interest on
the Certificates in excess of the Stated Interest Rate.
Therefore, only the holders of the Certificates will be entitled
to receive and retain the proceeds of drawings under the
Liquidity Facility. See Description of the Liquidity
Facility.
Principal
Payments of principal of the Equipment Notes are scheduled to be
received by the Trustee on January 8 and July 8 in certain years.
Scheduled payments of interest on the Deposits and of interest
or principal on the Equipment Notes are herein referred to as
Scheduled Payments, and January 8 and July 8 of each
year, commencing on January 8, 2010, until the final
expected Regular Distribution Date are herein referred to as
Regular Distribution Dates. See Description of
the Equipment Notes Principal and Interest
Payments. The Final Maturity Date is
January 8, 2018.
S-27
Distributions
The Paying Agent will distribute on each Regular Distribution
Date to the Certificateholders all Scheduled Payments received
in respect of the Deposits, the receipt of which is confirmed by
the Paying Agent on such Regular Distribution Date. The Trustee
will distribute, subject to the Intercreditor Agreement, on each
Regular Distribution Date to the Certificateholders all
Scheduled Payments received in respect of Equipment Notes held
on behalf of the Trust, the receipt of which is confirmed by the
Trustee on such Regular Distribution Date. Each
Certificateholder will be entitled to receive its proportionate
share, based upon its fractional interest in the Trust, of any
distribution in respect of Scheduled Payments of interest on the
Deposits and, subject to the Intercreditor Agreement, of
principal or interest on Equipment Notes held on behalf of the
Trust. Each such distribution of Scheduled Payments will be made
by the Paying Agent or Trustee to the Certificateholders of
record on the record date applicable to such Scheduled Payment
subject to certain exceptions. (Sections 4.01 and 4.02;
Escrow Agreement, Section 2.03) If a Scheduled Payment is
not received by the Paying Agent or Trustee on a Regular
Distribution Date but is received within five days thereafter,
it will be distributed on the date received to such holders of
record. If it is received after such
five-day
period, it will be treated as a Special Payment and distributed
as described below.
Any payment in respect of, or any proceeds of, any Equipment
Note, or Collateral under (and as defined in) any Indenture
other than a Scheduled Payment (each, a Special
Payment) will be distributed on, in the case of an early
redemption or a purchase of any Equipment Note, the date of such
early redemption or purchase (which shall be a Business Day),
and otherwise on the Business Day specified for distribution of
such Special Payment pursuant to a notice delivered by the
Trustee as soon as practicable after the Trustee has received
funds for such Special Payment (each, a Special
Distribution Date). Any such distribution will be subject
to the Intercreditor Agreement. Any unused Deposits to be
distributed after the Delivery Period Termination Date or the
occurrence of a Triggering Event, together with accrued and
unpaid interest thereon (each, also a Special
Payment), will be distributed on a date 25 days after
the Paying Agent has received notice of the event requiring such
distribution (also, a Special Distribution Date).
However, if such date is within ten days before or after a
Regular Distribution Date, such Special Payment shall be made on
such Regular Distribution Date.
Triggering Event means (x) the occurrence of an
Indenture Default under all Indentures resulting in a PTC Event
of Default with respect to the Certificates, (y) the
acceleration of all of the outstanding Equipment Notes (provided
that during the Delivery Period the aggregate principal amount
thereof exceeds $150 million) or (z) certain
bankruptcy or insolvency events involving Continental.
The Paying Agent, in the case of the Deposits, and the Trustee,
in the case of Trust Property, will mail a notice to the
Certificateholders stating the scheduled Special Distribution
Date, the related record date, the amount of the Special Payment
and the reason for the Special Payment. In the case of a
redemption or purchase of the Equipment Notes held in the Trust
or any distribution of unused Deposits after the Delivery Period
Termination Date or the occurrence of a Triggering Event, such
notice will be mailed not less than 15 days prior to the
date such Special Payment is scheduled to be distributed, and in
the case of any other Special Payment, such notice will be
mailed as soon as practicable after the Trustee has confirmed
that it has received funds for such Special Payment.
(Section 4.02(c); Trust Supplement, Section 3.03;
Escrow Agreement, Sections 2.03 and 2.06) Each distribution
of a Special Payment, other than a final distribution, on a
Special Distribution Date will be made by the Paying Agent or
the Trustee, as applicable, to the Certificateholders of record
on the record date applicable to such Special Payment.
(Section 4.02(b); Escrow Agreement, Section 2.03) See
Indenture Defaults and Certain Rights Upon an
Indenture Default and Description of the Equipment
Notes Redemption.
The Pass Through Trust Agreement requires that the Trustee
establish and maintain, for the Trust and for the benefit of the
Certificateholders, one or more non-interest bearing accounts
(the Certificate Account) for the deposit of
payments representing Scheduled Payments received by the
Trustee. The Pass Through Trust Agreement requires that the
Trustee establish and maintain, for the Trust and for the
benefit of the Certificateholders, one or more accounts (the
Special Payments Account) for the deposit of
payments representing Special Payments received by the Trustee,
which shall be non-interest bearing except in certain
circumstances where the Trustee may invest amounts in such
account in certain permitted investments. Pursuant to the terms
of the Pass Through Trust Agreement, the Trustee is
required to deposit any Scheduled Payments received by it in the
Certificate
S-28
Account and to deposit any Special Payments so received by it in
the Special Payments Account. (Section 4.01;
Trust Supplement, Section 3.02) All amounts so
deposited will be distributed by the Trustee on a Regular
Distribution Date or a Special Distribution Date, as
appropriate. (Section 4.02; Trust Supplement,
Section 3.03)
The Escrow Agreement requires that the Paying Agent establish
and maintain, for the benefit of the Receiptholders, one or more
accounts (the Paying Agent Account), which shall be
non-interest bearing. Pursuant to the terms of the Escrow
Agreement, the Paying Agent is required to deposit interest on
Deposits and any unused Deposits withdrawn by the Escrow Agent
in the related Paying Agent Account. All amounts so deposited
will be distributed by the Paying Agent on a Regular
Distribution Date or Special Distribution Date, as appropriate.
The final distribution for the Trust will be made only upon
presentation and surrender of the Certificates at the office or
agency of the Trustee specified in the notice given by the
Trustee of such final distribution. The Trustee will mail such
notice of the final distribution to the Certificateholders,
specifying the date set for such final distribution and the
amount of such distribution. (Trust Supplement,
Section 7.01) See Termination of the
Trust below. Distributions in respect of Certificates
issued in global form will be made as described in
Book Entry; Delivery and Form below.
If any Distribution Date is a Saturday, Sunday or other day on
which commercial banks are authorized or required to close in
New York, New York, Houston, Texas or Wilmington, Delaware (any
other day being a Business Day), distributions
scheduled to be made on such Regular Distribution Date or
Special Distribution Date will be made on the next succeeding
Business Day, without additional interest.
Pool
Factors
The Pool Balance indicates, as of any date, the
original aggregate face amount of the Certificates less the
aggregate amount of all payments made in respect of the
Certificates or in respect of Deposits other than payments made
in respect of interest or premium or reimbursement of any costs
or expenses incurred in connection therewith. The Pool Balance
as of any Distribution Date shall be computed after giving
effect to any special distribution with respect to unused
Deposits, payment of principal of the Equipment Notes or payment
with respect to other Trust Property and the distribution
thereof to be made on that date. (Trust Supplement,
Section 2.01)
The Pool Factor as of any Distribution Date is the
quotient (rounded to the seventh decimal place) computed by
dividing (i) the Pool Balance by (ii) the original
aggregate face amount of the Certificates. The Pool Factor as of
any Distribution Date shall be computed after giving effect to
any special distribution with respect to unused Deposits,
payment of principal of the Equipment Notes or payments with
respect to other Trust Property and the distribution
thereof to be made on that date. (Trust Supplement,
Section 2.01) The Pool Factor will be 1.0000000 on the date
of issuance of the Certificates; thereafter, the Pool Factor
will decline as described herein to reflect reductions in the
Pool Balance. The amount of a Certificateholders pro rata
share of the Pool Balance can be determined by multiplying the
par value of the holders Certificate by the Pool Factor as
of the applicable Distribution Date. Notice of the Pool Factor
and the Pool Balance will be mailed to Certificateholders on
each Distribution Date. (Trust Supplement,
Section 3.01)
S-29
The following table sets forth the expected aggregate principal
amortization schedule for the Equipment Notes (the Assumed
Amortization Schedule) and resulting Pool Factors. The
scheduled distribution of principal payments would be affected
if Equipment Notes with respect to any Aircraft are not acquired
by the Trust, if any Equipment Notes held in the Trust are
redeemed or purchased or if a default in payment on such
Equipment Notes occurs. Accordingly, the aggregate principal
amortization schedule applicable to the Trust and the resulting
Pool Factors may differ from those set forth in the following
table.
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Scheduled
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Expected
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Principal
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Pool
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Date
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Payments
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Factor
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Issuance Date
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$
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0
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1.0000000
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January 8, 2010
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7,877,062
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0.9797862
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July 8, 2010
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7,874,729
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0.9595784
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January 8, 2011
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7,874,729
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0.9393705
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July 8, 2011
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10,641,236
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0.9120634
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January 8, 2012
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10,643,486
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0.8847505
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July 8, 2012
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10,643,486
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0.8574376
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January 8, 2013
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10,643,486
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0.8301247
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July 8, 2013
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10,643,486
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0.8028117
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January 8, 2014
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10,846,877
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0.7749769
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July 8, 2014
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11,151,504
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0.7463603
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January 8, 2015
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12,322,193
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0.7147396
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July 8, 2015
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12,430,654
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0.6828405
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January 8, 2016
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12,430,654
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0.6509414
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July 8, 2016
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253,663,418
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0.0000000
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The Pool Factor and Pool Balance will be recomputed if there has
been an early redemption, purchase, or default in the payment of
principal or interest in respect of one or more of the Equipment
Notes held in the Trust, as described in
Indenture Defaults and Certain Rights Upon an
Indenture Default and Description of the Equipment
Notes Redemption, or a special distribution
attributable to unused Deposits after the Delivery Period
Termination Date or the occurrence of a Triggering Event, as
described in Description of the Deposit Agreement.
If the principal payments scheduled for a Regular Distribution
Date prior to the Delivery Period Termination Date are changed,
notice thereof will be mailed by the Trustee to the
Certificateholders by no later than the 15th day prior to
such Regular Distribution Date. In the event of (i) any
other change in the scheduled repayments from the Assumed
Amortization Schedule or (ii) any such redemption,
purchase, default or special distribution, the Pool Factors and
the Pool Balances will be recomputed after giving effect thereto
and notice thereof will be mailed by the Trustee to the
Certificateholders promptly after the Delivery Period
Termination Date in the case of clause (i) and promptly
after the occurrence of any event described in clause (ii).
Reports
to Certificateholders
On each Distribution Date, the Paying Agent and Trustee will
include with each distribution by it of a Scheduled Payment or
Special Payment to Certificateholders a statement setting forth
the following information (per $1,000 aggregate principal amount
of Certificate, except as to the amounts described in items
(a) and (f) below):
(a) The aggregate amount of funds distributed on such
Distribution Date under the Pass Through Trust Agreement
and under the Escrow Agreement, indicating the amount allocable
to each source, including any portion thereof paid by the
Liquidity Provider.
(b) The amount of such distribution under the Pass Through
Trust Agreement allocable to principal and the amount allocable
to premium, if any.
(c) The amount of such distribution under the Pass Through
Trust Agreement allocable to interest.
(d) The amount of such distribution under the Escrow
Agreement allocable to interest.
(e) The amount of such distribution under the Escrow
Agreement allocable to unused Deposits, if any.
(f) The Pool Balance and the Pool Factor.
(Trust Supplement, Section 3.01(a))
S-30
So long as the Certificates are registered in the name of DTC or
its nominee, on the record date prior to each Distribution Date,
the Trustee will request that DTC post on its Internet bulletin
board a securities position listing setting forth the names of
all DTC Participants reflected on DTCs books as holding
interests in the Certificates on such record date. On each
Distribution Date, the Paying Agent and Trustee will mail to
each such DTC Participant the statement described above and will
make available additional copies as requested by such DTC
Participant for forwarding to Certificate Owners.
(Trust Supplement, Section 3.01(a))
In addition, after the end of each calendar year, the Trustee
and Paying Agent will furnish to each Certificateholder at any
time during the preceding calendar year a report containing the
sum of the amounts determined pursuant to clauses (a), (b), (c),
(d) and (e) above with respect to the Trust for such
calendar year or, in the event such person was a
Certificateholder during only a portion of such calendar year,
for the applicable portion of such calendar year, and such other
items as are readily available to the Trustee and which a
Certificateholder shall reasonably request as necessary for the
purpose of such Certificateholders preparation of its
U.S. federal income tax returns. (Trust Supplement,
Section 3.01(b)) Such report and such other items shall be
prepared on the basis of information supplied to the Trustee by
the DTC Participants and shall be delivered by the Trustee to
such DTC Participants to be available for forwarding by such DTC
Participants to Certificate Owners in the manner described
above. (Trust Supplement, Section 3.01(b)) At such
time, if any, as the Certificates are issued in the form of
definitive certificates, the Paying Agent and Trustee will
prepare and deliver the information described above to each
Certificateholder of record as the name and period of ownership
of such Certificateholder appears on the records of the
registrar of the Certificates.
The Trustee is required to provide promptly to
Certificateholders all material non-confidential information
received by the Trustee from Continental.
(Trust Supplement, Section 3.01(e))
Indenture
Defaults and Certain Rights Upon an Indenture Default
Upon the occurrence and continuation of an event of default
under an Indenture (after giving effect to any applicable grace
period and notice requirement, an Indenture
Default), the Controlling Party will direct the Loan
Trustee under such Indenture in the exercise of remedies
thereunder and may accelerate and sell all (but not less than
all) of the Equipment Notes issued under such Indenture or sell
the collateral under such Indenture to any person, subject to
certain limitations. See Description of the Intercreditor
Agreement Intercreditor Rights
Limitations on Exercise of Remedies. The proceeds of any
such sale will be distributed pursuant to the provisions of the
Intercreditor Agreement. Any such proceeds so distributed to the
Trustee upon any such sale shall be deposited in the applicable
Special Payments Account and shall be distributed to the
Certificateholders on a Special Distribution Date.
(Sections 4.01 and 4.02) The market for Equipment Notes at
the time of the existence of an Indenture Default may be very
limited and there can be no assurance as to the price at which
they could be sold. If any such Equipment Notes are sold for
less than their outstanding principal amount, Certificateholders
will receive a smaller amount of principal distributions under
the relevant Indenture than anticipated and will not have any
claim for the shortfall against Continental, the Liquidity
Provider or the Trustee.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date or within five days thereafter, distributed to
the Trustee by the Subordination Agent on account of any
Equipment Note or Collateral under (and as defined in) any
Indenture held in the Trust following an Indenture Default will
be deposited in the Special Payments Account for the Trust and
will be distributed to the Certificateholders on a Special
Distribution Date. (Sections 4.01 and 4.02;
Trust Supplement, Section 3.02) Any funds representing
payments received with respect to any defaulted Equipment Notes,
or the proceeds from the sale of any Equipment Notes, held by
the Trustee in the Special Payments Account will, to the extent
practicable, be invested and reinvested by the Trustee in
certain permitted investments pending the distribution of such
funds on a Special Distribution Date. (Section 4.04)
The Pass Through Trust Agreement provides that the Trustee
will, within 90 days after the occurrence of any default
known to the Trustee, give to the Certificateholders notice,
transmitted by mail, of such uncured or unwaived default known
to it, provided that, except in the case of default in a
payment of principal, premium, if any, or interest on any of the
Equipment Notes held in the Trust, the Trustee will be protected
in withholding such notice if it in good faith determines that
the withholding of such notice is in the interests of the
Certificateholders. (Section 7.02) The term
default as used in this paragraph only means the
occurrence of an Indenture Default under any Indenture
S-31
pursuant to which Equipment Notes held by the Trust were issued,
as described above, except that in determining whether any such
Indenture Default has occurred, any grace period or notice in
connection therewith will be disregarded.
The Pass Through Trust Agreement contains a provision
entitling the Trustee, subject to the duty of the Trustee during
a default to act with the required standard of care, to be
offered reasonable security or indemnity by the holders of the
Certificates before proceeding to exercise any right or power
under the Pass Through Trust Agreement or the Intercreditor
Agreement at the request of such Certificateholders.
(Section 7.03(e))
Subject to certain qualifications set forth in the Pass Through
Trust Agreement and to the Intercreditor Agreement, the
Certificateholders holding Certificates evidencing fractional
undivided interests aggregating not less than a majority in
interest in the Trust shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee or pursuant to the terms of the
Intercreditor Agreement, or exercising any trust or power
conferred on the Trustee under the Pass Through
Trust Agreement or the Intercreditor Agreement, including
any right of the Trustee as Controlling Party under the
Intercreditor Agreement or as holder of the Equipment Notes.
(Section 6.04)
In certain cases, the holders of the Certificates evidencing
fractional undivided interests aggregating not less than a
majority in interest of the Trust may on behalf of the holders
of all the Certificates waive any past event of
default under the Trust (i.e., any Indenture
Default under any Indenture pursuant to which Equipment Notes
held by the Trust were issued) and its consequences or, if the
Trustee is the Controlling Party, may direct the Trustee to
instruct the applicable Loan Trustee to waive any past Indenture
Default and its consequences, except (i) a default in the
deposit of any Scheduled Payment or Special Payment or in the
distribution thereof, (ii) a default in payment of the
principal, premium, if any, or interest with respect to any of
the Equipment Notes and (iii) a default in respect of any
covenant or provision of the Pass Through Trust Agreement
that cannot be modified or amended without the consent of each
Certificateholder affected thereby. (Section 6.05) Each
Indenture will provide that, with certain exceptions, the
holders of the majority in aggregate unpaid principal amount of
the Equipment Notes issued thereunder may on behalf of all such
holders waive any past default or Indenture Default thereunder.
(Indentures, Section 5.06) Notwithstanding such provisions
of the Indentures, pursuant to the Intercreditor Agreement only
the Controlling Party will be entitled to waive any such past
default or Indenture Default. See Description of the
Intercreditor Agreement Intercreditor
Rights Controlling Party.
Purchase
Rights of Holders of Additional Junior Certificates
If Additional Junior Certificates are issued, upon the
occurrence and during the continuation of a Certificate Buyout
Event, with 15 days written notice to the Trustee and
each Certificateholder the holders of such Additional Junior
Certificates will have the right to purchase all but not less
than all of the Certificates on the third business day next
following the expiry of such
15-day
notice period. See Possible Issuance of Additional Junior
Certificates. If Continental or any of its affiliates is a
holder of Additional Junior Certificates, it will not have the
purchase rights described above. (Trust Supplement,
Section 4.01) In each case, the purchase price will be
equal to the Pool Balance of the Certificates plus accrued and
unpaid interest thereon to the date of purchase, without
premium, but including any other amounts then due and payable to
the Certificateholders.
A Certificate Buyout Event means that a Continental
Bankruptcy Event has occurred and is continuing and the
following events have occurred: (A) (i) the
60-day
period specified in Section 1110(a)(2)(A) of the
U.S. Bankruptcy Code (the
60-Day
Period) has expired and (ii) Continental has not
entered into one or more agreements under
Section 1110(a)(2)(A) of the U.S. Bankruptcy Code to
perform all of its obligations under all of the Indentures or,
if it has entered into such agreements, has at any time
thereafter failed to cure any default under any of the
Indentures in accordance with Section 1110(a)(2)(B) of the
Bankruptcy Code; or (B) if prior to the expiry of the
60-Day
Period, Continental shall have abandoned any Aircraft.
PTC Event
of Default
A Pass Through Certificate Event of Default (a PTC Event
of Default) under the Pass Through Trust Agreement
means the failure to pay:
|
|
|
|
|
The outstanding Pool Balance of the Certificates within ten
Business Days of the Final Maturity Date.
|
S-32
|
|
|
|
|
Interest due on the Certificates within ten Business Days of any
Distribution Date (unless the Subordination Agent shall have
made Interest Drawings, or withdrawals from the Cash Collateral
Account, with respect thereto in an aggregate amount sufficient
to pay such interest and shall have distributed such amount to
the Trustee). (Section 1.01)
|
Any failure to make expected principal distributions with
respect to the Certificates on any Regular Distribution Date
(other than the Final Maturity Date) will not constitute a PTC
Event of Default. A PTC Event of Default resulting from an
Indenture Default under all Indentures will constitute a
Triggering Event.
Merger,
Consolidation and Transfer of Assets
Continental will be prohibited from consolidating with or
merging into any other corporation or transferring substantially
all of its assets as an entirety to any other corporation unless:
|
|
|
|
|
The surviving successor or transferee corporation shall be
validly existing under the laws of the United States or any
state thereof or the District of Columbia.
|
|
|
|
The surviving successor or transferee corporation shall be a
citizen of the United States (as defined in
Title 49 of the United States Code relating to aviation
(the Transportation Code)) holding an air carrier
operating certificate issued pursuant to Chapter 447 of
Title 49, United States Code, if, and so long as, such
status is a condition of entitlement to the benefits of
Section 1110 of the U.S. Bankruptcy Code.
|
|
|
|
The surviving successor or transferee corporation shall
expressly assume all of the obligations of Continental contained
in the Basic Agreement and the Trust Supplement, the Note
Purchase Agreement, the Indentures, the Participation Agreements
and any other operative documents.
|
|
|
|
Continental shall have delivered a certificate and an opinion or
opinions of counsel indicating that such transaction, in effect,
complies with such conditions.
|
In addition, after giving effect to such transaction, no
Indenture Default shall have occurred and be continuing.
(Section 5.02; Indentures, Section 4.07)
The Basic Agreement, the Trust Supplement, the Note
Purchase Agreement, the Indentures and the Participation
Agreements will not contain any covenants or provisions that may
afford the Trustee or Certificateholders protection in the event
of a highly leveraged transaction, including transactions
effected by management or affiliates, which may or may not
result in a change in control of Continental.
Modifications
of the Pass Through Trust Agreement and Certain Other
Agreements
The Pass Through Trust Agreement contains provisions
permitting, at the request of Continental, the execution of
amendments or supplements to the Pass Through
Trust Agreement or, if applicable, to the Deposit
Agreement, the Escrow Agreement, the Intercreditor Agreement,
the Note Purchase Agreement or the Liquidity Facility, without
the consent of the holders of any of the Certificates:
|
|
|
|
|
To evidence the succession of another corporation to Continental
and the assumption by such corporation of Continentals
obligations under the Pass Through Trust Agreement or the
Note Purchase Agreement.
|
|
|
|
To add to the covenants of Continental for the benefit of
holders of the Certificates or to surrender any right or power
conferred upon Continental in the Pass Through
Trust Agreement, the Intercreditor Agreement, the Note
Purchase Agreement or the Liquidity Facility.
|
|
|
|
To correct or supplement any provision of the Pass Through Trust
Agreement, the Deposit Agreement, the Escrow Agreement, the
Intercreditor Agreement, the Note Purchase Agreement or the
Liquidity Facility which may be defective or inconsistent with
any other provision in the Pass Through Trust Agreement,
the Deposit Agreement, the Escrow Agreement, the Intercreditor
Agreement or the Liquidity Facility, as applicable, or to cure
any ambiguity or to modify any other provision with respect to
matters or questions arising under the Pass Through
Trust Agreement, the Deposit Agreement, the Escrow
Agreement, the Intercreditor Agreement, the Note Purchase
Agreement or the Liquidity Facility, provided that such action
shall not materially adversely affect the interests of the
holders of the Certificates; to correct any mistake in
|
S-33
|
|
|
|
|
the Pass Through Trust Agreement, the Deposit Agreement,
the Escrow Agreement, the Intercreditor Agreement or the
Liquidity Facility; or, as provided in the Intercreditor
Agreement, to give effect to or provide for a Replacement
Facility.
|
|
|
|
|
|
To comply with any requirement of the Commission, any applicable
law, rules or regulations of any exchange or quotation system on
which the Certificates are listed, or any regulatory body.
|
|
|
|
To modify, eliminate or add to the provisions of the Pass
Through Trust Agreement, the Deposit Agreement, the Escrow
Agreement, the Intercreditor Agreement, the Note Purchase
Agreement or the Liquidity Facility to such extent as shall be
necessary to continue the qualification of the Pass Through
Trust Agreement (including any supplemental agreement)
under the Trust Indenture Act of 1939, as amended (the
Trust Indenture Act), or any similar federal
statute enacted after the execution of the Pass Through
Trust Agreement, and to add to the Pass Through
Trust Agreement, the Deposit Agreement, the Escrow
Agreement, the Intercreditor Agreement, the Note Purchase
Agreement or the Liquidity Facility such other provisions as may
be expressly permitted by the Trust Indenture Act.
|
|
|
|
To evidence and provide for the acceptance of appointment under
the Pass Through Trust Agreement, the Deposit Agreement,
the Escrow Agreement, the Intercreditor Agreement, the Note
Purchase Agreement or the Liquidity Facility by a successor
Trustee and to add to or change any of the provisions of the
Pass Through Trust Agreement, the Deposit Agreement, the
Escrow Agreement, the Intercreditor Agreement, the Note Purchase
Agreement or the Liquidity Facility as shall be necessary to
provide for or facilitate the administration of the Trust under
the Basic Agreement by more than one Trustee.
|
|
|
|
To provide for the issuance of Additional Junior Certificates
after the Delivery Period Termination Date, subject to certain
terms and conditions. See Possible Issuance of Additional
Junior Certificates.
|
In each case, such modification or supplement may not adversely
affect the status of the Trust as a grantor trust under Subpart
E, Part I of Subchapter J of Chapter 1 of Subtitle A
of the Internal Revenue Code of 1986, as amended (the
Code), for U.S. federal income tax purposes.
(Section 9.01; Trust Supplement, Section 6.02)
The Pass Through Trust Agreement also contains provisions
permitting the execution, with the consent of the holders of the
Certificates evidencing fractional undivided interests
aggregating not less than a majority in interest of the Trust,
of amendments or supplements adding any provisions to or
changing or eliminating any of the provisions of the Pass
Through Trust Agreement, the Deposit Agreement, the Escrow
Agreement, the Intercreditor Agreement, the Note Purchase
Agreement or the Liquidity Facility to the extent applicable to
the Certificateholders or of modifying the rights and
obligations of the Certificateholders under the Pass Through
Trust Agreement, the Deposit Agreement, the Escrow
Agreement, the Intercreditor Agreement, the Note Purchase
Agreement or the Liquidity Facility. No such amendment or
supplement may, without the consent of the holder of each
Certificate so affected thereby:
|
|
|
|
|
Reduce in any manner the amount of, or delay the timing of, any
receipt by the Trustee (or, with respect to the Deposits, the
Receiptholders) of payments with respect to the Equipment Notes
held in the Trust or distributions in respect of any Certificate
(or, with respect to the Deposits, payments upon the Deposits),
or change the date or place of any payment in respect of any
Certificate, or make distributions payable in coin or currency
other than that provided for in such Certificates, or impair the
right of any Certificateholder to institute suit for the
enforcement of any such payment when due.
|
|
|
|
Permit the disposition of any Equipment Note held in the Trust,
except as provided in the Pass Through Trust Agreement, or
otherwise deprive such Certificateholder of the benefit of the
ownership of the applicable Equipment Notes.
|
|
|
|
Alter the priority of distributions specified in the
Intercreditor Agreement in a manner materially adverse to such
Certificateholders.
|
|
|
|
Reduce the percentage of the aggregate fractional undivided
interests of the Trust provided for in the Pass Through Trust
Agreement, the consent of the holders of which is required for
any such supplemental trust agreement or for any waiver provided
for in the Pass Through Trust Agreement.
|
S-34
|
|
|
|
|
Modify any of the provisions relating to the rights of the
Certificateholders in respect of the waiver of events of default
or receipt of payment.
|
|
|
|
Adversely affect the status of the Trust as a grantor trust
under Subpart E, Part I of Subchapter J of Chapter 1
of Subtitle A of the Code for U.S. federal income tax
purposes. (Section 9.02; Trust Supplement,
Section 6.03)
|
In the event that the Trustee, as holder (or beneficial owner
through the Subordination Agent) of any Equipment Note in trust
for the benefit of the Certificateholders or as Controlling
Party under the Intercreditor Agreement, receives (directly or
indirectly through the Subordination Agent) a request for a
consent to any amendment, modification, waiver or supplement
under any Indenture, any Participation Agreement, any Equipment
Note or any other related document, the Trustee shall forthwith
send a notice of such proposed amendment, modification, waiver
or supplement to each Certificateholder as of the date of such
notice, except in the case when consent of Certificateholders is
not required. The Trustee shall request from the
Certificateholders a direction as to:
|
|
|
|
|
Whether or not to take or refrain from taking (or direct the
Subordination Agent to take or refrain from taking) any action
which a holder of such Equipment Note or the Controlling Party
has the option to direct.
|
|
|
|
Whether or not to give or execute (or direct the Subordination
Agent to give or execute) any waivers, consents, amendments,
modifications or supplements as a holder of such Equipment Note
or as Controlling Party.
|
|
|
|
How to vote (or direct the Subordination Agent to vote) any
Equipment Note if a vote has been called for with respect
thereto.
|
Provided such a request for Certificateholder direction shall
have been made, in directing any action or casting any vote or
giving any consent as the holder of any Equipment Note (or in
directing the Subordination Agent in any of the foregoing):
|
|
|
|
|
Other than as Controlling Party, the Trustee shall vote for or
give consent to any such action with respect to such Equipment
Note in the same proportion as that of (x) the aggregate
face amount of all Certificates actually voted in favor of or
for giving consent to such action by such direction of
Certificateholders to (y) the aggregate face amount of all
outstanding Certificates.
|
|
|
|
As the Controlling Party, the Trustee shall vote as directed in
such Certificateholder direction by the Certificateholders
evidencing fractional undivided interests aggregating not less
than a majority in interest in the Trust.
|
For purposes of the immediately preceding paragraph, a
Certificate shall have been actually voted if the
Certificateholder has delivered to the Trustee an instrument
evidencing such Certificateholders consent to such
direction prior to one Business Day before the Trustee directs
such action or casts such vote or gives such consent.
Notwithstanding the foregoing, but subject to certain rights of
the Certificateholders under the Pass Through
Trust Agreement and subject to the Intercreditor Agreement,
the Trustee may, in its own discretion and at its own direction,
consent and notify the relevant Loan Trustee of such consent (or
direct the Subordination Agent to consent and notify the
relevant Loan Trustee of such consent) to any amendment,
modification, waiver or supplement under the relevant Indenture,
Participation Agreement, any relevant Equipment Note or any
other related document, if an Indenture Default under any
Indenture shall have occurred and be continuing, or if such
amendment, modification, waiver or supplement will not
materially adversely affect the interests of the
Certificateholders. (Section 10.01)
In determining whether the Certificateholders of the requisite
fractional undivided interests of Certificates have given any
direction under the Pass Through Trust Agreement,
Certificates owned by Continental or any of its affiliates will
be disregarded and deemed not to be outstanding for purposes of
any such determination. Notwithstanding the foregoing,
(i) if any such person owns 100% of the Certificates, such
Certificates shall not be so disregarded, and (ii) if any
amount of Certificates so owned by any such person have been
pledged in good faith, such Certificates shall not be
disregarded if the pledgee establishes to the satisfaction of
the Trustee the pledgees right so to act with respect to
such Certificates and that the pledgee is not Continental or an
affiliate of Continental.
S-35
Obligation
to Purchase Equipment Notes
The Trustee will be obligated to purchase the Equipment Notes
issued with respect to the Aircraft during the Delivery Period,
subject to the terms and conditions of a note purchase agreement
(the Note Purchase Agreement). Under the Note
Purchase Agreement, Continental agrees to enter into a secured
debt financing with respect to each Aircraft. The Note Purchase
Agreement provides for the relevant parties to enter into a
participation agreement (each, a Participation
Agreement) and an indenture (each, an
Indenture) relating to the financing of each
Aircraft in substantially the form attached to the Note Purchase
Agreement.
The description of such financing agreements in this Prospectus
Supplement is based on the forms of such agreements attached to
the Note Purchase Agreement. However, the terms of the financing
agreements actually entered into may differ from the forms of
such agreements and, consequently, may differ from the
description of such agreements contained in this Prospectus
Supplement. See Description of the Equipment Notes.
Although such changes are permitted, under the Note Purchase
Agreement, the terms of such agreements must not vary the
Required Terms. In addition, Continental is obligated to certify
to the Trustee that any substantive modifications do not
materially and adversely affect the Certificateholders.
Continental must also obtain written confirmation from each
Rating Agency that the use of financing agreements modified in
any material respect from the forms attached to the Note
Purchase Agreement will not result in a withdrawal, suspension
or downgrading of the rating of the Certificates. Further, under
the Note Purchase Agreement, it is a condition precedent to the
obligation of the Trustee to purchase the Equipment Notes
related to the financing of an Aircraft that no Triggering Event
shall have occurred and, in the case of certain currently-owned
Aircraft, that certain maintenance shall have been performed on
such Aircraft. See Description of the Aircraft and the
Appraisals Timing of Financing the Aircraft.
The Trustee will have no right or obligation to purchase
Equipment Notes after the Delivery Period Termination Date.
The Required Terms, as defined in the Note Purchase
Agreement, mandate that:
|
|
|
|
|
The initial principal amount and principal amortization schedule
for each of the Equipment Notes issued with respect to each
Aircraft shall be as set forth in the applicable table below for
that Aircraft (or, in the case of the Boeing 737-924ER Aircraft,
the applicable table for that model):
|
Boeing
777-224ER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N77006
|
|
|
N78009
|
|
|
N78013
|
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
Date
|
|
Ending Balance
|
|
|
of Principal
|
|
|
Ending Balance
|
|
|
of Principal
|
|
|
Ending Balance
|
|
|
of Principal
|
|
|
At Issuance
|
|
$
|
41,734,000.00
|
|
|
$
|
0.00
|
|
|
$
|
41,366,000.00
|
|
|
$
|
0.00
|
|
|
$
|
43,478,000.00
|
|
|
$
|
0.00
|
|
January 8, 2010
|
|
|
40,397,992.73
|
|
|
|
1,336,007.27
|
|
|
|
40,060,498.89
|
|
|
|
1,305,501.11
|
|
|
|
42,105,869.40
|
|
|
|
1,372,130.60
|
|
July 8, 2010
|
|
|
39,062,267.99
|
|
|
|
1,335,724.74
|
|
|
|
38,755,358.26
|
|
|
|
1,305,140.63
|
|
|
|
40,734,092.15
|
|
|
|
1,371,777.25
|
|
January 8, 2011
|
|
|
37,726,845.34
|
|
|
|
1,335,422.65
|
|
|
|
37,450,068.44
|
|
|
|
1,305,289.82
|
|
|
|
39,362,158.09
|
|
|
|
1,371,934.06
|
|
July 8, 2011
|
|
|
36,391,746.20
|
|
|
|
1,335,099.14
|
|
|
|
36,144,618.86
|
|
|
|
1,305,449.58
|
|
|
|
37,990,056.12
|
|
|
|
1,372,101.97
|
|
January 8, 2012
|
|
|
35,056,994.03
|
|
|
|
1,334,752.17
|
|
|
|
34,838,997.93
|
|
|
|
1,305,620.93
|
|
|
|
36,617,774.05
|
|
|
|
1,372,282.07
|
|
July 8, 2012
|
|
|
33,722,614.66
|
|
|
|
1,334,379.37
|
|
|
|
33,533,192.90
|
|
|
|
1,305,805.03
|
|
|
|
35,245,298.48
|
|
|
|
1,372,475.57
|
|
January 8, 2013
|
|
|
32,388,636.52
|
|
|
|
1,333,978.14
|
|
|
|
32,227,189.72
|
|
|
|
1,306,003.18
|
|
|
|
33,872,614.65
|
|
|
|
1,372,683.83
|
|
July 8, 2013
|
|
|
31,055,091.01
|
|
|
|
1,333,545.51
|
|
|
|
30,920,972.89
|
|
|
|
1,306,216.83
|
|
|
|
32,499,706.25
|
|
|
|
1,372,908.40
|
|
January 8, 2014
|
|
|
29,718,160.47
|
|
|
|
1,336,930.54
|
|
|
|
29,610,686.74
|
|
|
|
1,310,286.15
|
|
|
|
31,122,520.76
|
|
|
|
1,377,185.49
|
|
July 8, 2014
|
|
|
28,108,845.80
|
|
|
|
1,609,314.67
|
|
|
|
28,292,454.81
|
|
|
|
1,318,231.93
|
|
|
|
29,736,983.82
|
|
|
|
1,385,536.94
|
|
January 8, 2015
|
|
|
26,479,128.59
|
|
|
|
1,629,717.21
|
|
|
|
26,690,098.72
|
|
|
|
1,602,356.09
|
|
|
|
28,052,816.17
|
|
|
|
1,684,167.65
|
|
July 8, 2015
|
|
|
24,848,255.47
|
|
|
|
1,630,873.12
|
|
|
|
25,084,808.93
|
|
|
|
1,605,289.79
|
|
|
|
26,365,565.04
|
|
|
|
1,687,251.13
|
|
January 8, 2016
|
|
|
23,218,708.69
|
|
|
|
1,629,546.78
|
|
|
|
23,478,864.14
|
|
|
|
1,605,944.79
|
|
|
|
24,677,625.45
|
|
|
|
1,687,939.59
|
|
July 8, 2016
|
|
|
0.00
|
|
|
|
23,218,708.69
|
|
|
|
0.00
|
|
|
|
23,478,864.14
|
|
|
|
0.00
|
|
|
|
24,677,625.45
|
|
S-36
Boeing 757-224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N34131
|
|
|
N33132
|
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
Date
|
|
Ending Balance
|
|
|
of Principal
|
|
|
Ending Balance
|
|
|
of Principal
|
|
|
At Issuance
|
|
$
|
13,992,000.00
|
|
|
$
|
0.00
|
|
|
$
|
13,262,000.00
|
|
|
$
|
0.00
|
|
January 8, 2010
|
|
|
13,537,293.27
|
|
|
|
454,706.73
|
|
|
|
12,831,339.04
|
|
|
|
430,660.96
|
|
July 8, 2010
|
|
|
13,082,829.54
|
|
|
|
454,463.73
|
|
|
|
12,400,575.06
|
|
|
|
430,763.98
|
|
January 8, 2011
|
|
|
12,628,625.62
|
|
|
|
454,203.92
|
|
|
|
11,970,057.35
|
|
|
|
430,517.71
|
|
July 8, 2011
|
|
|
12,174,699.93
|
|
|
|
453,925.69
|
|
|
|
11,539,803.37
|
|
|
|
430,253.98
|
|
January 8, 2012
|
|
|
11,721,072.68
|
|
|
|
453,627.25
|
|
|
|
11,109,832.25
|
|
|
|
429,971.12
|
|
July 8, 2012
|
|
|
11,267,766.05
|
|
|
|
453,306.63
|
|
|
|
10,680,165.05
|
|
|
|
429,667.20
|
|
January 8, 2013
|
|
|
10,814,804.51
|
|
|
|
452,961.54
|
|
|
|
10,250,824.93
|
|
|
|
429,340.12
|
|
July 8, 2013
|
|
|
10,362,215.06
|
|
|
|
452,589.45
|
|
|
|
9,821,837.49
|
|
|
|
428,987.44
|
|
January 8, 2014
|
|
|
9,816,138.04
|
|
|
|
546,077.02
|
|
|
|
9,304,237.76
|
|
|
|
517,599.73
|
|
July 8, 2014
|
|
|
9,271,347.80
|
|
|
|
544,790.24
|
|
|
|
8,787,857.70
|
|
|
|
516,380.06
|
|
January 8, 2015
|
|
|
8,720,374.70
|
|
|
|
550,973.10
|
|
|
|
8,265,617.21
|
|
|
|
522,240.49
|
|
July 8, 2015
|
|
|
8,169,645.93
|
|
|
|
550,728.77
|
|
|
|
7,743,608.32
|
|
|
|
522,008.89
|
|
January 8, 2016
|
|
|
7,620,057.91
|
|
|
|
549,588.02
|
|
|
|
7,222,680.68
|
|
|
|
520,927.64
|
|
July 8, 2016
|
|
|
0.00
|
|
|
|
7,620,057.91
|
|
|
|
0.00
|
|
|
|
7,222,680.68
|
|
Boeing
737-924ER
|
|
|
|
|
|
|
|
|
|
|
N37437 / N78438 / N57439
|
|
|
|
N45440 / N53441 / N37434 / N53442
|
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
Date
|
|
Ending Balance
|
|
|
of Principal
|
|
|
At Issuance
|
|
$
|
28,258,000.00
|
|
|
$
|
0.00
|
|
January 8, 2010
|
|
|
28,258,000.00
|
|
|
|
0.00
|
|
July 8, 2010
|
|
|
28,258,000.00
|
|
|
|
0.00
|
|
January 8, 2011
|
|
|
28,258,000.00
|
|
|
|
0.00
|
|
July 8, 2011
|
|
|
27,704,698.56
|
|
|
|
553,301.44
|
|
January 8, 2012
|
|
|
27,150,947.11
|
|
|
|
553,751.45
|
|
July 8, 2012
|
|
|
26,597,195.67
|
|
|
|
553,751.44
|
|
January 8, 2013
|
|
|
26,043,444.22
|
|
|
|
553,751.45
|
|
July 8, 2013
|
|
|
25,489,692.78
|
|
|
|
553,751.44
|
|
January 8, 2014
|
|
|
24,935,941.33
|
|
|
|
553,751.45
|
|
July 8, 2014
|
|
|
24,382,189.89
|
|
|
|
553,751.44
|
|
January 8, 2015
|
|
|
23,828,438.44
|
|
|
|
553,751.45
|
|
July 8, 2015
|
|
|
23,274,687.00
|
|
|
|
553,751.44
|
|
January 8, 2016
|
|
|
22,720,935.56
|
|
|
|
553,751.44
|
|
July 8, 2016
|
|
|
0.00
|
|
|
|
22,720,935.56
|
|
S-37
Boeing
737-824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N26232
|
|
|
N35236
|
|
|
N14240
|
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
Date
|
|
Ending Balance
|
|
|
of Principal
|
|
|
Ending Balance
|
|
|
of Principal
|
|
|
Ending Balance
|
|
|
of Principal
|
|
|
At Issuance
|
|
$
|
14,834,000.00
|
|
|
$
|
0.00
|
|
|
$
|
15,510,000.00
|
|
|
$
|
0.00
|
|
|
$
|
15,510,000.00
|
|
|
$
|
0.00
|
|
January 8, 2010
|
|
|
14,365,531.91
|
|
|
|
468,468.09
|
|
|
|
15,020,689.65
|
|
|
|
489,310.35
|
|
|
|
15,027,590.08
|
|
|
|
482,409.92
|
|
July 8, 2010
|
|
|
13,897,513.79
|
|
|
|
468,018.12
|
|
|
|
14,531,326.99
|
|
|
|
489,362.66
|
|
|
|
14,544,977.13
|
|
|
|
482,612.95
|
|
January 8, 2011
|
|
|
13,429,442.17
|
|
|
|
468,071.62
|
|
|
|
14,041,908.39
|
|
|
|
489,418.60
|
|
|
|
14,062,147.09
|
|
|
|
482,830.04
|
|
July 8, 2011
|
|
|
12,961,313.26
|
|
|
|
468,128.91
|
|
|
|
13,552,429.89
|
|
|
|
489,478.50
|
|
|
|
13,579,084.58
|
|
|
|
483,062.51
|
|
January 8, 2012
|
|
|
12,493,122.91
|
|
|
|
468,190.35
|
|
|
|
13,062,887.14
|
|
|
|
489,542.75
|
|
|
|
13,095,772.73
|
|
|
|
483,311.85
|
|
July 8, 2012
|
|
|
12,024,866.54
|
|
|
|
468,256.37
|
|
|
|
12,573,275.36
|
|
|
|
489,611.78
|
|
|
|
12,612,192.98
|
|
|
|
483,579.75
|
|
January 8, 2013
|
|
|
11,556,539.11
|
|
|
|
468,327.43
|
|
|
|
12,083,589.29
|
|
|
|
489,686.07
|
|
|
|
12,128,324.91
|
|
|
|
483,868.07
|
|
July 8, 2013
|
|
|
11,088,135.08
|
|
|
|
468,404.03
|
|
|
|
11,593,823.11
|
|
|
|
489,766.18
|
|
|
|
11,644,145.94
|
|
|
|
484,178.97
|
|
January 8, 2014
|
|
|
10,618,271.79
|
|
|
|
469,863.29
|
|
|
|
11,102,531.13
|
|
|
|
491,291.98
|
|
|
|
11,158,184.64
|
|
|
|
485,961.30
|
|
July 8, 2014
|
|
|
10,145,559.19
|
|
|
|
472,712.60
|
|
|
|
10,608,259.88
|
|
|
|
494,271.25
|
|
|
|
10,668,955.58
|
|
|
|
489,229.06
|
|
January 8, 2015
|
|
|
9,570,960.81
|
|
|
|
574,598.38
|
|
|
|
10,007,456.24
|
|
|
|
600,803.64
|
|
|
|
10,167,226.95
|
|
|
|
501,728.63
|
|
July 8, 2015
|
|
|
8,995,310.42
|
|
|
|
575,650.39
|
|
|
|
9,405,552.61
|
|
|
|
601,903.63
|
|
|
|
9,569,340.51
|
|
|
|
597,886.44
|
|
January 8, 2016
|
|
|
8,419,425.15
|
|
|
|
575,885.27
|
|
|
|
8,803,403.39
|
|
|
|
602,149.22
|
|
|
|
8,970,500.95
|
|
|
|
598,839.56
|
|
July 8, 2016
|
|
|
0.00
|
|
|
|
8,419,425.15
|
|
|
|
0.00
|
|
|
|
8,803,403.39
|
|
|
|
0.00
|
|
|
|
8,970,500.95
|
|
Boeing
737-724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N24729
|
|
|
N16732
|
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
Date
|
|
Ending Balance
|
|
|
of Principal
|
|
|
Ending Balance
|
|
|
of Principal
|
|
|
At Issuance
|
|
$
|
12,225,000.00
|
|
|
$
|
0.00
|
|
|
$
|
11,913,000.00
|
|
|
$
|
0.00
|
|
January 8, 2010
|
|
|
11,839,002.20
|
|
|
|
385,997.80
|
|
|
|
11,537,168.01
|
|
|
|
375,831.99
|
|
July 8, 2010
|
|
|
11,453,296.50
|
|
|
|
385,705.70
|
|
|
|
11,161,295.84
|
|
|
|
375,872.17
|
|
January 8, 2011
|
|
|
11,067,546.70
|
|
|
|
385,749.80
|
|
|
|
10,785,380.70
|
|
|
|
375,915.14
|
|
July 8, 2011
|
|
|
10,681,749.70
|
|
|
|
385,797.00
|
|
|
|
10,409,419.55
|
|
|
|
375,961.15
|
|
January 8, 2012
|
|
|
10,295,902.06
|
|
|
|
385,847.64
|
|
|
|
10,033,409.05
|
|
|
|
376,010.50
|
|
July 8, 2012
|
|
|
9,910,000.01
|
|
|
|
385,902.05
|
|
|
|
9,657,345.54
|
|
|
|
376,063.51
|
|
January 8, 2013
|
|
|
9,524,039.41
|
|
|
|
385,960.60
|
|
|
|
9,281,224.96
|
|
|
|
376,120.58
|
|
July 8, 2013
|
|
|
9,138,015.66
|
|
|
|
386,023.75
|
|
|
|
8,905,042.85
|
|
|
|
376,182.11
|
|
January 8, 2014
|
|
|
8,750,789.31
|
|
|
|
387,226.35
|
|
|
|
8,527,688.80
|
|
|
|
377,354.05
|
|
July 8, 2014
|
|
|
8,361,214.76
|
|
|
|
389,574.55
|
|
|
|
8,148,046.42
|
|
|
|
379,642.38
|
|
January 8, 2015
|
|
|
7,887,673.55
|
|
|
|
473,541.21
|
|
|
|
7,686,578.09
|
|
|
|
461,468.33
|
|
July 8, 2015
|
|
|
7,413,265.35
|
|
|
|
474,408.20
|
|
|
|
7,224,264.88
|
|
|
|
462,313.21
|
|
January 8, 2016
|
|
|
6,938,663.57
|
|
|
|
474,601.78
|
|
|
|
6,761,763.03
|
|
|
|
462,501.85
|
|
July 8, 2016
|
|
|
0.00
|
|
|
|
6,938,663.57
|
|
|
|
0.00
|
|
|
|
6,761,763.03
|
|
S-38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N14735
|
|
|
N24736
|
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
|
Equipment Note
|
|
|
Scheduled Payment
|
|
Date
|
|
Ending Balance
|
|
|
of Principal
|
|
|
Ending Balance
|
|
|
of Principal
|
|
|
At Issuance
|
|
$
|
12,181,000.00
|
|
|
$
|
0.00
|
|
|
$
|
12,392,000.00
|
|
|
$
|
0.00
|
|
January 8, 2010
|
|
|
11,796,390.31
|
|
|
|
384,609.69
|
|
|
|
12,000,572.27
|
|
|
|
391,427.73
|
|
July 8, 2010
|
|
|
11,412,072.87
|
|
|
|
384,317.44
|
|
|
|
11,609,602.73
|
|
|
|
390,969.54
|
|
January 8, 2011
|
|
|
11,027,711.51
|
|
|
|
384,361.36
|
|
|
|
11,218,588.51
|
|
|
|
391,014.22
|
|
July 8, 2011
|
|
|
10,643,303.09
|
|
|
|
384,408.42
|
|
|
|
10,827,526.43
|
|
|
|
391,062.08
|
|
January 8, 2012
|
|
|
10,258,844.22
|
|
|
|
384,458.87
|
|
|
|
10,436,413.02
|
|
|
|
391,113.41
|
|
July 8, 2012
|
|
|
9,874,331.15
|
|
|
|
384,513.07
|
|
|
|
10,045,244.46
|
|
|
|
391,168.56
|
|
January 8, 2013
|
|
|
9,489,759.72
|
|
|
|
384,571.43
|
|
|
|
9,654,016.55
|
|
|
|
391,227.91
|
|
July 8, 2013
|
|
|
9,105,125.38
|
|
|
|
384,634.34
|
|
|
|
9,262,724.63
|
|
|
|
391,291.92
|
|
January 8, 2014
|
|
|
8,719,292.77
|
|
|
|
385,832.61
|
|
|
|
8,870,213.70
|
|
|
|
392,510.93
|
|
July 8, 2014
|
|
|
8,331,120.41
|
|
|
|
388,172.36
|
|
|
|
8,475,322.52
|
|
|
|
394,891.18
|
|
January 8, 2015
|
|
|
7,859,283.60
|
|
|
|
471,836.81
|
|
|
|
7,995,318.76
|
|
|
|
480,003.76
|
|
July 8, 2015
|
|
|
7,386,582.93
|
|
|
|
472,700.67
|
|
|
|
7,514,436.18
|
|
|
|
480,882.58
|
|
January 8, 2016
|
|
|
6,913,689.38
|
|
|
|
472,893.55
|
|
|
|
7,033,357.39
|
|
|
|
481,078.79
|
|
July 8, 2016
|
|
|
0.00
|
|
|
|
6,913,689.38
|
|
|
|
0.00
|
|
|
|
7,033,357.39
|
|
|
|
|
|
|
The interest rate applicable to the Equipment Notes must be
equal to the rate applicable to the Certificates.
|
|
|
|
|
|
The payment dates for the Equipment Notes must be January 8 and
July 8.
|
|
|
|
The amounts payable under the all-risk aircraft hull insurance
maintained with respect to each Aircraft must be sufficient to
pay the unpaid principal amount of the related Equipment Notes
together with six months of interest accrued thereon, subject to
certain rights of self-insurance.
|
|
|
|
(a) The past due rate in the Indentures, (b) the
Make-Whole Premium payable under the Indentures, (c) the
provisions relating to the redemption of Equipment Notes in the
Indentures and (d) the indemnification of the Loan
Trustees, Subordination Agent, Liquidity Provider, Trustee,
Escrow Agent and registered holders of the Equipment Notes (in
such capacity, the Note Holders) with respect to
certain taxes and expenses, in each case shall be provided as
set forth in the form of Participation Agreement attached as an
exhibit to the Note Purchase Agreement.
|
|
|
|
In the case of the Indentures, modifications are prohibited
(i) to the Granting Clause of the Indentures so as to
deprive the Note Holders under all the Indentures of a first
priority security interest in the Aircraft and certain of
Continentals rights under warranties with respect to the
Aircraft or to eliminate the obligations intended to be secured
thereby, (ii) to certain provisions relating to the
issuance, redemption, payments, and ranking of the Equipment
Notes (including the obligation to pay the Make-Whole Premium in
certain circumstances), (iii) to certain provisions
regarding Indenture Defaults (including cross-defaults among
Indentures) and remedies relating thereto, (iv) to certain
provisions relating to any replaced airframe or engines with
respect to an Aircraft and (v) to the provision that New
York law will govern the Indentures.
|
|
|
|
In the case of the Participation Agreements, modifications are
prohibited (i) to certain conditions to the obligations of
the Trustee to purchase the Equipment Notes issued with respect
to an Aircraft involving good title to such Aircraft, the
release of any recorded liens on the Aircraft, obtaining a
certificate of airworthiness with respect to such Aircraft,
entitlement to the benefits of Section 1110 with respect to
such Aircraft and filings of certain documents with the FAA and
the registration of certain interests with the International
Registry under the Cape Town Treaty, (ii) to the provisions
restricting the Note Holders ability to transfer such
Equipment Notes, (iii) to certain provisions requiring the
delivery of legal opinions and (iv) to the provision that
New York law will govern the Participation Agreement.
|
|
|
|
In the case of all of the Participation Agreements and
Indentures, modifications are prohibited in any material adverse
respect as regards the interest of the Note Holders, the
Subordination Agent, the Liquidity Provider or the Loan Trustee
in the definition of Make-Whole Premium.
|
S-39
Notwithstanding the foregoing, any such forms of financing
agreements may be modified to correct or supplement any such
provision which may be defective or to cure any ambiguity or
correct any mistake, provided that any such action shall not
materially adversely affect the interests of the Note Holders,
the Subordination Agent, the Liquidity Provider, the Loan
Trustee or the Certificateholders.
Liquidation
of Original Trust
On the earlier of (i) the first Business Day after
December 31, 2009 and (ii) the fifth Business Day
after the occurrence of a Triggering Event (such Business Day,
the Transfer Date), the Trust established on the
Issuance Date (the Original Trust) will transfer and
assign all of its assets and rights to a newly created successor
trust (the Successor Trust) with substantially
identical terms, except that (i) the Successor Trust will
not have the right to purchase new Equipment Notes and
(ii) Delaware law will govern the Original Trust and New
York law will govern the Successor Trust. The institution acting
as Trustee of the Original Trust (the Original
Trustee) will also act as Trustee of the Successor Trust
(the New Trustee). The New Trustee will assume the
obligations of the Original Trustee under each transaction
document to which the Original Trustee was a party. Upon the
effectiveness of such transfer, assignment and assumption, the
Original Trust will be liquidated and each of the Certificates
will represent the same percentage interest in the Successor
Trust as it represented in the Original Trust immediately prior
to such transfer, assignment and assumption. Unless the context
otherwise requires, all references in this Prospectus Supplement
to the Trust, the Trustee, the Pass Through Trust Agreement
and similar terms shall apply to the Original Trust until the
effectiveness of such transfer, assignment and assumption, and
thereafter shall be applicable with respect to the Successor
Trust. If for any reason such transfer, assignment and
assumption cannot be effected to the Successor Trust, the
Original Trust will continue in existence until it is effected.
The Original Trust may be treated as a partnership for
U.S. federal income tax purposes. The Successor Trust will,
in the opinion of Tax Counsel, be treated as a grantor trust.
See Certain U.S. Federal Income Tax
Consequences.
Termination
of the Trust
The obligations of Continental and the Trustee with respect to
the Trust will terminate upon the distribution to
Certificateholders of all amounts required to be distributed to
them pursuant to the Pass Through Trust Agreement and the
disposition of all property held in the Trust. The Trustee will
send to each Certificateholder notice of the termination of the
Trust, the amount of the proposed final payment and the proposed
date for the distribution of such final payment. The final
distribution to any Certificateholder will be made only upon
surrender of such Certificateholders Certificates at the
office or agency of the Trustee specified in such notice of
termination. (Trust Supplement, Section 7.01)
The
Trustee
The Trustee will be Wilmington Trust Company. The
Trustees address is Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001,
Attention: Corporate Trust Administration.
Book-Entry;
Delivery and Form
General
Upon issuance, the Certificates will be represented by one or
more fully registered global certificates. Each global
certificate will be deposited with, or on behalf of, The
Depository Trust Company (DTC) and registered
in the name of Cede & Co. (Cede), the
nominee of DTC. DTC was created to hold securities for its
participants (DTC Participants) and facilitate the
clearance and settlement of securities transactions between DTC
Participants through electronic book-entry changes in accounts
of the DTC Participants, thereby eliminating the need for
physical movement of certificates. DTC Participants include
securities brokers and dealers, banks, trust companies and
clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either
directly or indirectly (Indirect DTC Participants).
Interests in a global certificate may also be held through the
Euroclear System and Clearstream, Luxembourg.
So long as such book-entry procedures are applicable, no person
acquiring an interest in the Certificates (Certificate
Owner) will be entitled to receive a certificate
representing such persons interest in the Certificates.
S-40
Unless and until definitive Certificates are issued under the
limited circumstances described below under
Physical Certificates, all references to
actions by Certificateholders shall refer to actions taken by
DTC upon instructions from DTC Participants, and all references
herein to distributions, notices, reports and statements to
Certificateholders shall refer, as the case may be, to
distributions, notices, reports and statements to DTC or Cede,
as the registered holder of such Certificates, or to DTC
Participants for distribution to Certificate Owners in
accordance with DTC procedures.
DTC is a limited purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve
System, a clearing corporation within the meaning of
the New York Uniform Commercial Code and clearing
agency registered pursuant to Section 17A of the
Securities Exchange Act of 1934.
Under the New York Uniform Commercial Code, a clearing
corporation is defined as:
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a person that is registered as a clearing agency
under the federal securities laws;
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a federal reserve bank; or
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any other person that provides clearance or settlement services
with respect to financial assets that would require it to
register as a clearing agency under the federal securities laws
but for an exclusion or exemption from the registration
requirement, if its activities as a clearing corporation,
including promulgation of rules, are subject to regulation by a
federal or state governmental authority.
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A clearing agency is an organization established for
the execution of trades by transferring funds, assigning
deliveries and guaranteeing the performance of the obligations
of parties to trades.
Under the rules, regulations and procedures creating and
affecting DTC and its operations, DTC is required to make
book-entry transfers of the Certificates among DTC Participants
on whose behalf it acts with respect to the Certificates and to
receive and transmit distributions of principal, premium, if
any, and interest with respect to the Certificates. DTC
Participants and Indirect DTC Participants with which
Certificate Owners have accounts similarly are required to make
book-entry transfers and receive and transmit the payments on
behalf of their respective customers. Certificate Owners that
are not DTC Participants or Indirect DTC Participants but desire
to purchase, sell or otherwise transfer ownership of, or other
interests in, the Certificates may do so only through DTC
Participants and Indirect DTC Participants. In addition,
Certificate Owners will receive all distributions of principal,
premium, if any, and interest from the Trustee through DTC
Participants or Indirect DTC Participants, as the case may be.
Under a book-entry format, Certificate Owners may experience
some delay in their receipt of payments, because payments with
respect to the Certificates will be forwarded by the Trustee to
Cede, as nominee for DTC. DTC will forward payments in
same-day
funds to each DTC Participant who is credited with ownership of
the Certificates in an amount proportionate to the principal
amount of that DTC Participants holdings of beneficial
interests in the Certificates, as shown on the records of DTC or
its nominee. Each such DTC Participant will forward payments to
its Indirect DTC Participants in accordance with standing
instructions and customary industry practices. DTC Participants
and Indirect DTC Participants will be responsible for forwarding
distributions to Certificate Owners for whom they act.
Accordingly, although Certificate Owners will not possess
physical Certificates, DTCs rules provide a mechanism by
which Certificate Owners will receive payments on the
Certificates and will be able to transfer their interests.
Unless and until physical Certificates are issued under the
limited circumstances described under Physical
Certificates below, the only physical Certificateholder
will be Cede, as nominee of DTC. Certificate Owners will not be
recognized by the Trustee as registered owners of Certificates
under the Pass Through Trust Agreement. Certificate Owners
will be permitted to exercise their rights under the Pass
Through Trust Agreement only indirectly through DTC. DTC
will take any action permitted to be taken by a
Certificateholder under the Pass Through Trust Agreement
only at the direction of one or more DTC Participants to whose
accounts with DTC the Certificates are credited. In the event
any action requires approval by Certificateholders of a certain
percentage of the beneficial interests in the Trust, DTC will
take action only at the direction of and on behalf of DTC
Participants whose holdings include undivided interests that
satisfy the required percentage. DTC may take conflicting
actions with respect to other undivided interests to the extent
that the actions are taken on behalf of DTC Participants whose
holdings include those undivided interests. DTC will convey
notices and other communications to DTC Participants, and DTC
Participants will convey notices and other communications to
Indirect DTC Participants in
S-41
accordance with arrangements among them. Arrangements among DTC
and its direct and indirect participants are subject to any
statutory or regulatory requirements as may be in effect from
time to time. DTCs rules applicable to itself and DTC
Participants are on file with the Commission.
A Certificate Owners ability to pledge its Certificates to
persons or entities that do not participate in the DTC system,
or otherwise to act with respect to its Certificates, may be
limited due to the lack of a physical Certificate to evidence
ownership of the Certificates, and because DTC can only act on
behalf of DTC Participants, who in turn act on behalf of
Indirect DTC Participants.
Neither Continental nor the Trustee will have any liability for
any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Certificates
held by Cede, as nominee for DTC, for maintaining, supervising
or reviewing any records relating to the beneficial ownership
interests or for the performance by DTC, any DTC Participant or
any Indirect DTC Participant of their respective obligations
under the rules and procedures governing their obligations.
As long as the Certificates are registered in the name of DTC or
its nominee, Continental will make all payments to the Loan
Trustee under the applicable Indenture in immediately available
funds. The Trustee will pass through to DTC in immediately
available funds all payments received from Continental,
including the final distribution of principal with respect to
the Certificates.
Any Certificates registered in the name of DTC or its nominee
will trade in DTCs
Same-Day
Funds Settlement System until maturity. DTC will require
secondary market trading activity in the Certificates to settle
in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in
same-day
funds on trading activity in the Certificates.
Physical
Certificates
Physical Certificates will be issued in paper form to
Certificateholders or their nominees, rather than to DTC or its
nominee, only if:
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Continental advises the Trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as
depository with respect to the Certificates and Continental is
unable to locate a qualified successor;
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Continental elects to terminate the book-entry system through
DTC; or
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after the occurrence of a PTC Event of Default, Certificate
Owners owning at least a majority in interest in the Trust
advise the Trustee, Continental and DTC through DTC Participants
that the continuation of a book-entry system through DTC or a
successor to DTC is no longer in the Certificate Owners
best interest.
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Upon the occurrence of any of the events described in the three
subparagraphs above, the Trustee will notify all Certificate
Owners through DTC Participants of the availability of physical
Certificates. Upon surrender by DTC of the global Certificates
and receipt of instructions for re-registration, the Trustee
will reissue the Certificates as physical Certificates to the
applicable Certificate Owners.
In the case of the physical Certificates that are issued, the
Trustee or a paying agent will make distributions of principal,
premium, if any, and interest with respect to such Certificates
directly to holders in whose names the physical Certificates
were registered at the close of business on the applicable
record date. Except for the final payment to be made with
respect to a Certificate, the Trustee or a paying agent will
make distributions by check mailed to the addresses of the
registered holders as they appear on the register maintained by
the Trustee. The Trustee or a paying agent will make the final
payment with respect to any Certificate only upon presentation
and surrender of the applicable Certificate at the office or
agency specified in the notice of final distribution to
Certificateholders.
Physical Certificates will be freely transferable and
exchangeable at the office of the Trustee upon compliance with
the requirements set forth in the Pass Through
Trust Agreement. Neither the Trustee nor any transfer or
exchange agent will impose a service charge for any registration
of transfer or exchange. However, the Trustee or transfer or
exchange agent will require payment of a sum sufficient to cover
any tax or other governmental charge attributable to a transfer
or exchange.
S-42
DESCRIPTION
OF THE DEPOSIT AGREEMENT
The following summary describes the material terms of the
Deposit Agreement. The summary does not purport to be complete
and is qualified in its entirety by reference to all of the
provisions of the Deposit Agreement, which will be filed as an
exhibit to a Current Report on
Form 8-K
to be filed by Continental with the Commission.
General
Under the Escrow Agreement, the Escrow Agent will enter into a
Deposit Agreement with the Depositary (the Deposit
Agreement). Pursuant to the Escrow Agreement, the
Depositary will establish separate accounts into which the
proceeds of the Offering attributable to Certificates will be
deposited (each, a Deposit) on behalf of the Escrow
Agent. Pursuant to the Deposit Agreement, on each Regular
Distribution Date the Depositary will pay to the Paying Agent on
behalf of the Escrow Agent, for distribution to the
Certificateholders, an amount equal to interest accrued on the
Deposits during the relevant interest period at a rate per annum
equal to the interest rate applicable to the Certificates. After
the Issuance Date, upon each financing of an Aircraft during the
Delivery Period, the Trustee will request the Escrow Agent to
withdraw from the Deposits funds sufficient to enable the
Trustee to purchase the Equipment Note issued with respect to
such Aircraft. Accrued but unpaid interest on all such Deposits
withdrawn will be paid on the next Regular Distribution Date.
Any portion of any Deposit withdrawn that is not used to
purchase such Equipment Note will be re-deposited by the Trustee
into an account relating to the Trust. The Deposits and interest
paid thereon will not be subject to the subordination provisions
of the Intercreditor Agreement and will not be available to pay
any other amount in respect of the Certificates.
Unused
Deposits
The Trustees obligations to purchase the Equipment Notes
issued with respect to each Aircraft are subject to satisfaction
of certain conditions at the time of financing, as set forth in
the Note Purchase Agreement. See Description of the
Certificates Obligation to Purchase Equipment
Notes. Since the Aircraft are expected to be financed from
time to time during the Delivery Period, no assurance can be
given that all such conditions will be satisfied at the time of
financing for each such Aircraft. Moreover, since the Boeing
737-924ER
Aircraft will be newly manufactured, their delivery as scheduled
is subject to delays in the manufacturing process and to the
Aircraft manufacturers right to postpone deliveries under
its agreement with Continental. See Description of the
Aircraft and Appraisals Timing of Financing the
Aircraft.
If any funds remain as Deposits at the end of the Delivery
Period or, if earlier, upon the acquisition by the Trust of the
Equipment Notes with respect to all of the Aircraft (the
Delivery Period Termination Date), such funds will
be withdrawn by the Escrow Agent and distributed, with accrued
and unpaid interest thereon but without premium, to the
Certificateholders after at least 15 days prior
written notice.
Distribution
Upon Occurrence of Triggering Event
If a Triggering Event shall occur prior to the Delivery Period
Termination Date, the Escrow Agent will withdraw any funds then
held as Deposits and cause such funds, with accrued and unpaid
interest thereon but without any premium, to be distributed to
the Certificateholders by the Paying Agent on behalf of the
Escrow Agent, after at least 15 days prior written
notice. Accordingly, if a Triggering Event occurs prior to the
Delivery Period Termination Date, the Trust will not acquire
Equipment Notes issued with respect to Aircraft available to be
financed after the occurrence of such Triggering Event.
Replacement
of Depositary
If the Depositarys short-term unsecured debt rating or
short-term issuer credit rating issued by either Rating Agency
falls below the Depositary Threshold Rating, then Continental
must, within 30 days of such event occurring, replace the
Depositary with a new depositary bank that has a short-term
unsecured debt rating or short-term issuer credit rating issued
by each Rating Agency equal to or higher than the Depositary
Threshold Rating, subject to receipt of written confirmation
from each Rating Agency that such replacement will not result in
a withdrawal, suspension or downgrading of the ratings for the
Certificates then rated by such Rating Agency without regard to
any downgrading of any rating of the Depositary being replaced.
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At any time during the Delivery Period, Continental may replace
the Depositary, or the Depositary may replace itself, with a new
depositary bank that has a short-term unsecured debt rating or
short-term issuer credit rating issued by each Rating Agency
equal to or higher than the Depositary Threshold Rating, subject
to receipt of written confirmation from each Rating Agency that
such replacement will not result in a withdrawal, suspension or
downgrading of the ratings for the Certificates then rated by
such Rating Agency.
Depositary Threshold Rating means the short-term
unsecured debt rating of
P-1 by
Moodys and the short-term issuer credit rating of
A-1+ by
Standard & Poors.
Depositary
The Bank of New York Mellon (the Bank) will act as
depositary (the Depositary). The Bank is a New York
State chartered bank that formerly was named The Bank of
New York. The Bank has total assets of approximately
$163.0 billion and total equity capital of approximately
$12.3 billion, in each case at March 31, 2009. The
Bank is a wholly-owned subsidiary of The Bank of New York Mellon
Corporation.
The Bank has long-term senior debt ratings of Aaa from
Moodys Investors Service, Inc. (Moodys),
AA from Standard & Poors Ratings Services, a
Standard & Poors Financial Services LLC business
(Standard & Poors, and together with
Moodys, the Rating Agencies) and AA- from
Fitch Ratings (Fitch), and short-term deposit
ratings of P1 from Moodys,
A-1+ from
Standard & Poors and F1+ from Fitch.
The Banks principal office is located at One Wall Street,
New York, New York 10286, and its telephone number is
212-495-1784.
A copy of the most recent filings of The Bank of New York Mellon
Corporation with the Commission, including its Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
may be obtained from The Bank of New York Mellon
Corporations Public Relations Department, One Wall Street,
31st Floor,
(212) 635-1569
or from the Commission at
http://www.sec.gov.
The information that The Bank of New York Mellon Corporation and
affiliates, including the Bank, file with the Commission is not
part of, and is not incorporated by reference in, this
Prospectus Supplement.
S-44
DESCRIPTION
OF THE ESCROW AGREEMENT
The following summary describes the material terms of the escrow
and paying agent agreement (the Escrow Agreement).
The summary does not purport to be complete and is qualified in
its entirety by reference to all of the provisions of the Escrow
Agreement, which will be filed as an exhibit to a Current Report
on
Form 8-K
to be filed by Continental with the Commission.
Wells Fargo Bank Northwest, N.A., as escrow agent (the
Escrow Agent), Wilmington Trust Company, as
paying agent on behalf of the Escrow Agent (the Paying
Agent), the Trustee and the Underwriters will enter into
the Escrow Agreement for the benefit of the Certificateholders
as holders of the Escrow Receipts affixed thereto (in such
capacity, a Receiptholder). The cash proceeds of the
offering of Certificates will be deposited on behalf of the
Escrow Agent (for the benefit of Receiptholders) with the
Depositary as Deposits. The Escrow Agent shall permit the
Trustee to cause funds to be withdrawn from such Deposits on or
prior to the Delivery Period Termination Date to allow the
Trustee to purchase the related Equipment Notes pursuant to the
Note Purchase Agreement. In addition, the Escrow Agent shall
direct the Depositary to pay interest on the Deposits accrued in
accordance with the Deposit Agreement to the Paying Agent for
distribution to the Receiptholders.
The Escrow Agreement requires that the Paying Agent establish
and maintain, for the benefit of the related Receiptholders, one
or more Paying Agent Account(s), which shall be
non-interest-bearing. The Paying Agent shall deposit interest on
Deposits and any unused Deposits withdrawn by the Escrow Agent
in the related Paying Agent Account. The Paying Agent shall
distribute these amounts on a Regular Distribution Date or
Special Distribution Date, as appropriate.
Upon receipt by the Depositary of cash proceeds from this
Offering, the Escrow Agent will issue one or more escrow
receipts (Escrow Receipts) which will be affixed by
the Trustee to each Certificate. Each Escrow Receipt evidences
the related Receiptholders interest in amounts from time
to time deposited into the Paying Agent Account and is limited
in recourse to amounts deposited into such account. An Escrow
Receipt may not be assigned or transferred except in connection
with the assignment or transfer of the Certificate to which it
is affixed. Each Escrow Receipt will be registered by the Escrow
Agent in the same name and manner as the Certificate to which it
is affixed.
Each Receiptholder shall have the right (individually and
without the need for any other action of any person, including
the Escrow Agent or any other Receiptholder), upon any default
in the payment of interest on the Deposits when due by the
Depositary in accordance with the Deposit Agreement, or upon any
default in the payment of the final withdrawal when due by the
Depositary in accordance with the terms of the Deposit Agreement
and Escrow Agreement, to proceed directly against the
Depositary. The Escrow Agent will notify Receiptholders in the
event of a default in any such payment and will promptly forward
to Receiptholders upon receipt copies of all written
communications relating to any payments due to the
Receiptholders in respect of the Deposits.
S-45
DESCRIPTION
OF THE LIQUIDITY FACILITY
The following summary describes the material terms of the
Liquidity Facility and certain provisions of the Intercreditor
Agreement relating to the Liquidity Facility. The summary does
not purport to be complete and is qualified in its entirety by
reference to all of the provisions of the Liquidity Facility and
the Intercreditor Agreement, each of which will be filed as an
exhibit to a Current Report on
Form 8-K
to be filed by Continental with the Commission.
General
Goldman Sachs Bank USA (the Liquidity Provider) will
enter into a revolving credit agreement (the Liquidity
Facility) with the Subordination Agent with respect to the
Trust. On any Regular Distribution Date, if, after giving effect
to the subordination provisions of the Intercreditor Agreement,
the Subordination Agent does not have sufficient funds for the
payment of interest on the Certificates, the Liquidity Provider
under the Liquidity Facility will make an advance (an
Interest Drawing) in the amount needed to fund such
interest shortfall up to the Maximum Available Commitment. The
maximum amount of Interest Drawings available under the
Liquidity Facility is expected to provide an amount sufficient
to pay interest on the Certificates on up to three consecutive
semiannual Regular Distribution Dates (without regard to any
expected future payments of principal on the Certificates) at
the interest rate shown on the cover page of this Prospectus
Supplement for the Certificates (the Stated Interest
Rate). The Subordination Agent is obligated to pay the
Liquidity Provider a commitment fee on the Maximum Commitment at
a rate of 2% per annum. If interest payment defaults occur which
exceed the amount covered by and available under the Liquidity
Facility, the Certificateholders will bear their allocable share
of the deficiencies to the extent that there are no other
sources of funds. The initial Liquidity Provider may be replaced
by one or more other entities under certain circumstances.
Drawings
The aggregate amount available under the Liquidity Facility at
January 8, 2010, the first Regular Distribution Date,
assuming that all Aircraft will be financed under the Offering
prior to January 8, 2010, will be
$ .
Except as otherwise provided below, the Liquidity Facility will
enable the Subordination Agent to make Interest Drawings
thereunder promptly on or after any Regular Distribution Date
if, after giving effect to the subordination provisions of the
Intercreditor Agreement, there are insufficient funds available
to the Subordination Agent to pay interest on the Certificates
at the Stated Interest Rate; provided, however, that the
maximum amount available to be drawn under the Liquidity
Facility on any Regular Distribution Date to fund any shortfall
of interest on Certificates will not exceed the then Maximum
Available Commitment. The Maximum Available
Commitment at any time is an amount equal to the then
Maximum Commitment less the aggregate amount of each Interest
Drawing outstanding under the Liquidity Facility at such time,
provided that following a Downgrade Drawing, a Special
Termination Drawing, a Final Drawing or a Non-Extension Drawing
under the Liquidity Facility, the Maximum Available Commitment
under such Liquidity Facility shall be zero.
Maximum Commitment means initially
$ ,
as the same may be reduced from time to time as described below.
Required Amount means, for any day, the sum of the
aggregate amount of interest, calculated at the rate per annum
equal to the Stated Interest Rate, that would be payable on the
Certificates on each of the three successive Regular
Distribution Dates immediately following such day or, if such
day is a Regular Distribution Date, on such day and the
succeeding two Regular Distribution Dates, in each case
calculated on the basis of the Pool Balance on such day and
without regard to expected future payments of principal on the
Certificates.
The Liquidity Facility does not provide for drawings thereunder
to pay for principal of or premium on the Certificates or any
interest on the Certificates in excess of the Stated Interest
Rate or more than three semiannual installments of interest
thereon. (Liquidity Facility, Section 2.02; Intercreditor
Agreement, Section 3.5) In addition, the Liquidity Facility
does not provide for drawings thereunder to pay any amounts
payable with respect to the Deposits.
Each payment by the Liquidity Provider reduces by the same
amount the Maximum Available Commitment, subject to
reinstatement as described below. With respect to any Interest
Drawing, upon reimbursement of the Liquidity Provider in full or
in part for the amount of such Interest Drawings plus interest
thereon, the Maximum Available Commitment will be reinstated by
an amount equal to the amount of such Interest Drawing so
reimbursed to an amount not to exceed the then Required Amount.
However, the Liquidity Facility will not be so reinstated at any
time if (i) a
S-46
Liquidity Event of Default shall have occurred and be continuing
and less than 65% of the then aggregate outstanding principal
amount of all Equipment Notes are Performing Equipment Notes or
(ii) a Final Drawing, Downgrade Drawing, Special
Termination Drawing or Non-Extension Drawing shall have been
made or an Interest Drawing shall have been converted into a
Final Advance. With respect to any other drawings under the
Liquidity Facility, amounts available to be drawn thereunder are
not subject to reinstatement. On the first Regular Distribution
Date and on each date on which the Pool Balance shall have been
reduced by payments made to the Certificateholders pursuant to
the Intercreditor Agreement, the Maximum Commitment will be
automatically reduced from time to time to an amount equal to
the then Required Amount. (Liquidity Facility,
Section 2.04(a); Intercreditor Agreement,
Section 3.5(j))
Performing Equipment Note means an Equipment Note
with respect to which no payment default has occurred and is
continuing (without giving effect to any acceleration);
provided that in the event of a bankruptcy proceeding
under the U.S. Bankruptcy Code in which Continental is a
debtor any payment default existing during the
60-day
period under Section 1110(a)(2)(A) of the
U.S. Bankruptcy Code (or such longer period as may apply
under Section 1110(b) of the U.S. Bankruptcy Code or
as may apply for the cure of such payment default under
Section 1110(a)(2)(B) of the U.S. Bankruptcy Code)
shall not be taken into consideration until the expiration of
the applicable period.
If at any time (i) the short-term unsecured debt rating or
short-term issuer credit rating, as the case may be, of the
Liquidity Provider (if applicable) then issued by either Rating
Agency is lower than the Liquidity Threshold Rating and
(ii) in the case of the initial Liquidity Facility, the
short-term unsecured debt rating or short-term issuer credit
rating, as the case may be, of the Liquidity Guarantor then
issued by either Rating Agency is lower than the Liquidity
Threshold Rating or the Liquidity Guarantors guaranty
ceases to be in full force and effect (or becomes invalid or
unenforceable or the Liquidity Guarantor repudiates its
liabilities thereunder) (unless each Rating Agency shall have
confirmed in writing on or prior to the date of such downgrading
that such downgrading will not result in the downgrading,
withdrawal or suspension of the ratings of the Certificates),
and the Liquidity Facility is not replaced with a Replacement
Facility within ten days after receipt by the Subordination
Agent of notice of such downgrading or such guarantee becoming
invalid or unenforceable and as otherwise provided in the
Intercreditor Agreement, such Liquidity Facility will be drawn
in full up to the then Maximum Available Commitment (the
Downgrade Drawing). The proceeds of a Downgrade
Drawing will be deposited into a cash collateral account (the
Cash Collateral Account) for the Certificates and
used for the same purposes and under the same circumstances and
subject to the same conditions as cash payments of Interest
Drawings under the Liquidity Facility would be used. (Liquidity
Facility, Section 2.02(c); Intercreditor Agreement,
Section 3.5(c)) If a qualified Replacement Facility is
subsequently provided, the balance of the Cash Collateral
Account will be repaid to the replaced Liquidity Provider.
A Replacement Facility for the Liquidity Facility
will mean an irrevocable liquidity facility (or liquidity
facilities) in substantially the form of the replaced Liquidity
Facility, including reinstatement provisions, or in such other
form (which may include a letter of credit) as shall permit the
Rating Agencies to confirm in writing their respective ratings
then in effect for the Certificates (before downgrading of such
ratings, if any, as a result of the downgrading of the replaced
Liquidity Provider), in a face amount (or in an aggregate face
amount) equal to the then Required Amount and issued by a person
(or persons) having a short-term unsecured debt rating or
short-term issuer credit rating, as the case may be, issued by
both Rating Agencies which are equal to or higher than the
Liquidity Threshold Rating. (Intercreditor Agreement,
Section 1.1) The provider of any Replacement Facility will
have the same rights (including, without limitation, priority
distribution rights and rights as Controlling Party)
under the Intercreditor Agreement as the Liquidity Provider
being replaced.
Liquidity Threshold Rating means the short-term
unsecured debt rating of
P-1 by
Moodys and the short-term issuer credit rating of
A-1 by
Standard & Poors.
If at any time during the
18-month
period prior to the final expected Regular Distribution Date,
the Pool Balance is greater than the aggregate outstanding
principal amount of Equipment Notes (other than any Equipment
Notes previously sold or with respect to which the collateral
securing such Equipment Notes has been disposed of), the
Liquidity Provider may, in its discretion, give notice of
special termination under the Liquidity Facility (a
Special Termination Notice). The effect of the
delivery of such Special Termination Notice will be to cause
(i) the Liquidity Facility to expire on the fifth Business
Day after the date on which such Special Termination Notice is
received by the Subordination Agent, (ii) the Subordination
Agent to promptly request, and the Liquidity Provider to
promptly make, a special termination drawing (a Special
Termination Drawing) in an amount equal to the Maximum
Available Commitment thereunder and (iii) all amounts owing
to the Liquidity Provider automatically to
S-47
become accelerated. The proceeds of a Special Termination
Drawing will be deposited into the Cash Collateral Account and
used for the same purposes under the same circumstances and
subject to the same conditions as cash payments of Interest
Drawings under the Liquidity Facility would be used. (Liquidity
Facility, Section 6.02; Intercreditor Agreement,
Section 3.5(m))
The Liquidity Facility provides that the Liquidity
Providers obligations thereunder will expire on the
earliest of:
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364 days after the Issuance Date (counting from, and
including, the Issuance Date).
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The date on which the Subordination Agent delivers to the
Liquidity Provider a certification that all of the Certificates
have been paid in full.
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The date on which the Subordination Agent delivers to the
Liquidity Provider a certification that a Replacement Facility
has been substituted for such Liquidity Facility.
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The fifth Business Day following receipt by the Subordination
Agent of a Termination Notice from the Liquidity Provider (see
Liquidity Events of Default).
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The fifth Business Day following receipt by the Subordination
Agent of a Special Termination Notice from the Liquidity
Provider.
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The date on which no amount is or may (by reason of
reinstatement) become available for drawing under such Liquidity
Facility.
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The Liquidity Facility provides that it may be extended for
additional
364-day
periods by mutual agreement of the Liquidity Provider and the
Subordination Agent. The Intercreditor Agreement will provide
for the replacement of the Liquidity Facility if it is scheduled
to expire earlier than 15 days after the Final Maturity
Date and it is not so extended at least 25 days prior to its
then scheduled expiration date. If the Liquidity Facility is not
so extended or replaced by the 25th day prior to its then
scheduled expiration date, the Liquidity Facility will be drawn
in full up to the then Maximum Available Commitment (the
Non-Extension Drawing). The proceeds of the
Non-Extension Drawing will be deposited in the Cash Collateral
Account to be used for the same purposes and under the same
circumstances, and subject to the same conditions, as cash
payments of Interest Drawings under the Liquidity Facility would
be used. (Liquidity Facility, Section 2.02(b);
Intercreditor Agreement, Section 3.5(d))
Subject to certain limitations, Continental may, at its option,
arrange for a Replacement Facility at any time to replace the
Liquidity Facility (including without limitation any Replacement
Facility described in the following sentence). In addition, if
the Liquidity Provider shall determine not to extend the
Liquidity Facility, then the Liquidity Provider may, at its
option, arrange for a Replacement Facility to replace the
Liquidity Facility (i) during the period no earlier than
40 days and no later than 25 days prior to the then
scheduled expiration date of the Liquidity Facility and
(ii) at any time after such scheduled expiration date. The
Liquidity Provider may also arrange for a Replacement Facility
to replace the Liquidity Facility at any time after a Downgrade
Drawing. If any Replacement Facility is provided at any time
after a Downgrade Drawing, a Special Termination Drawing or a
Non-Extension Drawing under the Liquidity Facility, the funds
with respect to the Liquidity Facility on deposit in the Cash
Collateral Account will be returned to the Liquidity Provider
being replaced. (Intercreditor Agreement, Section 3.5(e))
Upon receipt by the Subordination Agent of a Termination Notice
with respect to the Liquidity Facility from the Liquidity
Provider, the Subordination Agent shall request a final drawing
(a Final Drawing) under the Liquidity Facility in an
amount equal to the then Maximum Available Commitment. The
Subordination Agent will hold the proceeds of the Final Drawing
in the Cash Collateral Account as cash collateral to be used for
the same purposes and under the same circumstances, and subject
to the same conditions, as cash payments of Interest Drawings
under the Liquidity Facility would be used. (Liquidity Facility,
Section 2.02(d); Intercreditor Agreement,
Section 3.5(i))
Drawings under the Liquidity Facility will be made by delivery
by the Subordination Agent of a certificate in the form required
by the Liquidity Facility. Upon receipt of such a certificate,
the Liquidity Provider is obligated to make payment of the
drawing requested thereby in immediately available funds. Upon
payment by the Liquidity
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Provider of the amount specified in any drawing under the
Liquidity Facility, the Liquidity Provider will be fully
discharged of its obligations under the Liquidity Facility with
respect to such drawing and will not thereafter be obligated to
make any further payments under the Liquidity Facility in
respect of such drawing to the Subordination Agent or any other
person.
Reimbursement
of Drawings
The Subordination Agent must reimburse amounts drawn under the
Liquidity Facility by reason of an Interest Drawing, Final
Drawing, Downgrade Drawing, Special Termination Drawing or
Non-Extension Drawing and interest thereon, but only to the
extent that the Subordination Agent has funds available therefor.
Interest
Drawings, Special Termination Drawing and Final
Drawing
Amounts drawn by reason of an Interest Drawing, Special
Termination Drawing or Final Drawing will be immediately due and
payable, together with interest on the amount of such drawing.
From the date of the drawing to (but excluding) the third
business day following the Liquidity Providers receipt of
the notice of such Interest Drawing or Final Drawing, interest
will accrue at the Base Rate plus 4.5% per annum. Thereafter,
interest will accrue at LIBOR for the applicable interest period
plus 4.5% per annum. In the case of the Final Drawing, however,
the Subordination Agent may convert the Final Drawing into a
drawing bearing interest at the Base Rate plus 4.5% per annum on
the last day of an interest period for such Drawing. Any Special
Termination Drawing under the Liquidity Facility, other than any
portion thereof applied to the payment of interest on the
Certificates, will bear interest at LIBOR for the applicable
interest period plus 4.5% per annum on the outstanding amount
from time to time of such Special Termination Drawing.
Base Rate means, on any day, a fluctuating interest
rate per annum in effect from time to time, which rate per annum
shall at all times be equal to (a) the weighted average of
the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a business
day, for the next preceding business day) by the Federal Reserve
Bank of New York, or if such rate is not so published for any
day that is a business day, the average of the quotations for
such day for such transactions received by the Liquidity
Provider from three Federal funds brokers of recognized standing
selected by it, plus (b) one-quarter of one percent (1/4 of
1%).
LIBOR means, with respect to any interest period,
(i) the rate per annum appearing on Reuters Screen LIBOR01
Page (or any successor or substitute therefor) at approximately
11:00 a.m. (London time) two business days before the first
day of such interest period, as the rate for dollar deposits
with a maturity comparable to such interest period, or
(ii) if the rate calculated pursuant to clause (i)
above is not available, the average (rounded upwards, if
necessary, to the next
1/16
of 1%) of the rates per annum at which deposits in dollars are
offered for the relevant interest period by three banks of
recognized standing selected by the Liquidity Provider in the
London interbank market at approximately 11:00 a.m. (London
time) two business days before the first day of such interest
period in an amount approximately equal to the principal amount
of the drawing to which such interest period is to apply and for
a period comparable to such interest period.
Downgrade
Drawings and Non-Extension Drawings
The amount drawn under the Liquidity Facility by reason of a
Downgrade Drawing or a Non-Extension Drawing will be treated as
follows:
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Such amount will be released on any Distribution Date to the
Liquidity Provider to the extent that such amount exceeds the
Required Amount.
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Any portion of such amount withdrawn from the Cash Collateral
Account to pay interest on the Certificates will be treated in
the same way as Interest Drawings.
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The balance of such amount will be invested in certain specified
eligible investments.
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Any Downgrade Drawing under the Liquidity Facility, other than
any portion thereof applied to the payment of interest on the
Certificates, will bear interest (x) subject to
clause (y) below, in an amount equal to the investment
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earnings on amounts deposited in the Cash Collateral Account
plus 2% per annum on the outstanding amount from time to time of
such Downgrade Drawing and (y) from and after the date, if
any, on which it is converted into a Final Drawing as described
below under Liquidity Events of Default,
at a rate equal to LIBOR for the applicable interest period (or,
as described in the first paragraph under
Interest Drawings, Special Termination Drawing
and Final Drawing, the Base Rate) plus 4.5% per annum.
Any Non-Extension Drawing under the Liquidity Facility, other
than any portion thereof applied to the payment of interest on
the Certificates, will bear interest (x) subject to
clause (y) below, in an amount equal to the investment
earnings on amounts deposited in the Cash Collateral Account
plus 2% per annum on the outstanding amount from time to time of
such Non-Extension Drawing and (y) from and after the date,
if any, on which it is converted into a Final Drawing as
described below under Liquidity Events of
Default, at a rate equal to LIBOR for the applicable
interest period (or, as described in the first paragraph under
Interest Drawings, Special Termination Drawing
and Final Drawing, the Base Rate) plus 4.5% per annum.
Liquidity
Events of Default
Events of default under the Liquidity Facility (each, a
Liquidity Event of Default) will consist of:
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The acceleration of all of the Equipment Notes (provided,
that if such acceleration occurs during the Delivery Period, the
aggregate principal amount thereof exceeds $150 million).
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Certain bankruptcy or similar events involving Continental.
(Liquidity Facility, Section 1.01)
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If (i) any Liquidity Event of Default has occurred and is
continuing and (ii) less than 65% of the aggregate
outstanding principal amount of all Equipment Notes are
Performing Equipment Notes, the Liquidity Provider may, in its
discretion, give a notice of termination of the Liquidity
Facility to the Subordination Agent (a Termination
Notice). The Termination Notice will have the following
consequences:
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The Liquidity Facility will expire on the fifth Business Day
after the date on which such Termination Notice is received by
the Subordination Agent.
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The Subordination Agent will promptly request, and the Liquidity
Provider will make, a Final Drawing thereunder in an amount
equal to the then Maximum Available Commitment.
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Any drawing remaining unreimbursed as of the date of termination
will be automatically converted into a Final Drawing under the
Liquidity Facility.
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All amounts owing to the Liquidity Provider automatically will
be accelerated.
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Notwithstanding the foregoing, the Subordination Agent will be
obligated to pay amounts owing to the Liquidity Provider only to
the extent of funds available therefor after giving effect to
the payments in accordance with the provisions set forth under
Description of the Intercreditor Agreement
Priority of Distributions. (Liquidity Facility,
Section 6.01) Upon the circumstances described below under
Description of the Intercreditor Agreement
Intercreditor Rights, the Liquidity Provider may become
the Controlling Party with respect to the exercise of remedies
under the Indentures. (Intercreditor Agreement,
Section 2.6(c))
Liquidity
Provider
The initial Liquidity Provider will be Goldman Sachs Bank USA.
The payment obligations of Goldman Sachs Bank USA under the
Liquidity Facility will be guaranteed by The Goldman Sachs
Group, Inc., an affiliate of the Liquidity Provider (the
Liquidity Guarantor). The Liquidity Guarantor has a
short-term unsecured debt rating of
P-1 from
Moodys and a short-term issuer credit rating of
A-1 from
Standard & Poors.
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DESCRIPTION
OF THE INTERCREDITOR AGREEMENT
The following summary describes the material provisions of the
Intercreditor Agreement (the Intercreditor
Agreement) among the Trustee, the Liquidity Provider and
Wilmington Trust Company, as subordination agent (the
Subordination Agent). The summary does not purport
to be complete and is qualified in its entirety by reference to
all of the provisions of the Intercreditor Agreement, which will
be filed as an exhibit to a Current Report on
Form 8-K
to be filed by Continental with the Commission.
Intercreditor
Rights
Controlling
Party
Each Loan Trustee will be directed in taking, or refraining from
taking, any action under an Indenture or with respect to the
Equipment Notes issued under such Indenture, by the holders of
at least a majority of the outstanding principal amount of the
Equipment Notes issued under such Indenture, so long as no
Indenture Default shall have occurred and be continuing
thereunder. For so long as the Subordination Agent is the
registered holder of the Equipment Notes, the Subordination
Agent will act with respect to the preceding sentence in
accordance with the directions of the Trustee, to the extent
constituting, in the aggregate, directions with respect to the
required principal amount of Equipment Notes.
After the occurrence and during the continuance of an Indenture
Default under an Indenture, each Loan Trustee will be directed
in taking, or refraining from taking, any action thereunder or
with respect to the Equipment Notes issued under such Indenture,
including acceleration of such Equipment Notes or foreclosing
the lien on the related Aircraft, by the Controlling Party,
subject to the limitations described below. See
Description of the Certificates Indenture
Defaults and Certain Rights Upon an Indenture Default for
a description of the rights of the Certificateholders to direct
the Trustee.
The Controlling Party will be:
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The Trustee.
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Under certain circumstances, and notwithstanding the foregoing,
the Liquidity Provider, as discussed in the next paragraph.
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At any time after 18 months from the earliest to occur of
(x) the date on which the entire available amount under the
Liquidity Facility shall have been drawn (for any reason other
than a Downgrade Drawing, Special Termination Drawing or
Non-Extension Drawing that has not been converted into a Final
Drawing) and shall remain unreimbursed, (y) the date on
which the entire amount of any Downgrade Drawing, Special
Termination Drawing or Non-Extension Drawing shall have been
withdrawn from the Cash Collateral Account to pay interest on
the Certificates and shall remain unreimbursed and (z) the
date on which all Equipment Notes shall have been accelerated
(provided that if such acceleration occurs prior to the
Delivery Period Termination Date, the aggregate principal amount
thereof exceeds $150 million), the Liquidity Provider (so
long as it has not defaulted in its obligation to make any
drawing under the Liquidity Facility) shall have the right to
become the Controlling Party.
For purposes of giving effect to the rights of the Controlling
Party, the Trustee (to the extent not the Controlling Party)
shall irrevocably agree, and the Certificateholders (other than
the Certificateholders represented by the Controlling Party)
will be deemed to agree by virtue of their purchase of
Certificates, that the Subordination Agent, as record holder of
the Equipment Notes, shall exercise its voting rights in respect
of the Equipment Notes as directed by the Controlling Party.
(Intercreditor Agreement, Section 2.6) For a description of
certain limitations on the Controlling Partys rights to
exercise remedies, see Description of the Equipment
Notes Remedies.
Final Distributions means, on any Distribution Date,
the sum of (x) the aggregate amount of all accrued and
unpaid interest on the Certificates (excluding interest payable
on the Deposits) and (y) the Pool Balance as of the
immediately preceding Distribution Date (less the amount of the
Deposits as of such preceding Distribution Date other than any
portion of such Deposits thereafter used to acquire Equipment
Notes pursuant to the Note Purchase Agreement). For purposes of
calculating Final Distributions, any premium paid on the
Equipment Notes which has not been distributed to the
Certificateholders (other than such premium or a portion thereof
applied to the payment
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of interest on the Certificates or the reduction of the Pool
Balance) shall be added to the amount of such Final
Distributions.
Limitation
on Exercise of Remedies
So long as any Certificates are outstanding, during nine months
after the earlier of (x) the acceleration of the Equipment
Notes under any Indenture and (y) the bankruptcy or
insolvency of Continental, without the consent of the Trustee
(and the Additional Trustee, if Additional Junior Certificates
are then outstanding), no Aircraft subject to the lien of such
Indenture or such Equipment Notes may be sold in the exercise of
remedies under such Indenture, if the net proceeds from such
sale would be less than the Minimum Sale Price for such Aircraft
or such Equipment Notes.
Minimum Sale Price means, with respect to any
Aircraft or the Equipment Notes issued in respect of such
Aircraft, at any time, in the case of the sale of an Aircraft,
75%, or in the case of the sale of related Equipment Notes, 85%,
of the Appraised Current Market Value of such Aircraft.
Following the occurrence and during the continuation of an
Indenture Default under any Indenture, in the exercise of
remedies pursuant to such Indenture, the Loan Trustee under such
Indenture may be directed to lease the Aircraft to any person
(including Continental) so long as the Loan Trustee in doing so
acts in a commercially reasonable manner within the
meaning of Article 9 of the Uniform Commercial Code as in
effect in any applicable jurisdiction (including
Sections 9-610
and 9-627 thereof).
If following certain events of bankruptcy, reorganization or
insolvency with respect to Continental described in the
Intercreditor Agreement (a Continental Bankruptcy
Event) and during the pendency thereof, the Controlling
Party receives a proposal from or on behalf of Continental to
restructure the financing of any one or more of the Aircraft,
the Controlling Party will promptly thereafter give the
Subordination Agent and the Trustee (and the Additional Trustee,
if Additional Junior Certificates are then outstanding) notice
of the material economic terms and conditions of such
restructuring proposal whereupon the Subordination Agent acting
on behalf of the Trustee (and the Additional Trustee, if
Additional Junior Certificates are then outstanding) will
endeavor using reasonable commercial efforts to make such terms
and conditions of such restructuring proposal available to all
Certificateholders (and, if then outstanding, holders of
Additional Junior Certificates) (whether by posting on
DTCs Internet board or otherwise). Thereafter, the
Subordination Agent may not, whether acting on instructions of
the Controlling Party or otherwise, without the consent of the
Trustee (and the Additional Trustee, if Additional Junior
Certificates are then outstanding), enter into any term sheet,
stipulation or other agreement (whether in the form of an
adequate protection stipulation, an extension under
Section 1110(b) of the U.S. Bankruptcy Code or
otherwise) to effect any such restructuring proposal with or on
behalf of Continental unless and until the material economic
terms and conditions of such restructuring proposal shall have
been made available to all Certificateholders (and, if then
outstanding, holders of Additional Junior Certificates) for a
period of not less than 15 calendar days (except that such
requirement shall not apply to any such term sheet, stipulation
or other agreement that is entered into on or prior to the
expiry of the
60-Day
Period and that is effective for a period not longer than three
months from the expiry of the
60-Day
Period).
If Additional Junior Certificates have been issued and are
outstanding and any holder of Additional Junior Certificates
gives irrevocable notice of the exercise of its right to
purchase all (but not less than all) of the Certificates (as
described in Description of the Certificates
Purchase Rights of Holders of Additional Junior
Certificates), prior to the expiry of the
15-day
notice period specified above, the Controlling Party may not
direct the Subordination Agent or the Trustee to enter into any
such restructuring proposal with respect to any of the Aircraft,
unless and until such holder fails to purchase the Certificates
on the date that it is required to make such purchase.
Post
Default Appraisals
Upon the occurrence and continuation of an Indenture Default
under any Indenture, the Subordination Agent will be required to
obtain three desktop appraisals from the appraisers selected by
the Controlling Party setting forth the current market value,
current lease rate and distressed value (in each case, as
defined by the International Society of Transport Aircraft
Trading) of the Aircraft subject to such Indenture (each such
appraisal, an Appraisal and the
S-52
current market value appraisals being referred to herein as the
Post Default Appraisals). For so long as any
Indenture Default shall be continuing under any Indenture, and
without limiting the right of the Controlling Party to request
more frequent Appraisals, the Subordination Agent will be
required to obtain additional Appraisals on the date that is
364 days from the date of the most recent Appraisal or if a
Continental Bankruptcy Event shall have occurred and is
continuing, on the date that is 180 days from the date of
the most recent Appraisal.
Appraised Current Market Value of any Aircraft means
the lower of the average and the median of the three most recent
Post Default Appraisals of such Aircraft.
Priority
of Distributions
All payments in respect of the Equipment Notes and certain other
payments received on each Regular Distribution Date or Special
Distribution Date (each, a Distribution Date) will
be promptly distributed by the Subordination Agent on such
Distribution Date in the following order of priority:
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To the Subordination Agent, the Trustee, any Certificateholder
and the Liquidity Provider to the extent required to pay certain
out-of-pocket costs and expenses actually incurred by the
Subordination Agent (or reasonably expected to be incurred by
the Subordination Agent for the period ending on the next
succeeding Regular Distribution Date, which shall not exceed
$150,000 unless approved in writing by the Controlling Party) or
the Trustee or to reimburse any Certificateholder or the
Liquidity Provider in respect of payments made to the
Subordination Agent or the Trustee in connection with the
protection or realization of the value of the Equipment Notes
held by the Subordination Agent or any Collateral under (and as
defined in) any Indenture (collectively, the
Administration Expenses).
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To the Liquidity Provider (a) to the extent required to pay
the Liquidity Expenses or (b) in the case of a Special
Payment on account of the redemption, purchase or prepayment of
all of the Equipment Notes issued pursuant to an Indenture (an
Equipment Note Special Payment), so long as no
Indenture Default has occurred and is continuing under any
Indenture, the amount of accrued and unpaid Liquidity Expenses
that are not yet due, multiplied by the Section 2.4
Fraction or, if an Indenture Default has occurred and is
continuing, clause (a) will apply.
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To the Liquidity Provider (a) to the extent required to pay
interest accrued on the Liquidity Obligations and if a Special
Termination Drawing has been made and has not been converted
into a Final Drawing, to pay the outstanding amount of such
Special Termination Drawing or (b) in the case of an
Equipment Note Special Payment, so long as no Indenture Default
has occurred and is continuing under any Indenture, to the
extent required to pay accrued and unpaid interest then in
arrears on the Liquidity Obligations plus an amount equal to the
amount of accrued and unpaid interest on the Liquidity
Obligations not in arrears, multiplied by the Section 2.4
Fraction and if a Special Termination Drawing has been made and
has not been converted into a Final Drawing, the outstanding
amount of such Special Termination Drawing or, if an Indenture
Default has occurred and is continuing, clause (a) will
apply.
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To (i) the Liquidity Provider to the extent required to pay
the outstanding amount of all Liquidity Obligations and
(ii) if applicable, unless (in the case of this
clause (ii) only) (x) less than 65% of the aggregate
outstanding principal amount of all Equipment Notes are
Performing Equipment Notes and a Liquidity Event of Default
shall have occurred and is continuing or (y) a Final
Drawing shall have occurred under the Liquidity Facility, the
Subordination Agent to replenish the Cash Collateral Account up
to the Required Amount.
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To the Subordination Agent, the Trustee or any Certificateholder
to the extent required to pay certain fees, taxes, charges and
other amounts payable.
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To the Trustee (a) to the extent required to pay accrued and
unpaid interest at the Stated Interest Rate on the Pool Balance
of the Certificates (excluding interest, if any, payable with
respect to any Deposits) or (b) in the case of an Equipment Note
Special Payment, so long as no Indenture Default has occurred
and is continuing under any Indenture, to the extent required to
pay any such interest that is then due together with (without
duplication) such interest in an amount equal to accrued and
unpaid interest at the Stated Interest Rate on the outstanding
principal amount of the Equipment Notes held in the Trust being
redeemed, purchased or prepaid or, if an Indenture Default has
occurred and is continuing, clause (a) will apply.
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To the Trustee to the extent required to pay Expected
Distributions on the Certificates.
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If a class of Additional Junior Certificates has been issued,
the priority of distributions in the Intercreditor Agreement
with respect to amounts attributable to such Additional Junior
Certificates will be after the last item above. See
Possible Issuance of Additional Junior Certificates.
Section 2.4 Fraction means, with respect to any
Special Distribution Date, a fraction, the numerator of which
shall be the amount of principal of the Equipment Notes being
redeemed, purchased or prepaid on such Special Distribution
Date, and the denominator of which shall be the aggregate unpaid
principal amount of all Equipment Notes outstanding as of such
Special Distribution Date.
Liquidity Obligations means the obligations of the
Subordination Agent to reimburse or to pay the Liquidity
Provider all principal, interest, fees and other amounts owing
to it under the Liquidity Facility or certain other agreements.
Liquidity Expenses means the Liquidity Obligations
other than any interest accrued thereon or the principal amount
of any drawing under the Liquidity Facility.
Expected Distributions means, on any Distribution
Date (the Current Distribution Date), the difference
between:
(A) the Pool Balance as of the immediately preceding
Distribution Date (or, if the Current Distribution Date is the
first Distribution Date, the original aggregate face amount of
the Certificates), and
(B) the Pool Balance as of the Current Distribution Date
calculated on the basis that (i) the principal of the
Equipment Notes other than Performing Equipment Notes (the
Non-Performing Equipment Notes) held in the Trust
has been paid in full and such payments have been distributed to
the holders of the Certificates, (ii) the principal of the
Performing Equipment Notes held in the Trust has been paid when
due (but without giving effect to any acceleration of Performing
Equipment Notes) and such payments have been distributed to the
holders of the Certificates and (iii) the principal of any
Equipment Notes formerly held in the Trust that have been sold
pursuant to the Intercreditor Agreement has been paid in full
and such payments have been distributed to the holders of the
Certificates, but without giving effect to any reduction in the
Pool Balance as a result of any distribution attributable to
Deposits occurring after the immediately preceding Distribution
Date (or, if the Current Distribution Date is the first
Distribution Date, occurring after the initial issuance of the
Certificates).
For purposes of calculating Expected Distributions, any premium
paid on the Equipment Notes held in the Trust that has not been
distributed to the Certificateholders (other than such premium
or a portion thereof applied to the payment of interest on the
Certificates or the reduction of the Pool Balance) shall be
added to the amount of Expected Distributions.
Interest Drawings under the Liquidity Facility and withdrawals
from the Cash Collateral Account in respect of interest on the
Certificates, will be distributed to the Trustee,
notwithstanding the priority of distributions set forth in the
Intercreditor Agreement and otherwise described herein. All
amounts on deposit in the Cash Collateral Account that are in
excess of the Required Amount will be paid to the Liquidity
Provider.
Voting of
Equipment Notes
In the event that the Subordination Agent, as the registered
holder of any Equipment Note, receives a request for its consent
to any amendment, supplement, modification, consent or waiver
under such Equipment Note or the
S-54
related Indenture (or, if applicable, the related Participation
Agreement or other related document), (i) if no Indenture
Default shall have occurred and be continuing with respect to
such Indenture, the Subordination Agent shall request directions
from the Trustee and shall vote or consent in accordance with
such directions and (ii) if any Indenture Default shall
have occurred and be continuing with respect to such Indenture,
the Subordination Agent will exercise its voting rights as
directed by the Controlling Party, subject to certain
limitations; provided that no such amendment,
modification, consent or waiver shall, without the consent of
the Liquidity Provider and each affected Certificateholder,
reduce the amount of principal or interest payable by
Continental under any Equipment Note or change the time of
payments or method of calculation of any amount under any
Equipment Note. (Intercreditor Agreement, Section 9.1(b))
List of
Certificateholders
Upon the occurrence of an Indenture Default, the Subordination
Agent shall instruct the Trustee to, and the Trustee shall,
request that DTC post on its Internet bulletin board a
securities position listing setting forth the names of all the
parties reflected on DTCs books as holding interests in
the Certificates.
Reports
Promptly after the occurrence of a Triggering Event or an
Indenture Default resulting from the failure of Continental to
make payments on any Equipment Note and on every Regular
Distribution Date while the Triggering Event or such Indenture
Default shall be continuing, the Subordination Agent will
provide to the Trustee, the Liquidity Provider, the Rating
Agencies and Continental a statement setting forth the following
information:
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After a bankruptcy of Continental, with respect to each
Aircraft, whether such Aircraft is (i) subject to the
60-day
period of Section 1110 of the U.S. Bankruptcy Code,
(ii) subject to an election by Continental under
Section 1110(a) of the U.S. Bankruptcy Code,
(iii) covered by an agreement contemplated by
Section 1110(b) of the U.S. Bankruptcy Code or
(iv) not subject to any of (i), (ii) or (iii).
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To the best of the Subordination Agents knowledge, after
requesting such information from Continental, (i) whether
the Aircraft are currently in service or parked in storage,
(ii) the maintenance status of the Aircraft and
(iii) location of the Engines (as defined in the
Indentures). Continental has agreed to provide such information
upon request of the Subordination Agent, but no more frequently
than every three months with respect to each Aircraft so long as
it is subject to the lien of an Indenture.
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The current Pool Balance and outstanding principal amount of all
Equipment Notes for all Aircraft.
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The expected amount of interest which will have accrued on the
Equipment Notes and on the Certificates as of the next Regular
Distribution Date.
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The amounts paid to each person on such Distribution Date
pursuant to the Intercreditor Agreement.
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Details of the amounts paid on such Distribution Date identified
by reference to the relevant provision of the Intercreditor
Agreement and the source of payment (by Aircraft and party).
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If the Subordination Agent has made a Final Drawing under the
Liquidity Facility.
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The amounts currently owed to the Liquidity Provider.
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The amounts drawn under the Liquidity Facility.
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After a Continental Bankruptcy Event, any operational reports
filed by Continental with the bankruptcy court which are
available to the Subordination Agent on a non-confidential basis.
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The
Subordination Agent
Wilmington Trust Company will be the Subordination Agent
under the Intercreditor Agreement. Continental and its
affiliates may from time to time enter into banking and trustee
relationships with the Subordination Agent and its affiliates.
The Subordination Agents address is Wilmington
Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware
19890-0001,
Attention: Corporate Trust Administration.
S-55
The Subordination Agent may resign at any time, in which event a
successor Subordination Agent will be appointed as provided in
the Intercreditor Agreement. The Controlling Party may remove
the Subordination Agent for cause as provided in the
Intercreditor Agreement. In such circumstances, a successor
Subordination Agent will be appointed as provided in the
Intercreditor Agreement. Any resignation or removal of the
Subordination Agent and appointment of a successor Subordination
Agent does not become effective until acceptance of the
appointment by the successor Subordination Agent. (Intercreditor
Agreement, Section 8.1)
DESCRIPTION
OF THE AIRCRAFT AND THE APPRAISALS
The
Aircraft
The 17 aircraft to be financed pursuant to this Offering consist
of 12 Boeing aircraft currently owned by Continental and five
new Boeing
737-924ER
aircraft (the Aircraft). The 12 currently owned
Aircraft consist of three Boeing
777-224ER
aircraft, two Boeing
757-224
aircraft, three Boeing
737-824
aircraft and four Boeing
737-724
aircraft. The five Boeing
737-924ER
Aircraft will be newly delivered by the manufacturer during the
Delivery Period. The Aircraft have been designed to be in
compliance with Stage 3 noise level standards, which are the
most restrictive regulatory standards currently in effect in the
United States for aircraft noise abatement.
Boeing
777-224ER
Aircraft
The Boeing
777-224ER
aircraft is a long-range aircraft with a seating capacity of
approximately 285 passengers. The engine type utilized on
Continentals
777-224ER
aircraft is the General Electric GE90-94B.
Boeing
757-224
Aircraft
The Boeing
757-224
aircraft is a medium-range aircraft with a seating capacity of
approximately 175 passengers. The engine type utilized on
Continentals
757-224
aircraft is the Rolls-Royce Model RB211-535E4B.
Boeing
737-924ER
Aircraft
The Boeing
737-924ER
aircraft is a medium-range aircraft with a seating capacity of
approximately 173 passengers. The engine type utilized on
Continentals
737-924ER
aircraft is the CFM International, Inc. CFM56-7B26/3.
Boeing
737-824
Aircraft
The Boeing
737-824
aircraft is a medium-range aircraft with a seating capacity of
approximately 160 passengers. The engine type utilized on
Continentals
737-824
aircraft is the CFM International, Inc. CFM56-7B26.
Boeing
737-724
Aircraft
The Boeing
737-724
aircraft is a medium-range aircraft with a seating capacity of
approximately 125 passengers. The engine type utilized on
Continentals
737-724
aircraft is the CFM International, Inc. CFM56-7B24.
S-56
The
Appraisals
The table below sets forth the appraised values of the aircraft
that may be financed with the proceeds of this Offering, as
determined by Aircraft Information Services, Inc.
(AISI), BK Associates, Inc. (BK) and
Morten Beyer and Agnew, Inc. (MBA), independent
aircraft appraisal and consulting firms (the
Appraisers). Under the Note Purchase Agreement,
Continental will select to be financed pursuant to this Offering
five of the seven Boeing
737-924ER
aircraft listed below.
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Registration
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Manufacturers
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Delivery
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Appraisers Valuations
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Appraised
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Aircraft Type(1)
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Number
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Serial Number
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Month
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AISI
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BK
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MBA
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Value(2)
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Boeing
777-224ER
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N77006
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29476
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December 1998
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$
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74,280,000
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$
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79,920,000
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$
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75,880,000
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$
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75,880,000
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Boeing
777-224ER
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N78009
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29479
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April 1999
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75,210,000
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82,070,000
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74,560,000
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75,210,000
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Boeing
777-224ER
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N78013
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29861
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September 1999
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79,050,000
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83,960,000
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78,620,000
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79,050,000
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Boeing
757-224
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N34131
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28971
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June 1998
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24,370,000
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25,900,000
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26,050,000
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25,440,000
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Boeing
757-224
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N33132
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29281
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June 1998
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24,760,000
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25,790,000
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21,790,000
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24,113,333
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Boeing
737-924ER
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N37437
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33532
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July 2009
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57,870,000
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53,800,000
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53,640,000
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53,800,000
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Boeing
737-924ER
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N78438
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33533
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July 2009
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57,870,000
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53,800,000
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53,640,000
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53,800,000
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Boeing
737-924ER
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N57439
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33534
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August 2009
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58,020,000
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53,800,000
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53,730,000
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53,800,000
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Boeing
737-924ER
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N45440
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33535
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August 2009
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58,020,000
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53,800,000
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53,730,000
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53,800,000
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Boeing
737-924ER
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N53441
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30131
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August 2009
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58,020,000
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53,800,000
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53,730,000
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53,800,000
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Boeing
737-924ER
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N37434
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33528
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September 2009
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58,170,000
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53,800,000
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53,810,000
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53,810,000
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Boeing
737-924ER
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N53442
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33536
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September 2009
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58,170,000
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53,800,000
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53,810,000
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53,810,000
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Boeing
737-824
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N26232
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28942
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June 1999
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26,970,000
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27,900,000
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26,370,000
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26,970,000
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Boeing
737-824
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N35236
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28801
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September 1999
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28,200,000
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29,160,000
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27,510,000
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28,200,000
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Boeing
737-824
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N14240
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28952
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October 1999
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26,750,000
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29,980,000
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28,200,000
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28,200,000
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Boeing
737-724
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N24729
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28945
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July 1999
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20,130,000
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22,600,000
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23,950,000
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22,226,667
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Boeing
737-724
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N16732
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28948
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August 1999
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20,270,000
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22,610,000
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22,100,000
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21,660,000
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Boeing
737-724
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N14735
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28950
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September 1999
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21,770,000
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22,180,000
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22,490,000
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22,146,667
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Boeing
737-724
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N24736
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28803
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September 1999
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21,830,000
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23,490,000
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22,530,000
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22,530,000
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(1)
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The indicated registration number,
manufacturers serial number and delivery month for each
Boeing
737-924ER
aircraft reflect our current expectations, although these may
differ for the actual Aircraft financed hereunder. The financing
of each currently-owned Aircraft pursuant to this Offering is
expected to be effected after the existing security interest on
such Aircraft has been discharged, and the financing of each
Boeing
737-924ER
Aircraft is expected to be effected at delivery of such Aircraft
by Boeing to Continental. The actual delivery date for any
Boeing
737-924ER
aircraft may be subject to delay or acceleration. See
Timing of Financing the Aircraft.
Continental has certain rights to substitute other Boeing
737-924ER
aircraft if the scheduled delivery date of any Boeing
737-924ER
aircraft is delayed for more than 30 days after the month
scheduled for delivery or beyond the delivery deadline. See
Substitute Aircraft.
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(2)
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The appraised value of each
aircraft set forth above is the lesser of the average and median
values of such aircraft as appraised by the Appraisers.
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For purposes of the foregoing chart, AISI, BK and MBA each was
asked to provide its opinion as to the appraised value of each
aircraft. In the case of the Boeing
737-924ER
aircraft, such appraisals indicate appraised base value,
projected as of the scheduled delivery month of the applicable
aircraft, and in the case of the other Aircraft, indicate
appraised base value, adjusted for the maintenance status of the
Aircraft. As part of this process, all three Appraisers
performed desk top appraisals without any physical
inspection of the aircraft. The appraisals are based on various
assumptions and methodologies, which vary among the appraisals.
Each Appraiser assumed for purposes of its appraisal of five of
the currently-owned Aircraft that certain maintenance had been
performed on such Aircraft. Continental is planning to have such
maintenance performed on such Aircraft prior to October 2009. It
is a condition precedent to the Trustees obligation to
purchase Equipment Notes relating to each such Aircraft that
such maintenance shall have been performed on such Aircraft. See
Timing of Financing the Aircraft. The
Appraisers have delivered letters summarizing their respective
appraisals, copies of which are annexed to this Prospectus
Supplement as Appendix II. For a discussion of the
assumptions and methodologies used in each of the appraisals,
reference is hereby made to such summaries. In addition, we have
set forth on Appendix III to this
S-57
Prospectus Supplement a summary of the base value, maintenance
adjustment and maintenance adjusted base value determined by
each Appraiser with respect to each aircraft.
An appraisal is only an estimate of value. It is not indicative
of the price at which an aircraft may be purchased from the
manufacturer. Nor should it be relied upon as a measure of
realizable value. The proceeds realized upon a sale of any
Aircraft may be less than its appraised value. The value of the
Aircraft in the event of the exercise of remedies under the
applicable Indenture will depend on market and economic
conditions, the availability of buyers, the condition of the
Aircraft and other similar factors. Accordingly, there can be no
assurance that the proceeds realized upon any such exercise with
respect to the Equipment Notes and the Aircraft pursuant to the
applicable Indenture would equal the appraised value of such
Aircraft or be sufficient to satisfy in full payments due on
such Equipment Notes or the Certificates.
Timing of
Financing the Aircraft
The Boeing
737-924ER
aircraft that may be financed with the proceeds of this Offering
are scheduled for delivery under Continentals purchase
agreements with The Boeing Company (Boeing ) from
July 2009 through September 2009. See the table under
The Appraisals for the scheduled month
of delivery of each such aircraft. Under such purchase
agreements, delivery of an aircraft may be delayed due to
excusable delay, which is defined to include, among
other things, acts of God, governmental acts or failures to act,
strikes or other labor troubles, inability to procure materials,
or any other cause beyond Boeings control or not
occasioned by Boeings fault or negligence.
The other Aircraft expected to be financed with the proceeds of
this Offering are currently owned by Continental and subject to
existing security interests. Such security interests are
scheduled to be discharged prior to October 2009, and each
currently-owned Aircraft will be available for financing under
this Offering once such existing security interest with respect
to such Aircraft has been discharged. In the case of the
currently-owned Aircraft with registration numbers N24729,
N16732, N24736, N14240 and N33132, it is a condition precedent
to the obligation of the Trustee to purchase the Equipment Notes
relating to such Aircraft under the Note Purchase Agreement that
an 8C Check shall have been performed on such
Aircraft after May 2009 under Continentals maintenance
program. An 8C Check is the most extensive
inspection and refurbishment of an aircraft required to be
performed on these Aircraft under Continentals maintenance
program. Continental is planning to have the 8C
Checks performed on these Aircraft prior to October 2009.
The Note Purchase Agreement provides that the period for
financing the Aircraft under this Offering (the Delivery
Period) will expire on December 31, 2009.
If the scheduled delivery date of any Boeing
737-924ER
aircraft is delayed by more than 30 days after the month
scheduled for delivery or beyond December 31, 2009,
Continental has the right to replace such aircraft with a
Substitute Aircraft, subject to certain conditions. See
Substitute Aircraft. If delivery of any
Boeing
737-924ER
aircraft is delayed beyond the Delivery Period Termination Date
and Continental does not exercise its right to replace such
aircraft with a Substitute Aircraft, there will be unused
Deposits that will be distributed to Certificateholders together
with accrued and unpaid interest thereon but without a premium.
See Description of the Deposit Agreement
Unused Deposits.
Substitute
Aircraft
If the scheduled delivery date for any Boeing
737-924ER
aircraft is delayed (i) more than 30 days after the
month scheduled for delivery or (ii) beyond
December 31, 2009, Continental may identify for delivery a
substitute aircraft (each, together with the substitute aircraft
referred to below, a Substitute Aircraft) therefor
meeting the following conditions:
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A Substitute Aircraft must a Boeing
737-924ER
aircraft.
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Continental will be obligated to obtain written confirmation
from each Rating Agency that substituting such Substitute
Aircraft for the replaced aircraft will not result in a
withdrawal, suspension or downgrading of the ratings of the
Certificates.
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S-58
DESCRIPTION
OF THE EQUIPMENT NOTES
The following summary describes the material terms of the
Equipment Notes. The summary makes use of terms defined in, and
is qualified in its entirety by reference to all of the
provisions of, the Equipment Notes, the Indentures, the
Participation Agreements and the Note Purchase Agreement, each
of which will be filed as an exhibit to a Current Report on
Form 8-K
to be filed by Continental with the Commission. Except as
otherwise indicated, the following summaries relate to the
Equipment Notes, the Indenture and the Participation Agreement
that may be applicable to each Aircraft.
Under the Note Purchase Agreement, Continental will enter into a
secured debt financing with respect to each Aircraft. The Note
Purchase Agreement provides for the relevant parties to enter
into a Participation Agreement and an Indenture relating to the
financing of each Aircraft.
The description of such financing agreements in this Prospectus
Supplement is based on the forms of such agreements annexed to
the Note Purchase Agreement. However, the terms of the financing
agreements actually entered into may differ from the forms of
such agreements and, consequently, may differ from the
description of such agreements contained in this Prospectus
Supplement. Although such changes are permitted, under the Note
Purchase Agreement the terms of such agreements must not vary
the Required Terms. In addition, Continental will be obligated
to certify to the Trustee that any substantive modifications do
not materially and adversely affect the Certificateholders.
Continental must also obtain written confirmation from each
Rating Agency that the use of financing agreements modified in
any material respect from the forms attached to the Note
Purchase Agreement would not result in a withdrawal, suspension
or downgrading of the ratings of the Certificates. See
Description of the Certificates Obligation to
Purchase Equipment Notes.
General
Equipment Notes will be issued in one series with respect to
each Aircraft (the Equipment Notes). Continental may
elect to issue a single series of Additional Equipment Notes
with respect to an Aircraft at any time or from time to time,
which will be funded from sources other than this Offering and
will be subordinated in right of payment to the Equipment Notes.
See Possible Issuance of Additional Junior
Certificates. The Equipment Notes with respect to each
Aircraft will be issued under a separate Indenture between
Continental and Wilmington Trust Company, as indenture
trustee thereunder (each, a Loan Trustee).
Continentals obligations under the Equipment Notes will be
general obligations of Continental.
Principal
and Interest Payments
Subject to the provisions of the Intercreditor Agreement,
interest paid on the Equipment Notes held in the Trust will be
passed through to the Certificateholders on the dates and at the
rate per annum set forth on the cover page of this Prospectus
Supplement until the final expected Regular Distribution Date.
Subject to the provisions of the Intercreditor Agreement,
principal paid on the Equipment Notes held in the Trust will be
passed through to the Certificateholders in scheduled amounts on
the dates set forth herein until the final expected Regular
Distribution Date.
Interest will be payable on the unpaid principal amount of each
Equipment Note at the rate applicable to such Equipment Note on
January 8 and July 8 of each year, commencing on the first such
date to occur after initial issuance thereof. Such interest will
be computed on the basis of a
360-day year
of twelve
30-day
months.
Scheduled principal payments on the Equipment Notes will be made
on January 8 and July 8 in certain years, commencing on
January 8, 2010. See Description of the
Certificates Pool Factors for a discussion of
the scheduled payments of principal of the Equipment Notes and
possible revisions thereto.
If any date scheduled for a payment of principal, premium (if
any) or interest with respect to the Equipment Notes is not a
Business Day, such payment will be made on the next succeeding
Business Day, without any additional interest.
Continental is also required to pay under each Indenture such
Indentures pro rata share of the fees, the interest
payable on drawings under the Liquidity Facility in excess of
earnings on cash deposits from such drawings plus
S-59
certain other amounts and certain other payments due to the
Liquidity Provider under the Liquidity Facility and of
compensation and certain expenses payable to the Pass Through
Trustee and the Subordination Agent.
Redemption
If an Event of Loss occurs with respect to an Aircraft and such
Aircraft is not replaced by Continental under the related
Indenture, the Equipment Notes issued with respect to such
Aircraft will be redeemed, in whole, in each case at a price
equal to the aggregate unpaid principal amount thereof, together
with accrued interest thereon to, but not including, the date of
redemption, but without premium, on a Special Distribution Date.
(Indentures, Section 2.10)
All of the Equipment Notes issued with respect to an Aircraft
may be redeemed prior to maturity at any time, at the option of
Continental, provided that all outstanding Equipment Notes
issued with respect to all other Aircraft are simultaneously
redeemed. The redemption price in the case of any optional
redemption of Equipment Notes will be equal to the aggregate
unpaid principal amount thereof, together with accrued and
unpaid interest thereon to, but not including, the date of
redemption, plus a Make-Whole Premium. (Indentures,
Section 2.11)
Make-Whole Premium means, with respect to any
Equipment Note, an amount (as determined by an independent
investment bank of national standing) equal to the excess, if
any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment
Note computed by discounting such payments on a semiannual basis
on each payment date under the applicable Indenture (assuming a
360-day year
of twelve
30-day
months) using a discount rate equal to the Treasury Yield
plus % over (b) the
outstanding principal amount of such Equipment Note plus accrued
interest to the date of determination.
For purposes of determining the Make-Whole Premium,
Treasury Yield means, at the date of determination
with respect to any Equipment Note, the interest rate (expressed
as a decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield) determined to be the per
annum rate equal to the semiannual yield to maturity for United
States Treasury securities maturing on the Average Life Date of
such Equipment Note and trading in the public securities markets
either as determined by interpolation between the most recent
weekly average yield to maturity for two series of United States
Treasury securities trading in the public securities markets,
(A) one maturing as close as possible to, but earlier than,
the Average Life Date of such Equipment Note and (B) the
other maturing as close as possible to, but later than, the
Average Life Date of such Equipment Note, in each case as
published in the most recent H.15(519) or, if a weekly average
yield to maturity for United States Treasury securities maturing
on the Average Life Date of such Equipment Note is reported in
the most recent H.15(519), such weekly average yield to maturity
as published in such H.15(519). H.15(519) means the
weekly statistical release designated as such, or any successor
publication, published by the Board of Governors of the Federal
Reserve System. The date of determination of a Make-Whole
Premium shall be the third Business Day prior to the applicable
payment or redemption date and the most recent
H.15(519) means the H.15(519) published prior to the close
of business on the third Business Day prior to the applicable
payment or redemption date.
Average Life Date for any Equipment Note shall be
the date which follows the time of determination by a period
equal to the Remaining Weighted Average Life of such Equipment
Note. Remaining Weighted Average Life on a given
date with respect to any Equipment Note shall be the number of
days equal to the quotient obtained by dividing (a) the sum
of each of the products obtained by multiplying (i) the
amount of each then remaining scheduled payment of principal of
such Equipment Note by (ii) the number of days from and
including such determination date to but excluding the date on
which such payment of principal is scheduled to be made, by
(b) the then outstanding principal amount of such Equipment
Note.
Security
Aircraft
The Equipment Notes issued with respect to each Aircraft will be
secured by a security interest in such Aircraft and each of the
other Aircraft for which Equipment Notes are outstanding and an
assignment to the Loan Trustee of certain of Continentals
rights under warranties with respect to the Aircraft.
Since the Equipment Notes are cross-collateralized, any proceeds
from the sale of an Aircraft securing Equipment Notes or other
exercise of remedies under an Indenture with respect to such
Aircraft will (subject to the
S-60
provisions of the U.S. Bankruptcy Code) be available for
application to shortfalls with respect to obligations due under
the other Equipment Notes at the time such proceeds are
received. In the absence of any such shortfall, excess proceeds
will be held as additional collateral by the Loan Trustee under
such Indenture for such other Equipment Notes. However, if an
Equipment Note ceases to be held by the Subordination Agent (as
a result of sale upon the exercise of remedies or otherwise), it
ceases to be entitled to the benefits of cross-collateralization.
See Appendix IV to this Prospectus Supplement for tables
setting forth the projected loan to value ratios for each of the
aircraft that may be financed pursuant to the Offering.
Cash
Cash, if any, held from time to time by the Loan Trustee with
respect to any Aircraft, including funds held as the result of
an Event of Loss to such Aircraft, will be invested and
reinvested by such Loan Trustee, at the direction of
Continental, in investments described in the related Indenture.
(Indentures, Section 6.06)
Limitation
of Liability
Except as otherwise provided in the Indentures, each Loan
Trustee, in its individual capacity, will not be answerable or
accountable under the Indentures or under the Equipment Notes
under any circumstances except, among other things, for its own
willful misconduct or gross negligence. (Indentures,
Section 7.01)
Indenture
Defaults, Notice and Waiver
Indenture Defaults under each Indenture will include:
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The failure by Continental to pay any amount, when due, under
such Indenture or under any Equipment Note issued thereunder
that continues for more than ten Business Days, in the case of
principal, interest or Make-Whole Premium, and, in all other
cases, ten Business Days after Continental receives written
notice from the related Loan Trustee.
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Any representation or warranty made by Continental in such
Indenture, the related Participation Agreement or certain
related documents furnished to the Loan Trustee or any holder of
an Equipment Note pursuant thereto being false or incorrect in
any material respect when made that continues to be material and
adverse to the interests of the Loan Trustee or Note Holders and
remains unremedied after notice and specified cure periods.
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Failure by Continental to perform or observe any covenant or
obligation for the benefit of the Loan Trustee or holders of
Equipment Notes under such Indenture or certain related
documents that continues after notice and specified cure periods.
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The lapse or cancellation of insurance required under such
Indenture.
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The occurrence of an Indenture Default under any other Indenture.
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The occurrence of certain events of bankruptcy, reorganization
or insolvency of Continental. (Indentures, Section 5.01)
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The holders of a majority in principal amount of the outstanding
Equipment Notes issued with respect to any Aircraft, by notice
to the Loan Trustee, may on behalf of all the holders waive any
existing default and its consequences under the Indenture with
respect to such Aircraft, except a default in the payment of the
principal of, or premium or interest on any such Equipment Notes
or a default in respect of any covenant or provision of such
Indenture that cannot be modified or amended without the consent
of each holder of Equipment Notes. (Indentures,
Section 5.06) See Description of the Intercreditor
Agreement Voting of Equipment Notes regarding
the persons entitled to direct the vote of Equipment Notes.
Remedies
If an Indenture Default (other than certain events of
bankruptcy, reorganization or insolvency) occurs and is
continuing under an Indenture, the related Loan Trustee or the
holders of a majority in principal amount of the
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Equipment Notes outstanding under such Indenture may declare the
principal of all such Equipment Notes issued thereunder
immediately due and payable, together with all accrued but
unpaid interest thereon. If certain events of bankruptcy,
reorganization or insolvency occur with respect to Continental,
such amounts shall be due and payable without any declaration or
other act on the part of the related Loan Trustee or holders of
Equipment Notes. The holders of a majority in principal amount
of Equipment Notes outstanding under an Indenture may rescind
any declaration of acceleration of such Equipment Notes at any
time before the judgment or decree for the payment of the money
so due shall be entered if (i) there has been paid to the
related Loan Trustee an amount sufficient to pay all principal,
interest and premium, if any, on any such Equipment Notes, to
the extent such amounts have become due otherwise than by such
declaration of acceleration and (ii) all other Indenture
Defaults and incipient Indenture Defaults with respect to any
covenant or provision of such Indenture have been cured.
(Indentures, Section 5.02(b))
Each Indenture provides that if an Indenture Default under such
Indenture has occurred and is continuing, the related Loan
Trustee may exercise certain rights or remedies available to it
under such Indenture or under applicable law.
In the case of Chapter 11 bankruptcy proceedings in which
an air carrier is a debtor, Section 1110 of the
U.S. Bankruptcy Code (Section 1110)
provides special rights to holders of security interests with
respect to equipment (defined as described below).
Under Section 1110, the right of such holders to take
possession of such equipment in compliance with the provisions
of a security agreement is not affected by any provision of the
U.S. Bankruptcy Code or any power of the bankruptcy court.
Such right to take possession may not be exercised for
60 days following the date of commencement of the
reorganization proceedings. Thereafter, such right to take
possession may be exercised during such proceedings unless,
within the
60-day
period or any longer period consented to by the relevant
parties, the debtor agrees to perform its future obligations and
cures all existing and future defaults on a timely basis.
Defaults resulting solely from the financial condition,
bankruptcy, insolvency or reorganization of the debtor need not
be cured.
Equipment is defined in Section 1110, in part,
as an aircraft, aircraft engine, propeller, appliance, or spare
part (as defined in Section 40102 of Title 49 of the
U.S. Code) that is subject to a security interest granted
by, leased to, or conditionally sold to a debtor that, at the
time such transaction is entered into, holds an air carrier
operating certificate issued pursuant to chapter 447 of
Title 49 of the U.S. Code for aircraft capable of
carrying ten or more individuals or 6,000 pounds or more of
cargo. Rights under Section 1110 are subject to certain
limitations in the case of equipment first placed in service on
or prior to October 22, 1994.
It is a condition to the Trustees obligation to purchase
Equipment Notes with respect to each Aircraft that outside
counsel to Continental, which is expected to be Hughes
Hubbard & Reed LLP, provide its opinion to the Trustee
that the Loan Trustee will be entitled to the benefits of
Section 1110 with respect to the airframe and engines
comprising such Aircraft, assuming that, at the time of such
transaction, Continental holds an air carrier operating
certificate issued pursuant to chapter 447 of Title 49
of the U.S. Code for aircraft capable of carrying ten or
more individuals or 6,000 pounds or more of cargo. For a
description of certain limitations on the Loan Trustees
exercise of rights contained in the Indenture, see
Indenture Defaults, Notice and Waiver.
The opinion of Hughes Hubbard & Reed LLP will not
address the possible replacement of an Aircraft after an Event
of Loss in the future, the consummation of which is conditioned
upon the contemporaneous delivery of an opinion of counsel to
the effect that the related Loan Trustee will be entitled to
Section 1110 benefits with respect to such replacement
unless there is a change in law or court interpretation that
results in Section 1110 not being available. See
Certain Provisions of the
Indentures Events of Loss. The opinion of
Hughes Hubbard & Reed LLP will also not address the
availability of Section 1110 with respect to any possible
lessee of an Aircraft if it is leased by Continental.
If an Indenture Default under any Indenture occurs and is
continuing, any sums held or received by the related Loan
Trustee may be applied to reimburse such Loan Trustee for any
tax, expense or other loss incurred by it and to pay any other
amounts due to such Loan Trustee prior to any payments to
holders of the Equipment Notes issued under such Indenture.
(Indentures, Section 3.03)
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Modification
of Indentures
Without the consent of holders of a majority in principal amount
of the Equipment Notes outstanding under any Indenture, the
provisions of such Indenture and the related Participation
Agreement may not be amended or modified, except to the extent
indicated below.
Without the consent of the Liquidity Provider and the holder of
each Equipment Note outstanding under any Indenture affected
thereby, no amendment or modification of such Indenture may
among other things (a) reduce the principal amount of, or
premium, if any, or interest payable on, any Equipment Notes
issued under such Indenture or change the date on which any
principal, premium, if any, or interest is due and payable,
(b) permit the creation of any security interest with
respect to the property subject to the lien of such Indenture,
except as provided in such Indenture, or deprive any holder of
an Equipment Note issued under such Indenture of the benefit of
the lien of such Indenture upon the property subject thereto or
(c) modify the percentage of holders of Equipment Notes
issued under such Indenture required to take or approve any
action under such Indenture. (Indentures, Section 10.01(a))
Any Indenture may be amended without the consent of the holders
of Equipment Notes to, among other things, cure any defect or
inconsistency in such Indenture or the Equipment Notes issued
thereunder (provided that such change does not adversely affect
the interests of any such holder) or provide for the issuance
thereunder of an additional series of equipment notes (and the
issuance of equipment notes of the same designation under other
Indentures) from time to time. See Possible Issuance of
Additional Junior Certificates. (Indentures,
Section 10.01(b))
Indemnification
Continental will be required to indemnify each Loan Trustee, the
Liquidity Provider, the Subordination Agent, the Escrow Agent
and the Trustee, but not the holders of Certificates, for
certain losses, claims and other matters.
Certain
Provisions of the Indentures
Maintenance
Continental is obligated under each Indenture, among other
things and at its expense, to keep each Aircraft duly registered
and insured, and to maintain, service, repair and overhaul the
Aircraft so as to keep it in as good an operating condition as
when delivered to Continental, ordinary wear and tear excepted,
and in such condition as required to maintain the airworthiness
certificate for the Aircraft in good standing at all times.
(Indentures, Section 4.02)
Possession,
Lease and Transfer
Each Aircraft may be operated by Continental or, subject to
certain restrictions, by certain other persons. Normal
interchange agreements with respect to the Airframe and normal
interchange, pooling and borrowing agreements with respect to
any Engine, in each case customary in the commercial airline
industry, are permitted. Leases are also permitted to
U.S. air carriers and foreign air carriers that have their
principal executive office in certain specified countries,
subject to a reasonably satisfactory legal opinion that, among
other things, such country would recognize the Loan
Trustees security interest in respect of the applicable
Aircraft. In addition, a lessee may not be subject to insolvency
or similar proceedings at the commencement of such lease.
(Indentures, Section 4.02) Permitted foreign air carriers
are not limited to those based in a country that is a party to
the Convention on the International Recognition of Rights in
Aircraft (Geneva 1948) (the Convention) or the Cape
Town Convention on International Interests in Mobile Equipment
and the related Aircraft Equipment Protocol (the Cape Town
Treaty). It is uncertain to what extent the relevant Loan
Trustees security interest would be recognized if an
Aircraft is registered or located in a jurisdiction not a party
to the Convention or the Cape Town Treaty . Moreover, in the
case of an Indenture Default, the ability of the related Loan
Trustee to realize upon its security interest in an Aircraft
could be adversely affected as a legal or practical matter if
such Aircraft were registered or located outside the United
States.
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Registration
Continental is required to keep each Aircraft duly registered
under the Transportation Code with the FAA and to record each
Indenture and certain other documents under the Transportation
Code. In addition, Continental is required to register the
international interests created pursuant to the
Indenture under the Cape Town Treaty. (Indentures,
Section 4.02(e)) Such recordation of the Indenture and
certain other documents with respect to each Aircraft will give
the relevant Loan Trustee a first-priority, perfected security
interest in such Aircraft under U.S. law. If such Aircraft
is located outside the United States, under U.S. law the
effect of such perfection and the priority of such security
interest will be governed by the law of the jurisdiction where
such Aircraft is located. The Convention provides that such
security interest will be recognized, with certain limited
exceptions, in those jurisdictions that have ratified or adhere
to the Convention. The Cape Town Treaty provides that a
registered international interest has priority over
a subsequently registered interest and over an unregistered
interest for purposes of the law of those jurisdictions that
have ratified the Cape Town Treaty. There are many jurisdictions
in the world that have not ratified either the Convention or the
Cape Town Treaty, and the Aircraft may be located in any such
jurisdiction from time to time.
So long as no Indenture Default exists, Continental has the
right to register any Aircraft in a country other than the
United States at its own expense in connection with a permitted
lease of the Aircraft to a permitted foreign air carrier,
subject to certain conditions set forth in the related
Indenture. These conditions include a requirement that an
opinion of counsel be provided that the lien of the applicable
Indenture will continue as a first priority security interest in
the applicable Aircraft. (Indentures, Section 4.02(e))
Liens
Continental is required to maintain each Aircraft free of any
liens, other than the rights of the relevant Loan Trustee, the
holders of the Equipment Notes and Continental arising under the
applicable Indenture or the other operative documents related
thereto, and other than certain limited liens permitted under
such documents, including but not limited to (i) liens for
taxes either not yet due or being contested in good faith by
appropriate proceedings; (ii) materialmens,
mechanics and other similar liens arising in the ordinary
course of business and securing obligations that either are not
yet delinquent for more than 60 days or are being contested
in good faith by appropriate proceedings; (iii) judgment
liens so long as such judgment is discharged or vacated within
60 days or the execution of such judgment is stayed pending
appeal or discharged, vacated or reversed within 60 days
after expiration of such stay; and (iv) any other lien as
to which Continental has provided a bond or other security
adequate in the reasonable opinion of the Loan Trustee; provided
that in the case of each of the liens described in the foregoing
clauses (i), (ii) and (iii), such liens and proceedings do
not involve any material risk of the sale, forfeiture or loss of
such Aircraft or the interest of the Loan Trustee therein or
impair the lien of the relevant Indenture. (Indentures,
Section 4.01)
Replacement
of Parts; Alterations
Continental is obligated to replace all parts at its expense
that may from time to time be incorporated or installed in or
attached to any Aircraft and that may become lost, damaged
beyond repair, worn out, stolen, seized, confiscated or rendered
permanently unfit for use. Continental or any permitted lessee
has the right, at its own expense, to make such alterations,
modifications and additions with respect to each Aircraft as it
deems desirable in the proper conduct of its business and to
remove parts which it deems to be obsolete or no longer suitable
or appropriate for use, so long as such alteration,
modification, addition or removal does not materially diminish
the fair market value, utility, condition or useful life of the
related Aircraft or Engine or invalidate the Aircrafts
airworthiness certificate. (Indentures, Section 4.04(d))
Insurance
Continental is required to maintain, at its expense (or at the
expense of a permitted lessee), all-risk aircraft hull insurance
covering each Aircraft, at all times in an amount not less than
the unpaid principal amount of the Equipment Notes relating to
such Aircraft together with six months of interest accrued
thereon (the Debt Balance). However, after giving
effect to self-insurance permitted as described below, the
amount payable under
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such insurance may be less than such amounts payable with
respect to the Equipment Notes. In the event of a loss involving
insurance proceeds in excess of $10,000,000 per occurrence in
the case of a Boeing
777-224ER
Aircraft, $7,500,000 per occurrence in the case of a Boeing
757-224
Aircraft and $5,000,000 per occurrence in the case of any other
model of Aircraft, such proceeds up to the Debt Balance of the
relevant Aircraft will be payable to the applicable Loan
Trustee, for so long as the relevant Indenture shall be in
effect. In the event of a loss involving insurance proceeds of
up to $5,000,000 per occurrence, such proceeds will be payable
directly to Continental so long as no Indenture Default exists
under the related Indenture. So long as the loss does not
constitute an Event of Loss, insurance proceeds will be applied
to repair or replace the property. (Indentures,
Section 4.06 and Annex B)
In addition, Continental is obligated to maintain comprehensive
airline liability insurance at its expense (or at the expense of
a permitted lessee), including, without limitation, passenger
liability, baggage liability, cargo and mail liability,
hangarkeepers liability and contractual liability
insurance with respect to each Aircraft. Such liability
insurance must be underwritten by insurers of nationally or
internationally recognized responsibility. The amount of such
liability insurance coverage per occurrence may not be less than
the amount of comprehensive airline liability insurance from
time to time applicable to aircraft owned or leased and operated
by Continental of the same type and operating on similar routes
as such Aircraft. (Indentures, Section 4.06 and
Annex B)
Continental is also required to maintain war-risk, hijacking and
allied perils insurance if it (or any permitted lessee) operates
any Aircraft, Airframe or Engine in any area of recognized
hostilities or if Continental (or any permitted lessee)
maintains such insurance with respect to other aircraft operated
on the same international routes or areas on or in which the
Aircraft is operated. (Indentures, Section 4.06 and
Annex B)
Continental may self-insure under a program applicable to all
aircraft in its fleet, but the amount of such self-insurance in
the aggregate may not exceed 50% of the largest replacement
value of any single aircraft in Continentals fleet or
11/2%
of the average aggregate insurable value (during the preceding
policy year) of all aircraft on which Continental carries
insurance, whichever is less, unless an insurance broker of
national standing shall certify that the standard among all
other major U.S. airlines is a higher level of
self-insurance, in which case Continental may self-insure the
Aircraft to such higher level. In addition, Continental may
self-insure to the extent of any applicable deductible per
Aircraft that does not exceed industry standards for major
U.S. airlines. (Indentures, Section 4.06 and
Annex B)
In respect of each Aircraft, Continental is required to name as
additional insured parties the Loan Trustees, the holders of the
Equipment Notes and the Liquidity Provider under all liability,
hull and property and war risk, hijacking and allied perils
insurance policies required with respect to such Aircraft. In
addition, the insurance policies will be required to provide
that, in respect of the interests of such additional insured
persons, the insurance shall not be invalidated or impaired by
any act or omission of Continental, any permitted lessee or any
other person. (Indentures, Section 4.06 and Annex B)
Events
of Loss
If an Event of Loss occurs with respect to the Airframe or the
Airframe and Engines of an Aircraft, Continental must elect
within 45 days after such occurrence either to make payment
with respect to such Event of Loss or to replace such Airframe
and any such Engines. Not later than the first Business Day
following the earlier of (i) the 120th day following
the date of occurrence of such Event of Loss, and (ii) the
fourth Business Day following the receipt of the insurance
proceeds in respect of such Event of Loss, Continental must
either (i) pay to the Loan Trustee the outstanding
principal amount of the Equipment Notes, together with certain
additional amounts, but, in any case, without any Make-Whole
Premium or (ii) unless an Indenture Default or failure to
pay principal or interest under the Indenture or certain
bankruptcy defaults shall have occurred and is continuing,
substitute an airframe (or airframe and one or more engines, as
the case may be) for the Airframe, or Airframe and Engine(s),
that suffered such Event of Loss. (Indentures,
Sections 2.10 and 4.05(a))
If Continental elects to replace an Airframe (or Airframe and
one or more Engines, as the case may be) that suffered such
Event of Loss, it shall subject such an airframe (or airframe
and one or more engines) to the lien of the Indenture, and such
replacement airframe or airframe and engines must be the same
model as the Airframe or Airframe and Engines to be replaced or
an improved model, with a value, utility and remaining useful
life (without regard to hours or cycles remaining until the next
regular maintenance check) at least equal to the Airframe or
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Airframe and Engines to be replaced, assuming that such Airframe
and such Engines had been maintained in accordance with the
related Indenture. Continental is also required to provide to
the relevant Loan Trustee reasonably acceptable opinions of
counsel to the effect, among other things, that (i) certain
specified documents have been duly filed under the
Transportation Code and (ii) such Loan Trustee will be
entitled to receive the benefits of Section 1110 of the
U.S. Bankruptcy Code with respect to any such replacement
airframe (unless, as a result of a change in law or court
interpretation, such benefits are not then available).
(Indentures, Section 4.05(c))
If Continental elects not to replace such Airframe, or Airframe
and Engine(s), then upon payment of the outstanding principal
amount of the Equipment Notes issued with respect to such
Aircraft, together with accrued and unpaid interest thereon and
all additional amounts then due and unpaid with respect to such
Aircraft, the lien of the Indenture shall terminate with respect
to such Aircraft, and the obligation of Continental thereafter
to make interest and principal payments with respect thereto
shall cease. (Indentures, Sections 2.10, 3.02 and
4.05(a)(ii))
If an Event of Loss occurs with respect to an Engine alone,
Continental will be required to replace such Engine within
60 days after the occurrence of such Event of Loss with
another engine, free and clear of all liens (other than certain
permitted liens). Such replacement engine shall be the same make
and model as the Engine to be replaced, or an improved model,
suitable for installation and use on the Airframe, and having a
value, utility and remaining useful life (without regard to
hours or cycles remaining until overhaul) at least equal to the
Engine to be replaced, assuming that such Engine had been
maintained in accordance with the relevant Indenture.
(Indentures, Section 4.05)
An Event of Loss with respect to an Aircraft,
Airframe or any Engine means any of the following events with
respect to such property:
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The destruction of such property, damage to such property beyond
economic repair or rendition of such property permanently unfit
for normal use.
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The actual or constructive total loss of such property or any
damage to such property or requisition of title or use of such
property which results in an insurance settlement with respect
to such property on the basis of a total loss or a constructive
or compromised total loss.
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Any theft, hijacking or disappearance of such property for a
period of 180 consecutive days or more.
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Any seizure, condemnation, confiscation, taking or requisition
of title to such property by any governmental entity or
purported governmental entity (other than a U.S. government
entity) for a period exceeding 180 consecutive days.
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As a result of any law, rule, regulation, order or other action
by the FAA or any governmental entity, the use of such property
in the normal course of Continentals business of passenger
air transportation is prohibited for 180 consecutive days,
unless Continental, prior to the expiration of such
180-day
period, shall have undertaken and shall be diligently carrying
forward steps which are necessary or desirable to permit the
normal use of such property by Continental, but in any event if
such use shall have been prohibited for a period of two
consecutive years, provided that no Event of Loss shall be
deemed to have occurred if such prohibition has been applicable
to Continentals entire U.S. registered fleet of
similar property and Continental, prior to the expiration of
such two-year period, shall have conformed at least one unit of
such property in its fleet to the requirements of any such law,
rule, regulation, order or other action and commenced regular
commercial use of the same and shall be diligently carrying
forward, in a manner which does not discriminate against
applicable property in so conforming such property, steps which
are necessary or desirable to permit the normal use of such
property by Continental, but in any event if such use shall have
been prohibited for a period of three years.
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With respect to any Engine, any divestiture of title to such
Engine in connection with pooling or certain other arrangements
shall be treated as an Event of Loss. (Indentures, Annex A)
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POSSIBLE
ISSUANCE OF ADDITIONAL JUNIOR CERTIFICATES
Continental may elect to issue a single series of equipment
notes (the Additional Equipment Notes) at any time
and from time to time after the Delivery Period Termination Date
with respect to any Aircraft, which will be funded from sources
other than this offering (the Offering) but will be
issued under the same Indenture as the Equipment Notes for such
Aircraft. Any Additional Equipment Note issued under an
Indenture will be subordinated in right of payment to the
Equipment Notes issued under such Indenture. Continental will
fund the sale of any Additional Equipment Notes through the sale
of pass through certificates (the Additional Junior
Certificates) issued by a single Continental Airlines pass
through trust (the Additional Trust). There will be
no liquidity facility with respect to Additional Junior
Certificates.
The Trustee of any Additional Trust (the Additional
Trustee) will become a party to the Intercreditor
Agreement, and the Intercreditor Agreement will be amended by
written agreement of Continental and the Subordination Agent to
provide for the subordination of the Additional Junior
Certificates to the Administration Expenses, the Liquidity
Obligations and the Certificates. On each Distribution Date, no
distributions or other cash payments may be made on or in
respect of the Additional Junior Certificates unless and until
the Expected Distributions with respect to the Certificates on
such Distribution Date have been made in full; provided that,
the Additional Trustee will be reimbursed on a pari passu basis
with the Trustee for any amounts of the nature described in the
first bullet point under Description of the Intercreditor
Agreement-Priority of Distributions but solely to the
extent such amounts (x) constitute ordinary administrative
expenses (which shall not include any costs or expenses
(including any costs of counsel) incurred by the Additional
Trustee related to enforcement under any of the operative
documents) and (y) have been actually incurred by the
Additional Trustee under the pass through trust agreement for
the Additional Trust.
The holders of Additional Junior Certificates will have the
right to purchase all of the Certificates under certain
circumstances after a bankruptcy of Continental. See
Description of the Certificates Purchase
Rights of Holders of Additional Junior Certificates. In
addition, the Additional Trustee will be the Controlling Party
upon payment of Final Distributions to the holders of the
Certificates, subject to the rights of the Liquidity Provider to
be the Controlling Party under certain circumstances. See
Description of the Intercreditor Agreement
Intercreditor Rights.
Any such issuance of Additional Equipment Notes and Additional
Junior Certificates, and any such amendment of the Intercreditor
Agreement (and any amendment of an Indenture in connection with
such issuance) is contingent upon each Rating Agency providing
written confirmation that such actions will not result in a
withdrawal, suspension, or downgrading of the rating of the
Certificates.
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CERTAIN
U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The following summary describes all material generally
applicable U.S. federal income tax consequences to
Certificateholders of the purchase, ownership and disposition of
the Certificates and in the opinion of Hughes
Hubbard & Reed LLP, special tax counsel to Continental
(Tax Counsel), is accurate in all material respects
with respect to the matters discussed therein. Except as
otherwise specified, the summary is addressed to beneficial
owners of Certificates that are citizens or residents of the
United States, corporations created or organized in or under the
laws of the United States or any state therein or the District
of Columbia, estates the income of which is subject to
U.S. federal income taxation regardless of its source, or
trusts that meet the following two tests: (a) a
U.S. court is able to exercise primary supervision over the
administration of the trust and (b) one or more
U.S. fiduciaries have the authority to control all
substantial decisions of the trust
(U.S. Persons) that will hold the Certificates
as capital assets (U.S. Certificateholders).
This summary does not address the tax treatment of
U.S. Certificateholders that may be subject to special tax
rules, such as banks, insurance companies, dealers in securities
or commodities, partnerships, holders subject to the
mark-to-market rules, tax-exempt entities, holders that will
hold Certificates as part of a straddle or holders that have a
functional currency other than the U.S. Dollar,
nor, except as otherwise specified, does it address the tax
treatment of U.S. Certificateholders that do not acquire
Certificates at the public offering price as part of the initial
offering. The summary does not purport to be a comprehensive
description of all of the tax considerations that may be
relevant to a decision to purchase Certificates. This summary
does not describe any tax consequences arising under the laws of
any state, locality or taxing jurisdiction other than the United
States.
The summary is based upon the tax laws and practice of the
United States as in effect on the date of this Prospectus
Supplement, as well as judicial and administrative
interpretations thereof (in final or proposed form) available on
or before such date. All of the foregoing are subject to change,
which change could apply retroactively. We have not sought any
ruling from the U.S. Internal Revenue Service (the
IRS) with respect to the tax consequences described
below, and we cannot assure you that the IRS will not take
contrary positions. The Trust is not indemnified for any
U.S. federal income taxes that may be imposed upon it, and
the imposition of any such taxes on the Trust could result in a
reduction in the amounts available for distribution to the
Certificateholders. Prospective investors should consult
their own tax advisors with respect to the federal, state, local
and foreign tax consequences to them of the purchase, ownership
and disposition of the Certificates.
Tax
Status of the Trust
In the opinion of Tax Counsel, while there is no authority
addressing the characterization of entities that are similar to
the Trust in all material respects, the Original Trust should be
classified as a grantor trust for U.S. federal income tax
purposes. If, as may be the case, the Original Trust is not
classified as a grantor trust, it will, in the opinion of Tax
Counsel, be classified as a partnership for U.S. federal
income tax purposes and will not be classified as a publicly
traded partnership taxable as a corporation provided that at
least 90% of the Original Trusts gross income for each
taxable year of its existence is qualifying income
(which is defined to include, among other things, interest
income, gain from the sale or disposition of capital assets held
for the production of interest income, and income derived with
respect to a business of investing in securities). Tax Counsel
believes that income derived by the Original Trust from the
Equipment Notes will constitute qualifying income and that the
Trust therefore will meet the 90% test described above, assuming
that the Original Trust operates in accordance with the terms of
the Pass Through Trust Agreement and other agreements to
which it is a party. In the opinion of Tax Counsel, the
Successor Trust will be classified as a grantor trust.
Taxation
of Certificateholders Generally
Trust Classified
as a Grantor Trust
Assuming that the Trust is classified as a grantor trust, a
U.S. Certificateholder will be treated as owning its pro
rata undivided interest in the relevant Deposits and each of the
Equipment Notes held by the Trust, the Trusts contractual
rights and obligations under the Note Purchase Agreement, and
any other property held by the Trust.
S-68
Accordingly, each U.S. Certificateholders share of
interest paid on Equipment Notes and Deposits generally will be
taxable as ordinary income, as it is paid or accrued, in
accordance with such U.S. Certificateholders method
of accounting for U.S. federal income tax purposes, and a
U.S. Certificateholders share of premium, if any,
paid on redemption of an Equipment Note will be treated as
capital gain. The Deposits will likely be subject to the
short-term obligation rules, with the result that a U.S.
Certificateholder using the cash-method of accounting will be
required to defer interest deductions with respect to debt
incurred to purchase or carry a Deposit unless the U.S.
Certificateholder elects to include income from the Deposit
using the accrual method. Any amounts received by the Trust
under a Liquidity Facility in order to make interest payments
will be treated for U.S. federal income tax purposes as
having the same characteristics as the payments they replace.
In the case of a subsequent purchaser of a Certificate, the
purchase price for the Certificate should be allocated among the
Deposits and the assets held by the Trust (including the
Equipment Notes and the rights and obligations under the Note
Purchase Agreement with respect to Equipment Notes not
theretofore issued) in accordance with their relative fair
market values at the time of purchase. Any portion of the
purchase price allocable to the right and obligation under the
Note Purchase Agreement to acquire an Equipment Note should be
included in the purchasers basis in its share of the
Equipment Note when issued. Although the matter is not entirely
clear, in the case of a purchaser after initial issuance of the
Certificates but prior to the Delivery Period Termination Date,
if the purchase price reflects a negative value
associated with the obligation to acquire an Equipment Note
pursuant to the Note Purchase Agreement being burdensome under
conditions existing at the time of purchase (e.g., as a result
of the interest rate on the unissued Equipment Notes being below
market at the time of purchase of a Certificate), such negative
value probably would be added to such purchasers basis in
its interest in the Deposits and the remaining assets of the
Trust and reduce such purchasers basis in its share of the
Equipment Notes when issued. The preceding two sentences do not
apply to purchases of Certificates following the Delivery Period
Termination Date.
A U.S. Certificateholder who is treated as purchasing an
interest in an Equipment Note at a market discount (generally,
at a cost less than its remaining principal amount) that exceeds
a statutorily defined de minimis amount will be subject to the
market discount rules of the Code. These rules
provide, in part, that gain on the sale or other disposition of
a debt instrument with a term of more than one year and partial
principal payments (including partial redemptions) on such a
debt instrument are treated as ordinary income to the extent of
accrued but unrecognized market discount. The market discount
rules also provide for deferral of interest deductions with
respect to debt incurred to purchase or carry a debt instrument
that has market discount. A U.S. Certificateholder who
purchases an interest in an Equipment Note at a premium may
elect to amortize the premium as an offset to interest income on
the Equipment Note under rules prescribed by the Code and
Treasury regulations promulgated under the Code.
Each U.S. Certificateholder will be entitled to deduct,
consistent with its method of accounting, its pro rata share of
fees and expenses paid or incurred by the Trust as provided in
Section 162 or 212 of the Code. Certain fees and expenses,
including fees paid to the Trustee and the Liquidity Provider,
will be borne by parties other than the Certificateholders. It
is possible that such fees and expenses will be treated as
constructively received by the Trust, in which event a
U.S. Certificateholder will be required to include in
income and will be entitled to deduct its pro rata share of such
fees and expenses. If a U.S. Certificateholder is an
individual, estate or trust, the deduction for such
holders share of such fees or expenses will be allowed
only to the extent that all of such holders miscellaneous
itemized deductions, including such holders share of such
fees and expenses, exceed 2% of such holders adjusted
gross income. In addition, in the case of
U.S. Certificateholders who are individuals, certain
otherwise allowable itemized deductions will be subject
generally to additional limitations on itemized deductions under
applicable provisions of the Code.
Original
Trust Classified as a Partnership
If the Original Trust is classified as a partnership (and not as
a publicly traded partnership taxable as a corporation) for
U.S. federal income tax purposes, income or loss with
respect to the assets held by the Trust will be calculated at
the Trust level, but the Trust itself will not be subject to
U.S. federal income tax. A U.S. Certificateholder
would be required to report its share of the Trusts items
of income and deduction on its tax return for its taxable year
within which the Trusts taxable year (which should be a
calendar year) ends as well as income from its interest in the
relevant Deposits. A U.S. Certificateholders basis in
its interest in the Trust would be equal to its purchase price
therefor including its share of any funds withdrawn from the
Depositary and used to purchase
S-69
Equipment Notes, plus its share of the Trusts net income,
minus its share of any net losses of the Trust, and minus the
amount of any distributions from the Trust. In the case of an
original purchaser of a Certificate that is a calendar year
taxpayer, income or loss generally should be the same as it
would be if the Trust were classified as a grantor trust, except
that income or loss would be reported on an accrual basis even
if the U.S. Certificateholder otherwise uses the cash
method of accounting. A subsequent purchaser, however, generally
would be subject to tax on the same basis as an original holder
with respect to its interest in the Original Trust, and would
not be subject to the market discount rules or the bond premium
rules during the duration of the Original Trust, except that it
is possible that, in the case of a subsequent purchaser that
purchases Certificates at a time when the total adjusted tax
basis of the Trusts assets exceeds their fair market value
by more than $250,000, taxable income would be computed as if
the adjusted basis of the Trusts assets were reduced by
the amount of such excess.
Dissolution
of Original Trust and Formation of New Trust
Assuming that the Original Trust is classified as a grantor
trust, the dissolution of the Original Trust and distribution of
interests in the Successor Trust will not be a taxable event to
U.S. Certificateholders, who will continue to be treated as
owning their shares of the property transferred from the
Original Trust to the Successor Trust. If the Original Trust is
classified as a partnership, a U.S. Certificateholder will
be deemed to receive its share of the Equipment Notes and any
other property transferred by the Original Trust to the
Successor Trust in liquidation of its interest in the Original
Trust in a non-taxable transaction. In such case, the
U.S. Certificateholders basis in the property so
received will be equal to its basis in its interest in the
Original Trust, allocated among the various assets received
based upon their bases in the hands of the Original Trust and
any unrealized appreciation or depreciation in value in such
assets, and the U.S. Certificateholders holding
period for the Equipment Notes and other property will include
the Original Trusts holding period.
Sale or
Other Disposition of the Certificates
Upon the sale, exchange or other disposition of a Certificate, a
U.S. Certificateholder generally will recognize capital
gain or loss (subject to the possible recognition of ordinary
income under the market discount rules) equal to the difference
between the amount realized on the disposition (other than any
amount attributable to accrued interest which will be taxable as
ordinary income and any amount attributable to any Deposits) and
the U.S. Certificateholders adjusted tax basis in the
Note Purchase Agreement, Equipment Notes and any other property
held by the Trust. Any such gain or loss will be long-term
capital gain or loss to the extent attributable to property held
by the Trust for more than one year. In the case of individuals,
estates and trusts, the maximum rate of tax on net long-term
capital gains generally is 15%. After December 31, 2010,
this maximum rate is scheduled to return to the previous maximum
rate of 20%. Any gain with respect to an interest in a Deposit
will likely be treated as ordinary income. Notwithstanding the
foregoing, if the Original Trust is classified as a partnership,
gain or loss with respect to a disposition of an interest in the
Original Trust will be calculated and characterized by reference
to the U.S. Certificateholders adjusted tax basis and
holding period for its interest in the Original Trust.
Foreign
Certificateholders
Subject to the discussion of backup withholding below, payments
of principal and interest on the Equipment Notes to, or on
behalf of, any beneficial owner of a Certificate that is for
U.S. federal income tax purposes a nonresident alien (other
than certain former United States citizens or residents),
foreign corporation, foreign trust, or foreign estate (a
non-U.S. Certificateholder)
will not be subject to U.S. federal withholding tax
provided that:
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the
non-U.S. Certificateholder
does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Continental;
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the
non-U.S. Certificateholder
is not a bank receiving interest pursuant to a loan agreement
entered into in the ordinary course of its trade or business, or
a controlled foreign corporation for U.S. tax purposes that
is related to Continental; and
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certain certification requirements (including identification of
the beneficial owner of the Certificate) are complied with.
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S-70
Any capital gain realized upon the sale, exchange, retirement or
other disposition of a Certificate or upon receipt of premium
paid on an Equipment Note by a
non-U.S. Certificateholder
will not be subject to U.S. federal income or withholding
taxes if (i) such gain is not effectively connected with a
U.S. trade or business of the holder and (ii) in the
case of an individual, such holder is not present in the United
States for 183 days or more in the taxable year of the
sale, exchange, retirement or other disposition or receipt.
Backup
Withholding
Payments made on the Certificates and proceeds from the sale of
Certificates will not be subject to a backup withholding tax
(currently at the rate of 28%) unless, in general, the
Certificateholder fails to comply with certain reporting
procedures or otherwise fails to establish an exemption from
such tax under applicable provisions of the Code.
S-71
CERTAIN
DELAWARE TAXES
The Trustee is a Delaware banking corporation with its corporate
trust office in Delaware. In the opinion of Richards,
Layton & Finger, Wilmington, Delaware, counsel to the
Trustee, under currently applicable law, assuming that the Trust
will not be taxable as a corporation, but, rather, will be
classified as a grantor trust under subpart E, Part I of
Subchapter J of the Code or as partnerships under Subchapter K
of the Code, (i) the Trust will not be subject to any tax
(including, without limitation, net or gross income, tangible or
intangible property, net worth, capital, franchise or doing
business tax), fee or other governmental charge under the laws
of the State of Delaware or any political subdivision thereof
and (ii) Certificateholders that are not residents of or
otherwise subject to tax in Delaware will not be subject to any
tax (including, without limitation, net or gross income,
tangible or intangible property, net worth, capital, franchise
or doing business tax), fee or other governmental charge under
the laws of the State of Delaware or any political subdivision
thereof as a result of purchasing, holding (including receiving
payments with respect to) or selling a Certificate.
Neither the Trust nor the Certificateholders will be indemnified
for any state or local taxes imposed on them, and the imposition
of any such taxes on the Trust could result in a reduction in
the amounts available for distribution to the
Certificateholders. In general, should a Certificateholder or
the Trust be subject to any state or local tax which would not
be imposed if the Trustee were located in a different
jurisdiction in the United States, the Trustee will resign and a
new Trustee in such other jurisdiction will be appointed.
S-72
CERTAIN
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
(ERISA), imposes certain requirements on employee
benefit plans subject to Title I of ERISA (ERISA
Plans), and on those persons who are fiduciaries with
respect to ERISA Plans. Investments by ERISA Plans are subject
to ERISAs general fiduciary requirements, including, but
not limited to, the requirement of investment prudence and
diversification and the requirement that an ERISA Plans
investments be made in accordance with the documents governing
the Plan.
Section 406 of ERISA and Section 4975 of the Code
prohibit certain transactions involving the assets of an ERISA
Plan (as well as those plans that are not subject to ERISA but
which are subject to Section 4975 of the Code, such as
individual retirement accounts (together with ERISA Plans,
Plans)) and certain persons (referred to as
parties in interest or disqualified
persons) having certain relationships to such Plans,
unless a statutory or administrative exemption is applicable to
the transaction. A party in interest or disqualified person who
engages in a prohibited transaction may be subject to excise
taxes and other penalties and liabilities under ERISA and the
Code.
The Department of Labor has promulgated a regulation,
29 CFR
Section 2510.3-101
(the Plan Asset Regulation), describing what
constitutes the assets of a Plan with respect to the Plans
investment in an entity for purposes of ERISA and
Section 4975 of the Code. Under the Plan Asset Regulation,
if a Plan invests (directly or indirectly) in a Certificate, the
Plans assets will include both the Certificate and an
undivided interest in each of the underlying assets of the
Trust, including the Equipment Notes held by the Trust, unless
it is established that equity participation in the Trust by
benefit plan investors (including but not limited to Plans and
entities whose underlying assets include Plan assets by reason
of an employee benefit plans investment in the entity) is
not significant within the meaning of the Plan Asset
Regulation. In this regard, the extent to which there is equity
participation in the Trust by, or on behalf of, employee benefit
plans will not be monitored. If the assets of the Trust are
deemed to constitute the assets of a Plan, transactions
involving the assets of the Trust could be subject to the
prohibited transaction provisions of ERISA and Section 4975
of the Code unless a statutory or administrative exemption is
applicable to the transaction.
The fiduciary of a Plan that proposes to purchase and hold any
Certificates should consider, among other things, whether such
purchase and holding may involve (i) the direct or indirect
extension of credit to a party in interest or a disqualified
person, (ii) the sale or exchange of any property between a
Plan and a party in interest or a disqualified person, and
(iii) the transfer to, or use by or for the benefit of, a
party in interest or a disqualified person, of any Plan assets.
Such parties in interest or disqualified persons could include,
without limitation, Continental and its affiliates, the
Underwriters, the Loan Trustees, the Escrow Agent, the
Depositary, the Trustee and the Liquidity Provider. Depending on
the identity of the Plan fiduciary making the decision to
acquire or hold Certificates on behalf of a Plan, Prohibited
Transaction Class Exemption (PTCE)
91-38
(relating to investments by bank collective investment funds),
PTCE 84-14
(relating to transactions effected by a qualified
professional asset manager),
PTCE 95-60
(relating to investments by an insurance company general
account),
PTCE 96-23
(relating to transactions directed by an in-house professional
asset manager) or
PTCE 90-1
(relating to investments by insurance company pooled separate
accounts) (collectively, the Class Exemptions) could
provide an exemption from the prohibited transaction provisions
of ERISA and Section 4975 of the Code. However, there can
be no assurance that any of these Class Exemptions or any other
exemption will be available with respect to any particular
transaction involving the Certificates.
In addition to the Class Exemptions referred to above, an
individual exemption may apply to the purchase, holding and
secondary market sale of Certificates by Plans, provided that
certain specified conditions are met. In particular, the
Department of Labor has issued individual administrative
exemptions to each of the Underwriters which are substantially
the same as the administrative exemptions issued to Morgan
Stanley & Co. Incorporated, Prohibited Transaction
Exemption 90-24
(55 Fed. Reg. 20,548 (1990)), as amended (together, the
Underwriter Exemption). The Underwriter Exemption
generally exempts from the application of certain, but not all,
of the prohibited transaction provisions of Section 406 of
ERISA and Section 4975 of the Code certain transactions
relating to the initial purchase, holding and subsequent
secondary market sale of pass through certificates which
represent an interest in a trust that holds secured credit
instruments that bear interest or are purchased at a discount in
transactions by or between business entities (including
equipment notes secured by aircraft or leases of aircraft) and
certain other assets, provided that certain conditions set forth
in the Underwriter Exemption are satisfied.
S-73
The Underwriter Exemption sets forth a number of general and
specific conditions which must be satisfied for a transaction
involving the initial purchase, holding or secondary market sale
of certificates representing a beneficial ownership interest in
a trust to be eligible for exemptive relief thereunder. In
particular, the Underwriter Exemption requires that the
acquisition of certificates by a Plan be on terms that are at
least as favorable to the Plan as they would be in an
arms-length transaction with an unrelated party; the
rights and interests evidenced by the certificates not be
subordinated to the rights and interests evidenced by other
certificates of the same trust estate; the certificates at the
time of acquisition by the Plan be rated in one of the three
highest generic rating categories by Moodys,
Standard & Poors, Duff & Phelps Inc.
or Fitch Investors Service, Inc.; and the investing Plan be an
accredited investor as defined in Rule 501(a)(1) of
Regulation D of the Commission under the Securities Act of
1933, as amended.
In addition, the trust corpus generally must be invested in
qualifying receivables, such as the Equipment Notes, but may not
in general include a pre-funding account (except for a limited
amount of pre-funding which is invested in qualifying
receivables within a limited period of time following the
closing not to exceed three months). With respect to the
investment restrictions set forth in the Underwriter Exemption,
an investment in a Certificate will evidence both an interest in
the respective Original Trust as well as an interest in the
Deposits held in escrow by the Escrow Agent for the benefit of
the Certificateholder. Under the terms of the Escrow Agreement,
the proceeds from the Offering of the Certificates will be paid
over by the Underwriters to the Depositary on behalf of the
Escrow Agent (for the benefit of such Certificateholders as the
holders of the Escrow Receipts) and will not constitute property
of the Trust. Under the terms of the Escrow Agreement, the
Escrow Agent will be irrevocably instructed to enter into the
Deposit Agreement with the Depositary and to effect withdrawals
upon the receipt of appropriate notice from the Trustee so as to
enable the Trustee to purchase the identified Equipment Notes on
the terms and conditions set forth in the Note Purchase
Agreement. Interest on the Deposits relating to the Trust will
be paid to the Certificateholders as Receiptholders through a
Paying Agent appointed by the Escrow Agent. Pending satisfaction
of such conditions and withdrawal of such Deposits, the Escrow
Agents rights with respect to the Deposits will remain
plan assets subject to the fiduciary responsibility and
prohibited transaction provisions of ERISA and Section 4975
of the Code.
There can be no assurance that the Department of Labor would
determine that the Underwriter Exemption would be applicable to
Certificates in these circumstances. In particular, the
Department of Labor might assert that the escrow arrangement is
tantamount to an impermissible pre-funding rendering the
Underwriter Exemption inapplicable. In addition, even if all of
the conditions of the Underwriter Exemption are satisfied with
respect to the Certificates, no assurance can be given that the
Underwriter Exemption would apply with respect to all
transactions involving the Certificates or the assets of the
Trust. Therefore, the fiduciary of a Plan considering the
purchase of a Certificate should consider the availability of
the exemptive relief provided by the Underwriter Exemption, as
well as the availability of any other exemptions that may be
applicable, such as the Class Exemptions.
Governmental plans and certain church plans, while not subject
to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of ERISA and Section 4975
of the Code, may nevertheless be subject to state or other
federal laws that are substantially similar to the foregoing
provisions of ERISA and the Code. Fiduciaries of any such plans
should consult with their counsel before purchasing any
Certificates.
Any Plan fiduciary which proposes to cause a Plan to purchase
any Certificates should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 of the
Code to such an investment, and to confirm that such purchase
and holding will not constitute or result in a non-exempt
prohibited transaction or any other violation of an applicable
requirement of ERISA.
Each person who acquires or accepts a Certificate or an interest
therein, will be deemed by such acquisition or acceptance to
have represented and warranted that either: (i) no Plan
assets have been used to purchase or hold such Certificate or an
interest therein or (ii) the purchase and holding of such
Certificate or an interest therein are exempt from the
prohibited transaction restrictions of ERISA and the Code
pursuant to one or more prohibited transaction statutory or
administrative exemptions.
S-74
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated June , 2009
between Continental and the underwriters listed below
(collectively, the Underwriters), Continental has
agreed to cause the Trust to sell to the Underwriters, and the
Underwriters have agreed to purchase, the following respective
principal amounts of the Certificates.
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Principal Amount
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Underwriter
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of Certificates
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Morgan Stanley & Co. Incorporated
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$
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Goldman, Sachs & Co.
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Calyon Securities (USA) Inc.
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Total
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$
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389,687,000
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The underwriting agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and
that the Underwriters are obligated to purchase all of the
Certificates if any are purchased. If an Underwriter defaults on
its purchase commitment, the purchase commitments of
non-defaulting Underwriters may be increased or the offering of
Certificates may be terminated.
The aggregate proceeds from the sale of the Certificates will be
$389,687,000. Continental will pay the Underwriters a commission
of
$ .
Continental estimates that its expenses associated with the
offer and sale of the Certificates will be approximately
$2,100,000. The Underwriters have agreed to reimburse
Continental for certain of such expenses.
The Underwriters propose to offer the Certificates to the public
initially at the public offering price on the cover page of this
Prospectus Supplement and to selling group members at that price
less the concession set forth below. The Underwriters and
selling group members may allow a discount to other
broker/dealers as set forth below. After the initial public
offering, the public offering prices and concessions and
discounts may be changed by the Underwriters.
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To Selling
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Discount To
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Group Members
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Broker/Dealers
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%
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%
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The Certificates are a new issue of securities with no
established trading market. Continental does not intend to apply
for the listing of the Certificates on a national securities
exchange. The Underwriters have advised Continental that one or
more of the Underwriters currently intend to make a market in
the Certificates, as permitted by applicable laws and
regulations. The Underwriters are not obligated, however, to
make a market in the Certificates and any such market making may
be discontinued at any time at their sole discretion.
Accordingly, no assurance can be given as to the liquidity of
the trading market for the Certificates.
Continental has agreed to indemnify the Underwriters against
certain liabilities including liabilities under the Securities
Act of 1933, as amended, or contribute to payments which the
Underwriters may be required to make in that respect.
From time to time, the Underwriters or their affiliates have
performed and are performing investment banking and advisory
services for, and have provided and are providing general
financing and banking services to, Continental and its
affiliates, including, with respect to Morgan Stanley & Co.
Incorporated and Goldman, Sachs & Co., serving as
counterparties to certain fuel hedging arrangements. In
particular, affiliates of Goldman, Sachs & Co. are
acting as the initial Liquidity Provider and Liquidity Guarantor
and affiliates of Goldman, Sachs & Co. and Calyon
Securities (USA) Inc. are lenders to Continental.
Continental expects that delivery of the Certificates will be
made against payment therefor on or about the closing date
specified on the cover page of this Prospectus Supplement, which
will be the business day following
the date hereof (this settlement cycle being referred to as
T+ ). Under
Rule 15c6-1
of the Commission under the Securities Exchange Act of 1934,
trades in the secondary market generally are required to settle
in three business days, unless the parties to the trade
expressly agree otherwise. Accordingly, purchasers
S-75
who wish to trade Certificates on the date hereof or the next
succeeding business days will be
required, by virtue of the fact that the Certificates initially
will settle in T+ , to specify an
alternate settlement cycle at the time of any trade to prevent a
failed settlement and should consult their own advisor.
To facilitate the offering of the Certificates, the Underwriters
may engage in transactions that stabilize, maintain or otherwise
affect the price of the Certificates. Specifically, the
Underwriters may overallot in connection with the Offering,
creating a short position in the Certificates for their own
account. In addition, to cover overallotments or to stabilize
the price of the Certificates, the Underwriters may bid for, and
purchase, Certificates in the open market. Finally, the
Underwriters may reclaim selling concessions allowed to an agent
or a dealer for distributing Certificates in the Offering, if
the Underwriters repurchase previously distributed Certificates
in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Certificates
above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these
activities at any time.
LEGAL
MATTERS
The validity of the Certificates is being passed upon for
Continental by Hughes Hubbard & Reed LLP, New York,
New York, and for the Underwriters by Milbank, Tweed,
Hadley & McCloy LLP, New York, New York. Milbank,
Tweed, Hadley & McCloy LLP will rely on the opinion of
Richards, Layton & Finger, P.A., Wilmington, Delaware,
counsel for Wilmington Trust Company, as Trustee, as to
matters of Delaware law relating to the Pass Through
Trust Agreement.
EXPERTS
Our consolidated financial statements appearing in our Current
Report on
Form 8-K
filed on April 24, 2009 and the effectiveness of our
internal control over financial reporting as of
December 31, 2008 have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set
forth in its reports thereon, which are incorporated by
reference herein. Our financial statements are incorporated by
reference in reliance upon such reports given on the authority
of Ernst & Young LLP as experts in accounting and
auditing.
The references to AISI, BK and MBA, and to their respective
appraisal reports, dated June 10, 2009, are included herein
in reliance upon the authority of each such firm as an expert
with respect to the matters contained in its appraisal report.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Continental with the Commission
are incorporated by reference in this Prospectus Supplement:
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Filing
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Date Filed
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Annual Report on
Form 10-K
for the year ended December 31, 2008
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February 19, 2009
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Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009
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April 24, 2009
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Current Report on
Form 8-K
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January 6, 2009
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Current Report on
Form 8-K
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February 3, 2009
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Current Report on
Form 8-K
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March 3, 2009
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Current Report on
Form 8-K
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April 2, 2009
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Current Report on
Form 8-K
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April 24, 2009
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Current Report on
Form 8-K
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May 4, 2009
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Current Report on
Form 8-K
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June 2, 2009
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Current Report on
Form 8-K
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June 12, 2009
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Our Commission file number is 1-10323.
Reference is made to the information under Incorporation
of Certain Documents by Reference in the accompanying
Prospectus.
S-76
APPENDIX I
INDEX OF TERMS
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Page
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60-Day Period
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S-32
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Additional Equipment Notes
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S-67
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Additional Junior Certificates
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S-67
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Additional Trust
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S-67
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Additional Trustee
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S-67
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Administration Expenses
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S-53
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Aircraft
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S-56
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AISI
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S-57
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Appraisal
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S-52
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Appraised Current Market Value
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S-53
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Appraisers
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S-57
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Assumed Amortization Schedule
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S-30
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Average Life Date
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S-60
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Bank
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S-44
|
|
Base Rate
|
|
|
S-49
|
|
Basic Agreement
|
|
|
S-26
|
|
BK
|
|
|
S-57
|
|
Boeing
|
|
|
S-58
|
|
Business Day
|
|
|
S-29
|
|
Cape Town Treaty
|
|
|
S-63
|
|
Cash Collateral Account
|
|
|
S-47
|
|
Cede
|
|
|
S-40
|
|
Certificate Account
|
|
|
S-28
|
|
Certificate Buyout Event
|
|
|
S-32
|
|
Certificate Owner
|
|
|
S-40
|
|
Certificateholders
|
|
|
S-27
|
|
Certificates
|
|
|
S-26
|
|
Chase
|
|
|
S-17
|
|
Chase processing agreement
|
|
|
S-17
|
|
Class Exemptions
|
|
|
S-73
|
|
clearing agency
|
|
|
S-41
|
|
clearing corporation
|
|
|
S-41
|
|
CMI
|
|
|
S-26
|
|
Code
|
|
|
S-34
|
|
Commission
|
|
|
S-26
|
|
Company
|
|
|
S-26
|
|
Continental
|
|
|
S-26
|
|
Continental Bankruptcy Event
|
|
|
S-52
|
|
Controlling Party
|
|
|
S-51
|
|
Convention
|
|
|
S-63
|
|
Current Distribution Date
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|
|
S-54
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|
Debt Balance
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|
S-64
|
|
Delivery Period
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S-58
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Delivery Period Termination Date
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|
S-43
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|
Delta
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|
|
S-23
|
|
Deposit
|
|
|
S-43
|
|
Deposit Agreement
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|
|
S-43
|
|
Depositary
|
|
|
S-44
|
|
Depositary Threshold Rating
|
|
|
S-44
|
|
DHS
|
|
|
S-22
|
|
Distribution Date
|
|
|
S-53
|
|
Downgrade Drawing
|
|
|
S-47
|
|
DTC
|
|
|
S-40
|
|
DTC Participants
|
|
|
S-40
|
|
Equipment Note Special Payment
|
|
|
S-53
|
|
Equipment Notes
|
|
|
S-59
|
|
ERISA
|
|
|
S-73
|
|
ERISA Plans
|
|
|
S-73
|
|
Escrow Agent
|
|
|
S-45
|
|
Escrow Agreement
|
|
|
S-45
|
|
Escrow Receipts
|
|
|
S-45
|
|
Event of Loss
|
|
|
S-66
|
|
Expected Distributions
|
|
|
S-54
|
|
FAA
|
|
|
S-21
|
|
Final Distributions
|
|
|
S-51
|
|
Final Drawing
|
|
|
S-48
|
|
Final Maturity Date
|
|
|
S-27
|
|
Fitch
|
|
|
S-44
|
|
H.15(519)
|
|
|
S-60
|
|
Indenture
|
|
|
S-36
|
|
Indenture Default
|
|
|
S-31
|
|
Indirect DTC Participants
|
|
|
S-40
|
|
Intercreditor Agreement
|
|
|
S-51
|
|
Interest Drawing
|
|
|
S-46
|
|
IRS
|
|
|
S-68
|
|
Issuance Date
|
|
|
S-26
|
|
LIBOR
|
|
|
S-49
|
|
Liquidity Event of Default
|
|
|
S-50
|
|
Liquidity Expenses
|
|
|
S-54
|
|
Liquidity Facility
|
|
|
S-46
|
|
Liquidity Guarantor
|
|
|
S-50
|
|
Liquidity Obligations
|
|
|
S-54
|
|
Liquidity Provider
|
|
|
S-46
|
|
Liquidity Threshold Rating
|
|
|
S-47
|
|
Loan Trustee
|
|
|
S-59
|
|
LTVs
|
|
|
S-7
|
|
I-1
|
|
|
|
|
|
|
Page
|
|
|
Make-Whole Premium
|
|
|
S-39
|
|
Maximum Available Commitment
|
|
|
S-46
|
|
Maximum Commitment
|
|
|
S-46
|
|
MBA
|
|
|
S-57
|
|
Minimum Sale Price
|
|
|
S-52
|
|
Moodys
|
|
|
S-44
|
|
most recent H.15(519)
|
|
|
S-60
|
|
New Trustee
|
|
|
S-40
|
|
NOLs
|
|
|
S-19
|
|
Non-Extension Drawing
|
|
|
S-48
|
|
Non-Performing Equipment Notes
|
|
|
S-54
|
|
non-U.S.
Certificateholder
|
|
|
S-70
|
|
Northwest
|
|
|
S-23
|
|
Note Holders
|
|
|
S-39
|
|
Note Purchase Agreement
|
|
|
S-36
|
|
Offering
|
|
|
S-67
|
|
Original Trust
|
|
|
S-40
|
|
Original Trustee
|
|
|
S-40
|
|
Participation Agreement
|
|
|
S-36
|
|
Pass Through Trust Agreement
|
|
|
S-26
|
|
Paying Agent
|
|
|
S-45
|
|
Paying Agent Account
|
|
|
S-29
|
|
Performing Equipment Note
|
|
|
S-47
|
|
Plan Asset Regulation
|
|
|
S-73
|
|
Plans
|
|
|
S-73
|
|
Pool Balance
|
|
|
S-29
|
|
Pool Factor
|
|
|
S-29
|
|
Post Default Appraisals
|
|
|
S-53
|
|
PTC Event of Default
|
|
|
S-32
|
|
PTCE
|
|
|
S-73
|
|
Receiptholder
|
|
|
S-45
|
|
Regular Distribution Dates
|
|
|
S-27
|
|
Remaining Weighted Average Life
|
|
|
S-60
|
|
Replacement Facility
|
|
|
S-47
|
|
Required Amount
|
|
|
S-46
|
|
Required Terms
|
|
|
S-36
|
|
Scheduled Payments
|
|
|
S-27
|
|
Section 1110
|
|
|
S-62
|
|
Section 2.4 Fraction
|
|
|
S-54
|
|
Section 382
|
|
|
S-19
|
|
Special Distribution Date
|
|
|
S-28
|
|
Special Payment
|
|
|
S-28
|
|
Special Payments Account
|
|
|
S-28
|
|
Special Termination Drawing
|
|
|
S-47
|
|
Special Termination Notice
|
|
|
S-47
|
|
Standard & Poors
|
|
|
S-44
|
|
Stated Interest Rate
|
|
|
S-46
|
|
Subordination Agent
|
|
|
S-51
|
|
Substitute Aircraft
|
|
|
S-58
|
|
Successor Trust
|
|
|
S-40
|
|
Tax Counsel
|
|
|
S-68
|
|
Termination Notice
|
|
|
S-50
|
|
Transfer Date
|
|
|
S-40
|
|
Transportation Code
|
|
|
S-33
|
|
Treasury Yield
|
|
|
S-60
|
|
Triggering Event
|
|
|
S-28
|
|
Trust
|
|
|
S-26
|
|
Trust Indenture Act
|
|
|
S-34
|
|
Trust Property
|
|
|
S-26
|
|
Trust Supplement
|
|
|
S-26
|
|
Trustee
|
|
|
S-26
|
|
TSA
|
|
|
S-22
|
|
U.S. Certificateholders
|
|
|
S-68
|
|
U.S. Persons
|
|
|
S-68
|
|
Underwriters
|
|
|
S-75
|
|
United
|
|
|
S-16
|
|
I-2
APPENDIX II APPRAISAL LETTERS
Continental Airlines, Inc.
11th Floor, HQSFN 1600 Smith Street
Houston, TX 77002
Sight Unseen Base Value Opinion
19 Aircraft Portfolio
AISI File No.: A9S025BVO
Date: 10 June 2009
Headquarters: 26072 Merit Circle, Suite 123, Laguna Hills, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 E-MAIL: mail@AISI.aero
10 June 2009
Continental Airlines, Inc.
11th Floor, HQSFN 1600 Smith Street
Houston, TX 77002
|
|
|
Subject:
|
|
Sight Unseen Base Value Opinion |
|
|
19 Aircraft portfolio |
|
|
|
|
|
AISI File number: A9S025BVO |
|
|
|
Ref:
|
|
(a) Email messages 22/26/27/28/29/30 May 2009, 10 June 2009 |
Dear Ladies and Gentlemen:
Aircraft Information Services, Inc. (AISI) has been requested to offer our opinion of the sight
unseen base value in half life and maintenance adjusted condition for twelve used aircraft and in
new condition for seven future delivery aircraft for a total portfolio of 19 Aircraft as identified
and defined in Table I and reference (a) above (the Aircraft). New aircraft are valued in then
delivery US dollars and all other aircraft are in June 2009 US dollars.
1. Methodology and Definitions
The standard terms of reference for commercial aircraft value are base value and current market
value of an average aircraft. Base value is a theoretical value that assumes a hypothetical
balanced market while current market value is the value in the real market; both assume a
hypothetical average aircraft condition. All other values are derived from these values. AISI value
definitions are consistent with the current definitions of the International Society of Transport
Aircraft Trading (ISTAT), those of 01 January 1994. AISI is a member of that organization and
employs an ISTAT Certified and Senior Certified Appraiser.
AISI defines a base value as that of a transaction between an equally willing and informed buyer
and seller, neither under compulsion to buy or sell, for a single unit cash transaction with no
hidden value or liability, with supply and demand of the sale item roughly in balance and with no
event which would cause a short term change in the market. Base values are typically given for
aircraft in new condition, average half-life condition, or adjusted for an aircraft in a
specifically described condition at a specific time.
An average aircraft is an operable airworthy aircraft in average physical condition and with
average accumulated flight hours and cycles, with clear title and standard unrestricted certificate
of airworthiness, and registered in an authority which does not represent a penalty to aircraft
value or liquidity, with no damage history and with inventory configuration and level of
modification which is normal for its intended use and age.
Headquarters: 26072 Merit Circle, Suite 123, Laguna Hills, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 E-MAIL: mail@AISI.aero
10 June 2009
AISI File No. A9S025BVO
Page - 2 -
Note that a stored aircraft is not an average aircraft. AISI assumes average condition unless
otherwise specified in this report.
AISI also assumes that airframe, engine and component parts are from the original equipment
manufacturer (OEM) and that maintenance, maintenance program and essential records are sufficient
to permit normal commercial operation under a strict airworthiness authority.
Half-life condition assumes that every component or maintenance service which has a prescribed
interval that determines its service life, overhaul interval or interval between maintenance
services, is at a condition which is one-half of the total interval.
Full-life condition assumes zero time since overhaul of airframe, gear, apu, engine overhaul and
engine LLPs.
An adjusted appraisal reflects an adjustment from half life condition for the actual condition,
utilization, life remaining or time remaining of an airframe, engine or component.
It should be noted that AISI and ISTAT value definitions apply to a transaction involving a single
aircraft, and that transactions involving more than one aircraft are often executed
at considerable and highly variable discounts to a single aircraft price, for a variety of reasons
relating to an individual buyer or seller.
AISI defines a current market value, which is synonymous with the older term fair market value
as that value which reflects the real market conditions including short term events, whether at,
above or below the base value conditions. Assumptions of a single unit sale and definitions of
aircraft condition, buyer/seller qualifications and type of transaction remain unchanged from that
of base value. Current market value takes into consideration the status of the economy in which the
aircraft is used, the status of supply and demand for the particular aircraft type, the value of
recent transactions and the opinions of informed buyers and sellers. Note that for a current market
value to exist, the seller may not be under duress. Current market value assumes that there is no
short term time constraint to buy or sell.
AISI defines a distressed market value as that value which reflects the real market condition
including short term events, when the market for the subject aircraft is so depressed that the
seller is under duress. Distressed market value assumes that there is a time constraint to sell
within a period of less than 1 year. All other assumptions remain unchanged from that of current
market value.
None of the AISI value definitions take into account remarketing costs, brokerage costs, storage
costs, recertification costs or removal costs.
10 June 2009
AISI File No. A9S025BVO
Page - 3 -
AISI encourages the use of base values to consider historical trends, to establish a consistent
baseline for long term value comparisons and future value considerations, or to consider how actual
market values vary from theoretical base values. Base values are less volatile than current market
values and tend to diminish regularly with time. Base values are normally inappropriate to
determine near term values. AISI encourages the use of current market values to consider the
probable near term value of an aircraft when the seller is not under duress. AISI encourages the
use of distressed market values to consider the probable near term value of an aircraft when the
seller is under duress.
No physical inspection of the Aircraft or their essential records was made by AISI for the purposes
of this report, nor has any attempt been made to verify information provided to us, which is
assumed to be correct and applicable to the Aircraft.
If more than one aircraft is contained in this report than it should be noted that the values given
are not directly additive, that is, the total of the given values is not the value of the fleet but
rather the sum of the values of the individual aircraft if sold individually over time so as not to
exceed demand.
2. Valuation
For the twelve used aircraft, adjustments are calculated to account for the maintenance
status of the aircraft as indicated to AISI by the client in the above reference (a) data and in
accordance with standard AISI methods. Adjustments are calculated only where there is sufficient
information to do so, or where reasonable assumptions can be made.
All hours and cycle information provided for airframe, maintenance checks, gear and engines have
been projected from the data provided to June 2009 based on a daily utilization factor calculated
for each aircraft. All maintenance work, if any, which became due as a result of projecting the
hour and cycle information forward was assumed to have been completed and a new cycle started
unless more than one cycle would have elapsed, then half life was assumed. All used aircraft are in
June 2009 million US dollars.
The seven future delivery aircraft are valued in new condition. New aircraft are valued in then
delivery million US dollars assuming a 2.5% inflation rate and .5% escalation rate between June
2009 and the future delivery date.
AISI has been informed that 8C Checks are due in the near term for aircraft serial numbers 28945,
28948, 28803, 28952 and 29281 which are assumed to have been completed for this appraisal.
It is our considered opinion that the sight unseen base values of the Aircraft are as follows in
Table I subject to the assumptions, definitions, and disclaimers herein.
10 June 2009
AISI File No. A9S025BVO
Page - 4 -
Table I
June 2009 Million USDollars for Used Aircraft Values
Then Delivery Current Million USDollars for New Aircraft Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half Life |
|
Adjusted |
|
|
|
|
Serial |
|
|
|
|
|
|
|
|
|
Base Value |
|
Base Value |
No. |
|
Aircraft Type |
|
Number |
|
DoM |
|
Engine Type |
|
MTOW |
|
USDollars |
|
USDollars |
|
1 |
|
B737-700 |
|
28945 |
|
Jul-99 |
|
CFM56-7B24 |
|
|
154,500 |
|
|
$ |
20.45 |
|
|
$ |
20.13 |
|
2 |
|
B737-700 |
|
28948 |
|
Aug-99 |
|
CFM56-7B24 |
|
|
154,500 |
|
|
$ |
20.45 |
|
|
$ |
20.27 |
|
3 |
|
B737-700 |
|
28950 |
|
Sep-99 |
|
CFM56-7B24 |
|
|
154,500 |
|
|
$ |
20.45 |
|
|
$ |
21.77 |
|
4 |
|
B737-700 |
|
28803 |
|
Sep-99 |
|
CFM56-7B24 |
|
|
154,500 |
|
|
$ |
20.45 |
|
|
$ |
21.83 |
|
5 |
|
B737-800 |
|
28942 |
|
Jun-99 |
|
CFM56-7B26 |
|
|
174,200 |
|
|
$ |
25.24 |
|
|
$ |
26.97 |
|
6 |
|
B737-800 |
|
28801 |
|
Sep-99 |
|
CFM56-7B26 |
|
|
174,200 |
|
|
$ |
25.24 |
|
|
$ |
28.20 |
|
7 |
|
B737-800 |
|
28952 |
|
Oct-99 |
|
CFM56-7B26 |
|
|
174,200 |
|
|
$ |
25.24 |
|
|
$ |
26.75 |
|
8 |
|
B757-200 |
|
28971 |
|
Jun-98 |
|
RB211-535E4B |
|
|
255,000 |
|
|
$ |
24.24 |
|
|
$ |
24.37 |
|
9 |
|
B757-200 |
|
29281 |
|
Jun-98 |
|
RB211-535E4B |
|
|
255,000 |
|
|
$ |
24.24 |
|
|
$ |
24.76 |
|
10 |
|
B777-200ER |
|
29476 |
|
Dec-98 |
|
GE90-94B |
|
|
656,000 |
|
|
$ |
70.41 |
|
|
$ |
74.28 |
|
11 |
|
B777-200ER |
|
29479 |
|
Apr-99 |
|
GE90-94B |
|
|
656,000 |
|
|
$ |
74.32 |
|
|
$ |
75.21 |
|
12 |
|
B777-200ER |
|
29861 |
|
Sep-99 |
|
GE90-94B |
|
|
656,000 |
|
|
$ |
74.32 |
|
|
$ |
79.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hypothetical |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half Life |
|
New |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Value |
|
Base Value |
|
|
|
|
|
|
|
|
|
|
|
|
USDollars |
|
USDollars |
|
13 |
|
B737-900ER |
|
33532 |
|
Jul-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
$ |
52.52 |
|
|
$ |
57.87 |
|
14 |
|
B737-900ER |
|
33533 |
|
Jul-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
$ |
52.52 |
|
|
$ |
57.87 |
|
15 |
|
B737-900ER |
|
33534 |
|
Aug-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
$ |
52.67 |
|
|
$ |
58.02 |
|
16 |
|
B737-900ER |
|
33535 |
|
Aug-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
$ |
52.67 |
|
|
$ |
58.02 |
|
17 |
|
B737-900ER |
|
30131 |
|
Aug-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
$ |
52.67 |
|
|
$ |
58.02 |
|
18 |
|
B737-900ER |
|
33528 |
|
Sep-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
$ |
52.82 |
|
|
$ |
58.17 |
|
19 |
|
B737-900ER |
|
33536 |
|
Sep-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
$ |
52.82 |
|
|
$ |
58.17 |
|
|
|
|
Notes:
|
|
1) 8C Checks due in the near term for aircraft serial numbers 28945, 28948, 28803, 28952 and 29281 are assumed to have been completed. |
|
|
|
|
|
2) Hypothetical Half Life Values are values for New Aircraft in the hypothetical condition where
all components or maintenance service is at a condition which is one-half of the total life
interval. New aircraft would not be at this hypothetical condition; this value is used for
comparison only |
10 June 2009
AISI File No. A9S025BVO
Page - 5 -
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in writing, this report shall
be for the sole use of the client/addressee. This report is offered as a fair and unbiased
assessment of the subject aircraft. AISI has no past, present, or anticipated future interest in
any of the subject aircraft. The conclusions and opinions expressed in this report are based on
published information, information provided by others, reasonable interpretations and calculations
thereof and are given in good faith. AISI certifies that this report has been independently
prepared and it reflects AISIs conclusions and opinions which are judgments that reflect
conditions and values current at the time of this report. The values and conditions reported upon
are subject to any subsequent change. AISI shall not be liable to any party for damages arising out
of reliance or alleged reliance on this report, or for any partys action or failure to act as a
result of reliance or alleged reliance on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
John D. McNicol
President
1295 Northern Boulevard
Manhasset, New York 11030
(516) 365-6272 · Fax (516) 365-6287
June 10, 2009
Continental Airlines, Inc.
11th Floor, HQSFN 1600 Smith Street
Houston, TX 77002
Ladies & Gentlemen:
In response to your request, BK Associates, Inc. is pleased to provide our opinion regarding the
Base Values (BV) for 19 Boeing aircraft in the Continental Airlines Fleet. The aircraft include 12
B737, B757 or B777 aircraft already in service and seven B737-900ER aircraft scheduled to be
delivered in the Third Quarter of 2009. Our opinion of the values is included in the attached
Figure 1 along with the identification of each aircraft by manufacturers serial number, date of
manufacture, engine model and maximum takeoff weight.
Our values presented in Figure I include both a half-time value as well as a maintenance adjusted
value which includes appropriate financial adjustments based on our interpretation of the
maintenance summary and fleet utilization data you provided. The adjustments are approximate, based
on industry average costs, and normally would include an adjustment for the time remaining to a C
check, time remaining to a D check (in this case the 2C and the 8C), time remaining to
landing gear overhaul, time since the most recent heavy shop visit on engines and time remaining on
engine life limited parts.
For five of the aircraft, 8C checks are due in the very near future. These are aircraft nos.
1,2,4,7 and 9 in Figure 1. For these, we have assumed the 8C check is completed.
For one engine, GE90 Serial Number 900306, we understand it has been removed and is now in the
shop. The value assumes the shop visit is complete.
For the new aircraft, our opinion of the new value is given since they will not reach half-time for
some time.
June 10, 2009
Page 2
DEFINITIONS
According to the International Society of Transport Aircraft Tradings (ISTAT) definition of Base
Value, to which BK Associates subscribes, the base value is the Appraisers opinion of the
underlying economic value of an aircraft in an open, unrestricted, stable market environment with a
reasonable balance of supply and demand, and assumes full consideration of its highest and best
use. An aircrafts base value is founded in the historical trend of values and in the projection
of future value trends and presumes an arms length, cash transaction between willing, able and knowledgeable parties, acting prudently,
with an absence of duress and with a reasonable period of time available for marketing. The base
value normally refers to a transaction involving a single aircraft. When multiple aircraft are
acquired in the same transaction, the trading price of each unit may be discounted.
MARKET DISCUSSION & METHODOLOGY
For a newly delivered aircraft one can argue that, almost by definition, the base value is
approximately equal to the actual selling price. Without the existence of white tails or finished
aircraft for which there is no buyer, the very existence of a buyer and seller at the agreed price
suggests the market is in balance and the purchase price is the base value.
We do not know the purchase price of the Continental Aircraft but we do know the list price is in
the range between $70 and $80 million depending on the configuration and options. We also know that
nobody pays list price and the discount is normally at least 15 percent. Discounts of 25 to 35
percent are often applied for airlines placing large orders. We also have done several other recent
appraisals on similar aircraft for which we concluded the new price was $52,700,000. Considering
this and the configuration and specifications of the Aircraft and the likely escalation in the
price since our previous appraisal, we conclude its likely new price is approximately $53,800,000.
Regarding the other aircraft already in service, as the definition implies, the base value is
determined from long-term historical trends. BK Associates has accumulated a database of over
10,000 data points of aircraft sales that occurred since 1970. From analysis of these data we know,
for example, what the average aircraft should sell for as a percentage of its new price, as well
as, the high and low values that have occurred in strong and weak markets.
June 10, 2009
Page 3
Based on these data, we have developed relationships between aircraft age and sale price for
wide-bodies, narrow-bodies, large turboprops and, more recently, regional jet and freighter
aircraft. Within these groups we have developed further refinements for such things as derivative
aircraft, aircraft still in production versus no longer in production, and aircraft early in the
production run versus later models. Within each group variations are determined by the performance
capabilities of each aircraft relative to the others. We now track some 150 different variations of
aircraft types and models and determine current and forecast base values. These relationships are
verified, and changed or updated if necessary, when actual sales data becomes available.
This relationship between sales price as a function of age and the original price is depicted in
the following figure.
All of the Aircraft other than the new Aircraft are 10 to 11 years old. The data suggest that a 10
to 11-year old aircraft should sell for 42 to 46 percent of its original price. So, for the
B737-700s for example, the original price was likely about $36.5 million. The
June 10, 2009
Page 4
data suggest that on average today after allowing for inflation it should sell for about $19.6
million. By a similar analysis the suggested average selling price today for the B737-800s is $25
million, it would be $28 million for the B757s and $70 to $73 million for the B777s. However,
recent experience has shown that after a long production run, even popular and successful aircraft
tend to approach or fall below the average line in the figure, especially when the specific
aircraft is in the latter half of its likely useful life. By contrast, new, popular and successful
models tend to have values above the line for the first 10 years or so.
There is no doubt that all of these models have been quite successful. The B757 is the exception.
It was very successful in its day but is now out of production after a long production run, and
further, the B757s are the oldest of the group being appraised. We conclude, the B757s are slightly
below the average suggested by the historical data at $23.1 million.
The other aircraft are successful and still young in their production run. We concluded they have
base values above the average line in the figure.
These values are adjusted further from the average suggested by the historical comparison to
reflect differences in engine model and the addition of blended winglets.
As noted earlier in the conclusions, these half-time values are adjusted with an appropriate
financial adjustment to reach the maintenance adjusted values. These adjustments are based on our
assessment of industry average costs and may not be the same as Continentals cost. Another buyer
of the aircraft may have to have the work done elsewhere at a different cost.
ASSUMPTIONS & DISCLAIMER
It should be understood that BK Associates has neither inspected the Aircraft nor the maintenance
records, but has relied upon the information provided by you and in the BK Associates database. The
assumptions have been made that all Airworthiness Directives have been complied with; accident
damage has not been incurred that would affect market values; and maintenance has been accomplished
in accordance with a civil airworthiness authoritys approved maintenance program and accepted
industry standards. Further, we have assumed unless otherwise stated, that each Aircraft is in
typical configuration for the type and other than the new Aircraft, has accumulated an average
number of hours and cycles. Deviations from these assumptions can change significantly our opinion
regarding the values.
June 10, 2009
Page 5
BK Associates, Inc. has no present or contemplated future interest in the Aircraft, nor any
interest that would preclude our making a fair and unbiased estimate. This appraisal represents
the opinion of BK Associates, Inc. and reflects our best judgment based on the information
available to us at the time of preparation and the time and budget constraints imposed by the
client. It is not given as a recommendation, or as an inducement, for any financial transaction and
further, BK Associates, Inc. assumes no responsibility or legal liability for any action taken or
not taken by the addressee, or any other party, with regard to the appraised equipment. By
accepting this appraisal, the addressee agrees that BK Associates, Inc. shall bear no such
responsibility or legal liability. This appraisal is prepared for the use of the addressee and
shall not be provided to other parties without the express consent of the addressee.
|
|
|
|
|
|
Sincerely,
BK ASSOCIATES, INC.
|
|
|
|
|
|
John F. Keitz |
|
|
President
ISTAT Senior Certified Appraiser
And Appraiser Fellow |
|
|
JFK/kf
Attachment
Figure 1
Contenintal Airlines
Values $ Millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRCRAFT |
|
|
|
SERIAL |
|
DELIVERY |
|
|
|
MTOW |
|
1/2 time |
|
Mt. Adj. |
|
|
TYPE |
|
REGIST. |
|
NUMBER |
|
DATE |
|
ENGINE |
|
Lbs. |
|
BV |
|
BV |
1 |
|
737-700 |
|
N24729 |
|
28945 |
|
Jul-99 |
|
CFM56-7B24 |
|
|
154,500 |
|
|
|
22.45 |
|
|
|
22.60 |
|
2 |
|
737-700 |
|
N16732 |
|
28948 |
|
Aug-99 |
|
CFM56-7B24 |
|
|
154,500 |
|
|
|
22.45 |
|
|
|
22.61 |
|
3 |
|
737-700 |
|
N14735 |
|
28950 |
|
Sep-99 |
|
CFM56-7B24 |
|
|
154,500 |
|
|
|
22.45 |
|
|
|
22.18 |
|
4 |
|
737-700 |
|
N24736 |
|
28803 |
|
Sep-99 |
|
CFM56-7B24 |
|
|
154,500 |
|
|
|
22.45 |
|
|
|
23.49 |
|
5 |
|
737-800 |
|
N26232 |
|
28942 |
|
Jun-99 |
|
CFM56-7B26 |
|
|
174,200 |
|
|
|
27.65 |
|
|
|
27.90 |
|
6 |
|
737-800 |
|
N35236 |
|
28801 |
|
Sep-99 |
|
CFM56-7B26 |
|
|
174,200 |
|
|
|
28.20 |
|
|
|
29.16 |
|
7 |
|
737-800 |
|
N14240 |
|
28952 |
|
Oct-99 |
|
CFM56-7B26 |
|
|
174,200 |
|
|
|
28.75 |
|
|
|
29.98 |
|
8 |
|
757-200 |
|
N34131 |
|
28971 |
|
Jun-98 |
|
RB211-535E4B |
|
|
255,000 |
|
|
|
23.10 |
|
|
|
25.90 |
|
9 |
|
757-200 |
|
N33132 |
|
29281 |
|
Jun-98 |
|
RB211-535E4B |
|
|
255,000 |
|
|
|
23.10 |
|
|
|
25.79 |
|
10 |
|
777-200ER |
|
N77006 |
|
29476 |
|
Dec-98 |
|
GE90-94B |
|
|
656,000 |
|
|
|
73.30 |
|
|
|
79.92 |
|
11 |
|
777-200ER |
|
N78009 |
|
29479 |
|
Apr-99 |
|
GE90-94B |
|
|
656,000 |
|
|
|
76.20 |
|
|
|
82.07 |
|
12 |
|
777-200ER |
|
N78013 |
|
29861 |
|
Sep-99 |
|
GE90-94B |
|
|
656,000 |
|
|
|
77.65 |
|
|
|
83.96 |
|
13 |
|
737-900ER |
|
N37437 |
|
33532 |
|
Jul-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
|
53.80 |
|
|
|
53.80 |
|
14 |
|
737-900ER |
|
N78438 |
|
33533 |
|
Jul-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
|
53.80 |
|
|
|
53.80 |
|
15 |
|
737-900ER |
|
N57439 |
|
33534 |
|
Aug-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
|
53.80 |
|
|
|
53.80 |
|
16 |
|
737-900ER |
|
N45440 |
|
33535 |
|
Aug-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
|
53.80 |
|
|
|
53.80 |
|
17 |
|
737-900ER |
|
N53441 |
|
30131 |
|
Aug-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
|
53.80 |
|
|
|
53.80 |
|
18 |
|
737-900ER |
|
N37434 |
|
33528 |
|
Sep-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
|
53.80 |
|
|
|
53.80 |
|
19 |
|
737-900ER |
|
N53442 |
|
33536 |
|
Sep-09 |
|
CFM56-7B26/3 |
|
|
187,700 |
|
|
|
53.80 |
|
|
|
53.80 |
|
Extended Desktop Appraisal of:
Nineteen (19) Various Aircraft
Client:
Continental Airlines, Inc.
Date:
June 10, 2009
|
|
|
|
|
|
Washington D.C.
2101 Wilson Boulevard
Suite 1001
Arlington, VA 22201
Tel: 1 703 276 3200
Fax: 1 703 276 3201
Frankfurt
Frankfurt Trianon
Mainzer Landstrasse 16
60325 Frankfurt
Germany
Tel: 40 (0) 69 97168 436
Tokyo
3-16-16 Higashiooi
Shinagawa-ku
Tokyo 140-0011
Japan
Tel/Fax: 81 1 3763 6845
|
|
![(ISTAT LOGO)](h67165h6716509.gif) |
I. |
|
Introduction and Executive Summary |
Table of Contents:
|
I. |
|
Introduction |
|
|
II. |
|
Value Definitions/Terminology |
|
|
III. |
|
Current Market Conditions |
|
|
IV. |
|
Valuation |
|
|
V. |
|
Covenants |
Morten Beyer & Agnew (mba) has been retained by Continental Airlines, Inc. (the Client), to
provide an Extended Desktop Appraisal to determine the Maintenance Adjusted Current Base Values
(CBV) of twelve (12) aircraft of various types currently operated by Continental Airlines, Inc. as
of June 2009. mba will also provide New Delivery Base Values of seven (7) future new delivery
Boeing 737-900ER aircraft. The aircraft are further identified in Section IV of this report.
In performing this appraisal, mba relied on industry knowledge and intelligence, confidentially
obtained data points, its market expertise and current analysis of market trends and conditions,
along with information extrapolated from its semi-annual publications mba Future Aircraft Values
Jet Transport (FAV).
Based on the information set forth in this report, it is our opinion that the Maintenance Adjusted
Current Base Value and the New Delivery Base Value of the aircraft in this portfolio are as follows
and as more fully set forth in Section IV.
|
|
|
|
|
|
|
|
|
Maintenance Adjusted |
|
|
|
|
Current Base Value ($US) |
|
|
|
|
|
|
|
|
|
Portfolio (12 A/C) |
|
$ |
450,050,000 |
|
|
|
|
|
|
|
|
|
|
|
|
New Delivery |
|
|
|
|
Base Value ($US) |
|
|
|
|
|
|
|
|
|
737-900ER (7 A/C) |
|
$ |
376,090,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Portfolio (19 A/C) |
|
$ |
826,140,000 |
|
|
|
Section II of this report presents definitions of various terms, such as Current Base Value and
Current Market Value as promulgated by the Appraisal Program of the International Society of
Transport Aircraft Trading (ISTAT). ISTAT is a non-profit association of management personnel from
banks, leasing companies, airlines, manufacturers, brokers, and others who have a vested interest
in the commercial aviation industry and who have established a technical and ethical certification
program for expert appraisers.
Extended Desktop Appraisal
An Extended Desktop Appraisal is one that is characterized by the absence of any on-site inspection
of the aircraft or its maintenance records, but it does include consideration of maintenance status
information that is provided to the appraiser from the client, aircraft operator, or in the case of
a second opinion, possibly from another appraisers report. An Extended Desktop Appraisal would
normally provide a value that includes adjustments from the mid-time, mid-life baseline to account
for the actual maintenance status of the aircraft. (ISTAT Handbook)
Base Value
The ISTAT definition of Base Value (BV) has, essentially, the same elements of Market Value except
that the market circumstances are assumed to be in a reasonable state of equilibrium. Thus, BV
pertains to an idealized aircraft and market combination, but will not necessarily reflect the
actual CMV of the aircraft in question at any point in time. BV is founded in the historical trend
of values and value in use, and is generally used to analyze historical values or to project future
values.
ISTAT defines Base Value as the Appraisers opinion of the underlying economic value of an
aircraft, engine, or inventory of aircraft parts/equipment (hereinafter referred to as the asset), in an
open, unrestricted, stable market environment with a reasonable balance of supply and demand. Full
consideration is assumed of its highest and best use. An assets Base Value is founded in the
historical trend of values and in the projection of value trends and presumes an arms-length, cash
transaction between willing, able, and knowledgeable parties, acting prudently, with an absence of
duress and with a reasonable period of time available for marketing. In most cases, the Base Value
of an asset assumes the physical condition is average for an asset of its type and age. It further
assumes the maintenance time/life status is at mid-time, mid-life (or benefiting from an
above-average maintenance status if it is new or nearly new, as the case may be). Since Base Value
pertains to a somewhat idealized asset and market combination it may not necessarily reflect the
actual current value of the asset in question, but is a nominal starting value to which adjustments
may be applied to determine an actual value. Because it is related to long-term market trends, the
Base Value definition is commonly applied to analyses of historical values and projections of
residual values.
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|
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Continental Airlines, Inc.
Job File #09168
Page 2 of 15
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|
![(MBA FOOTER)](h67165h6716511.gif) |
Qualifications
mba is a recognized provider of aircraft and aviation-related asset appraisals and
inspections. mba and its principals have been providing appraisal services to the aviation
industry for 40 years; and its employees adhere to the rules and ethics set forth by the
International Society of Transport Aircraft Traders (ISTAT). mbas clients include most of the
worlds major airlines, lessors, financial institutions, and manufacturers and suppliers. mba
maintains offices in Washington, Frankfurt, and Tokyo.
mba publishes the semi-annual Future Aircraft Values (FAV), a three-volume compendium of current
and projected aircraft values for the next 20 years for over 150 types of jet, turboprop, and cargo
aircraft.
mba also provides consulting services to the industry relating to operations, marketing, and
management with emphasis on financial/operational analysis, airline safety audits and
certification, utilizing hands-on solutions to current situations. mba also provides expert
testimony and witness support on cases involving collateral/asset disputes, bankruptcies, financial
operations, safety, regulatory and maintenance concerns.
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|
Continental Airlines, Inc.
Job File #09168
Page 3 of 15
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![(MBA FOOTER)](h67165h6716511.gif) |
III. |
|
Current Market Conditions |
General Market Observation
The demand for and value of new and used jet transport aircraft is primarily driven by the state of
the world economy. In periods of strong prosperity, traffic grows at high single digit rates
limiting slack capacity. Over the years, we have observed that traffic growth is closely correlated
to growth in regional and world domestic product. However, over the long term, the trend has been
toward traffic lagging domestic product growth, with lower peaks, and deeper declines indicating
maturity in the airline industry.
In periods of decline (as observed in the early 1990s) a large surplus of aircraft existed on the
market with a disastrous effect on short-term prices. Eventually, values returned to normal levels,
being driven by the inherent economies and suitability of the individual aircraft types.
Commencing in late 2000, the majority of global economies began a slip into recession with slowing
traffic growth, a trend that was accelerated by the terrorist attacks on September 11, 2001. The
destruction of economic value and loss of consumer confidence, combined with continued military
conflict in the Middle East and the SARS epidemic of 2003, slowed the pace of recovery and stifled
the demand for new aircraft.
However, 2005 saw renewed optimism within the industry, with passenger levels finally climbing back
to pre-September 11th levels. This helped both Airbus & Boeing to reach record levels
for new orders with Airbus claiming 1,1111 new orders in 2005 and Boeing reporting
1,0282, for a total of 2,139 aircraft. The strong demand for new airframes continued
with combined orders for Airbus and Boeing totaling 1,834 and 2,754 aircraft in 2006 and 2007
respectively. This continued high order count can be attributed to
high fuel prices forcing carriers to retire the less fuel-efficient aircraft in their fleet, as
well as the fleet replacement cycle. The continued strength of the 787 with 93 additional orders in
2008 (total program 910 highest total orders before first flight of any commercial aircraft
program) and the re-emergence of the A350 as the A350XWB has also contributed to the strong order
cycle with Airbus claiming 483 total orders for the A350XWB program.
The 2008 Orders total 756 and 662 for Airbus and Boeing, respectively. The credit crisis has
expanded to encompass the broader economic base of the worlds developed countries and recession is
manifesting itself in the EU, US and BRIC counties as well as other emerging markets around the
world. Major lessors have begun to suggest to Airbus and Boeing that current production rates
should be curtailed in order to stave-off value impairments due to deteriorating traffic and
ability to secure financing for new
|
|
|
1 |
|
Source: www.airbus.com |
|
2 |
|
Source: www.boeing.com |
|
|
|
|
|
|
Continental Airlines, Inc.
Job File #09168
Page 4 of 15
|
|
![(MBA FOOTER)](h67165h6716511.gif) |
deliveries. mba believes up to 30% of the current backlog is at risk due to the combination of the
above factors.
The rapid rise in oil prices hurt airlines during the usually prosperous summer months and,
paradoxically, while oil has come down 60% since July 2008, economic woes and increasing
unemployment is reducing traffic demand across-the-board. Airlines registered a US$5 billion loss
in 2008. For 2009 IATA is forecasting a further loss of US$2.5 billion based on a fuel price of
US$60 per barrel, a decline of 3 per cent in passenger volumes, a drop of 5 per cent in cargo
traffic and yield deterioration of 3 per cent. Industry revenues are expected to contract by US$35
billion (from US$536 billion in 2008 to US$501 billion in 2009). Continental and United have
announced significant capacity cuts, mainly focusing on older less efficient aircraft such as the
MD-80 family and the 737 Classics. Southwest has deferred new deliveries again and the only ray of
optimism we detect is American accelerating new deliveries in order to retire MD-80s.
mba believes lower demand due to increased unemployment and finance availability coupled with
liquidity concerns of some carriers will see order deferrals/cancellations increasing and the
probability of lease defaults increasing in 2009. Residual values will be affected, especially for
less desirable aircraft types.
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|
|
Continental Airlines, Inc.
Job File #09168
Page 5 of 15
|
|
![(MBA FOOTER)](h67165h6716511.gif) |
Boeing 737NG Family Aircraft
The Boeing 737 Next Generation (NG) family consists of the 600/-700/-800 and 900ER series.
Boeing received the go-ahead to replace the Classic 737s with the upgraded NG versions in 1993
with the announcement of the 737-700. This was later followed with the introduction of the 737-800
series in 1994, the 600 series in 1995 and finally the 900 series in 1997. After the absorption
of Douglas by Boeing, the 737NG became the mainstay of the US short-haul fleet displacing older
MD-80 aircraft. The 737NG has also made its way to Europe with great success, and will continue to
provide healthy competition for the Airbus A320 family. To date, there are over 2,600 737NG
aircraft in operation with over 150 operators.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet Status |
|
737-700 |
|
737-800 |
|
737-900ER |
Ordered |
|
|
1,997 |
|
|
|
3,193 |
|
|
|
245 |
|
Cancelled/Transferred |
|
|
491 |
|
|
|
170 |
|
|
|
7 |
|
Net Orders |
|
|
1,506 |
|
|
|
3,023 |
|
|
|
238 |
|
Backlog |
|
|
527 |
|
|
|
1,444 |
|
|
|
192 |
|
Delivered |
|
|
979 |
|
|
|
1,579 |
|
|
|
46 |
|
Destroyed/Retired |
|
|
0 |
|
|
|
5 |
|
|
|
0 |
|
Not in Service/Parked |
|
|
19 |
|
|
|
17 |
|
|
|
0 |
|
Active Aircraft |
|
|
960 |
|
|
|
1,557 |
|
|
|
46 |
|
Number of Operators |
|
|
59 |
|
|
|
117 |
|
|
|
3 |
|
Average Daily Utilization (Hrs) |
|
|
7.93 |
|
|
|
7.92 |
|
|
|
5.87 |
|
Average Fleet Age (Yrs) |
|
|
5.79 |
|
|
|
5.07 |
|
|
|
0.96 |
|
Source: AvSofts ACAS Database, April 2009
The 737NG continues to be very popular in North America and parts of Europe. Boeing took the
737-300 concept, upgraded its avionics and cockpit and redesigned the wing, launching a similar
looking aircraft with enhanced capabilities. The NG aircraft are also starting to compete with
their older and larger sibling the Boeing 757, with the entry into service of the 737-900ER to Lion
Air in April 2007. Delta, Continental and Southwest are finding it capable of operating
trans-continental routes profitably and Delta has, in some cases, replaced their 757s with 737-800
aircraft on routes to Central America. Efficient aircraft like the 737NG will continue to dominate
fleets around the world.
Both the 737NG family and the competing Airbus A320 family had an outstanding year in 2007,
receiving 850 and 914 orders respectively. But with the downturn of the economy in 2008 and the
difficulties faced by operators and lessors in acquiring financing, orders were down to 488 for the
Boeing 737NG family and 472 for the A320 family.
|
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Continental Airlines, Inc.
Job File #09168
Page 6 of 15
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![(MBA FOOTER)](h67165h6716511.gif) |
Because narrowbody aircraft comprise the largest number of aircraft in the worlds fleets, it is
reasonable to expect a negative impact on their values in 2009 and beyond, as long as the economic
downturn persists. Modern aircraft like the 737NGs and the A320 family will not be exempt, but will
suffer less, particularly those aircraft less than 6 years old. Early build examples of their type
can expect to suffer a 5%-to-15% hit depending on their age. For older aircraft, primarily
those that are out of production, such as 737 Classics, and MD-80s, values could decline more than
30%.
According to Back Aviation Solutions, as of May 2009, there are currently 16 Boeing 737-700s, 11
Boeing 737-800s and no Boeing 737-900ERs available for sale or lease.
Source: BACK Aviation Solutions, May 2009
|
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Continental Airlines, Inc.
Job File #09168
Page 7 of 15
|
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![(MBA FOOTER)](h67165h6716511.gif) |
Boeing 757-200
The twin engine 757-200 was introduced in 1978, and first delivered in 1982 as the successor to the
727-200. The 757-200 is known for its exceptional fuel efficiency, low noise levels, increased
passenger comfort and top operating performance. Initially delivered with a MGTOW (Maximum Gross
Takeoff Weight) of 220,000 lb, the 757-200 evolved considerably during its 23 years in production.
The increased gross weight versions of the aircraft allow for greater capacity and range, making
the 757-200 suitable for thin long-haul routes. It was also the first Boeing airliner launched with
non-US engines, the Rolls Royce RB211-535 with the Pratt and Whitney PW2037 and PW2040 offered as
an option only later. The 757-200 has also been delivered as a PF (Package Freighter). Currently
there exist several conversion options including Boeing, Singapore Technologies Aerospace Ltd,
Israel Aircraft Industries, Precision Conversions, and Alcoa-SIE. Production of the 757-200 has
ceased with delivery of the last aircraft, in April 2005 to Shanghai Airlines.
|
|
|
|
|
Fleet Status |
|
757-200 |
Ordered |
|
|
1,033 |
|
Cancelled/Transferred |
|
|
125 |
|
Net Orders |
|
|
908 |
|
Backlog |
|
|
0 |
|
Delivered |
|
|
908 |
|
Destroyed/Retired |
|
|
20 |
|
Not in Service/Parked |
|
|
81 |
|
Converted to Freighter/Other |
|
|
77 |
|
Active Aircraft |
|
|
730 |
|
Number of Operators |
|
|
88 |
|
Average Daily Utilization (Hrs) |
|
|
8.85 |
|
Average Fleet Age (Yrs) |
|
|
15.68 |
|
Source: AvSofts ACAS Database, April 2009
Born out of the oil crisis of the 1970s when airlines were looking for more fuel-efficient and
quieter aircraft, the 757-200 became the aircraft of choice for major U.S. carriers operating
transcontinental routes. After this successful start, orders diminished during the late 1990s with
the introduction of the Airbus A320 family. The 757-200 found itself in an interesting market
niche, stuck between the small 737s and A320s and the larger 767 and A330 wide bodies. Airlines
began to look at covering the same routes with the greater operating flexibility of the 737s and
A320s or the additional capacity of the larger 767 and A330 wide bodies. The 2001 terrorist
attacks accelerated the end for the 757-200 as the majority of aircraft had been bought and
operated by U.S. airlines. With the major U.S airlines fighting for survival in the industries
worst ever downturn, none would place orders for 757s after 2001.
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Continental Airlines, Inc.
Job File #09168
Page 8 of 15
|
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![(MBA FOOTER)](h67165h6716511.gif) |
Prices for 757s have dropped to the point that cargo conversions are now beginning to be viable as
a replacement for 727-200 freighters for cargo operators like Fedex. Availability is increasing as
operators reduce capacity due to decreased consumer demand. Like most aircraft, especially those
that are out of production, mba expects values to soften during the current tough economic climate.
According to Back Aviation Solutions, as of May 2009, there are currently 25 Boeing 757-200s
available for sale or lease.
Source: BACK Aviation Solutions, May 2009
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Continental Airlines, Inc.
Job File #09168
Page 9 of 15
|
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![(MBA FOOTER)](h67165h6716511.gif) |
Boeing 777-200ER
The widebody 777-200ER is the extended range version of the 777-200A. With an increased range and
gross-weight, this aircraft is the staple of the transatlantic crossing for many operators who used
to operate the DC-10 and 747. The new technology and operating economics of the 777 have made it
one of the most popular widebody aircraft of all times.
|
|
|
|
|
Fleet Status |
|
777-200ER |
Ordered |
|
|
511 |
|
Cancelled/Transferred |
|
|
78 |
|
Net Orders |
|
|
433 |
|
Backlog |
|
|
26 |
|
Delivered |
|
|
407 |
|
Destroyed/Retired |
|
|
1 |
|
Not in Service/Parked |
|
|
2 |
|
Active Aircraft |
|
|
404 |
|
Number of Operators |
|
|
31 |
|
Average Daily Utilization (Hrs) |
|
|
11.42 |
|
Average Fleet Age (Yrs) |
|
|
7.92 |
|
Source: AvSofts ACAS Database, April 2009
The 777 has become a replacement for the larger, less efficient Boeing 747-200s, along with the
older DC-10-30s and in many cases the MD-11. It does still, however, compete head-to-head with the
Airbus A330/A340 on range and capacity. The current order backlog for the Boeing 777-200ER stands
at 26. The 777-200ER market is still firm and looks to remain so for the near future, even with the
recent downturn in the economy. This is because international routes for mainline operators remain
lucrative due to passenger demand holding firm. Some operators may choose to go for the longer
range 777-200LR or the larger capacity 777-300ER.
The A350XWB and the envisioned 787-10 could seriously impact 777-200ER residual values when they
enter service. However, the expected entry into service of the A350XWB is currently 2013-2014 and
Boeing is unlikely to launch the 787-10 until there is a competitor. At that stage the oldest
777-200ER will be approaching 16 years of service and nearing replacement.
According to Back Aviation Solutions, as of May 2009 there are currently 5 Boeing 777-200ERs
available for sale or lease.
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Continental Airlines, Inc.
Job File #09168
Page 10 of 15
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![(MBA FOOTER)](h67165h6716511.gif) |
Source: BACK Aviation Solutions, May 2009
|
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Continental Airlines, Inc.
Job File #09168
Page 11 of 15
|
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![(MBA FOOTER)](h67165h6716511.gif) |
In developing the Values of the aircraft in this portfolio, mba did not inspect the aircraft or the
records and documentation associated with them, but relied on partial information supplied by the
Client. This information was not independently verified by mba. Therefore, we used certain
assumptions that are generally accepted industry practice to calculate the value of aircraft when
more detailed information is not available.
The principal assumptions for the aircraft in this portfolio are as follows:
1. |
|
The aircraft is in good overall condition. |
|
2. |
|
The overhaul status of the airframe, engines, landing gear and other major components
are the equivalent of mid-time/mid-life, or new, unless otherwise stated. |
|
3. |
|
The historical maintenance documentation has been maintained to acceptable
international standards. |
|
4. |
|
The specifications of the aircraft are those most common for an aircraft of its type
and vintage. |
|
5. |
|
The aircraft is in a standard airline configuration. |
|
6. |
|
The aircraft is current as to all Airworthiness Directives and Service Bulletins. |
|
7. |
|
Its modification status is comparable to that most common for an aircraft of its type
and vintage. |
|
8. |
|
Its utilization is comparable to industry averages. |
|
9. |
|
There is no history of accident or incident damage. |
|
10. |
|
In the case of the Base Value, no accounting is made for lease revenues, obligations
or terms of ownership unless otherwise specified. |
|
11. |
|
For Aircraft serial numbers 28945, 28948, 28803, 28952 and 29281, the airframe 8C
Check is assumed to have been completed, as stipulated by the Client. |
|
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|
Continental Airlines, Inc.
Job File #09168
Page 12 of 15
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![(MBA FOOTER)](h67165h6716511.gif) |
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|
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|
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|
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|
|
|
Continental Airlines Portfolio Description |
|
|
Aircraft |
|
Serial |
|
|
|
Manufacture |
|
MTOW |
|
|
|
|
No. |
|
Type |
|
Number |
|
Registration |
|
Date |
|
(lbs) |
|
Engine Type |
|
Operator |
|
1
|
|
737-700*
|
|
|
28945 |
|
|
N24729
|
|
Jul-99
|
|
|
154,500 |
|
|
CFM56-7B24
|
|
Continental |
2
|
|
737-700*
|
|
|
28948 |
|
|
N16732
|
|
Aug-99
|
|
|
154,500 |
|
|
CFM56-7B24
|
|
Continental |
3
|
|
737-700
|
|
|
28950 |
|
|
N14735
|
|
Sep-99
|
|
|
154,500 |
|
|
CFM56-7B24
|
|
Continental |
4
|
|
737-700*
|
|
|
28803 |
|
|
N24736
|
|
Sep-99
|
|
|
154,500 |
|
|
CFM56-7B24
|
|
Continental |
5
|
|
737-800
|
|
|
28942 |
|
|
N26232
|
|
Jun-99
|
|
|
174,200 |
|
|
CFM56-7B26
|
|
Continental |
6
|
|
737-800
|
|
|
28801 |
|
|
N35236
|
|
Sep-99
|
|
|
174,200 |
|
|
CFM56-7B26
|
|
Continental |
7
|
|
737-800*
|
|
|
28952 |
|
|
N14240
|
|
Oct-99
|
|
|
174,200 |
|
|
CFM56-7B26
|
|
Continental |
8
|
|
757-200
|
|
|
28971 |
|
|
N34131
|
|
Jun-98
|
|
|
255,000 |
|
|
RB211-535E4B
|
|
Continental |
9
|
|
757-200*
|
|
|
29281 |
|
|
N33132
|
|
Jun-98
|
|
|
255,000 |
|
|
RB211-535E4B
|
|
Continental |
10
|
|
777-200ER
|
|
|
29476 |
|
|
N77006
|
|
Dec-98
|
|
|
656,000 |
|
|
GE90-94B
|
|
Continental |
11
|
|
777-200ER
|
|
|
29479 |
|
|
N78009
|
|
Apr-99
|
|
|
656,000 |
|
|
GE90-94B
|
|
Continental |
12
|
|
777-200ER
|
|
|
29861 |
|
|
N78013
|
|
Sep-99
|
|
|
656,000 |
|
|
GE90-94B
|
|
Continental |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
737-900ER
|
|
|
33532 |
|
|
N37437
|
|
Jul-09
|
|
|
187,700 |
|
|
CFM56-7B26/3
|
|
Continental |
14
|
|
737-900ER
|
|
|
33533 |
|
|
N78438
|
|
Jul-09
|
|
|
187,700 |
|
|
CFM56-7B26/3
|
|
Continental |
15
|
|
737-900ER
|
|
|
33534 |
|
|
N57439
|
|
Aug-09
|
|
|
187,700 |
|
|
CFM56-7B26/3
|
|
Continental |
16
|
|
737-900ER
|
|
|
33535 |
|
|
N45440
|
|
Aug-09
|
|
|
187,700 |
|
|
CFM56-7B26/3
|
|
Continental |
17
|
|
737-900ER
|
|
|
30131 |
|
|
N53441
|
|
Aug-09
|
|
|
187,700 |
|
|
CFM56-7B26/3
|
|
Continental |
18
|
|
737-900ER
|
|
|
33528 |
|
|
N37434
|
|
Sep-09
|
|
|
187,700 |
|
|
CFM56-7B26/3
|
|
Continental |
19
|
|
737-900ER
|
|
|
33536 |
|
|
N53442
|
|
Sep-09
|
|
|
187,700 |
|
|
CFM56-7B26/3
|
|
Continental |
* These aircraft are assumed to have undergone an airframe 8C Check.
|
|
|
|
|
|
Continental Airlines, Inc.
Job File #09168
Page 13 of 15
|
|
![(MBA FOOTER)](h67165h6716511.gif) |
|
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|
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|
|
|
|
Continental Airlines Valuation |
($US Million) |
|
|
|
|
Serial |
|
Half Time |
|
|
|
|
|
MX. Adj. |
No. |
|
Aircraft Type |
|
Number |
|
BV |
|
MX. Adj. |
|
CBV |
|
1
|
|
737-700
|
|
|
28945 |
|
|
|
23.44 |
|
|
|
0.51 |
|
|
|
23.95 |
|
2
|
|
737-700
|
|
|
28948 |
|
|
|
23.56 |
|
|
|
(1.46 |
) |
|
|
22.10 |
|
3
|
|
737-700
|
|
|
28950 |
|
|
|
23.68 |
|
|
|
(1.19 |
) |
|
|
22.49 |
|
4
|
|
737-700
|
|
|
28803 |
|
|
|
23.68 |
|
|
|
(1.15 |
) |
|
|
22.53 |
|
5
|
|
737-800
|
|
|
28942 |
|
|
|
27.64 |
|
|
|
(1.27 |
) |
|
|
26.37 |
|
6
|
|
737-800
|
|
|
28801 |
|
|
|
28.04 |
|
|
|
(0.53 |
) |
|
|
27.51 |
|
7
|
|
737-800
|
|
|
28952 |
|
|
|
28.17 |
|
|
|
0.03 |
|
|
|
28.20 |
|
8
|
|
757-200
|
|
|
28971 |
|
|
|
23.00 |
|
|
|
3.05 |
|
|
|
26.05 |
|
9
|
|
757-200
|
|
|
29281 |
|
|
|
23.00 |
|
|
|
(1.21 |
) |
|
|
21.79 |
|
10
|
|
777-200ER
|
|
|
29476 |
|
|
|
74.15 |
|
|
|
1.73 |
|
|
|
75.88 |
|
11
|
|
777-200ER
|
|
|
29479 |
|
|
|
75.69 |
|
|
|
(1.13 |
) |
|
|
74.56 |
|
12
|
|
777-200ER
|
|
|
29861 |
|
|
|
77.51 |
|
|
|
1.11 |
|
|
|
78.62 |
|
|
|
|
|
Sub-total
|
|
$ |
451.56 |
|
|
|
($1.51 |
) |
|
$ |
450.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weight |
|
|
|
|
|
New |
|
|
|
|
Serial |
|
Adjusted |
|
|
|
|
|
Delivery |
No. |
|
Aircraft Type |
|
Number |
|
BV |
|
MX. Adj. |
|
BV |
|
13
|
|
737-900ER
|
|
|
33532 |
|
|
|
53.64 |
|
|
|
0.00 |
|
|
|
53.64 |
|
14
|
|
737-900ER
|
|
|
33533 |
|
|
|
53.64 |
|
|
|
0.00 |
|
|
|
53.64 |
|
15
|
|
737-900ER
|
|
|
33534 |
|
|
|
53.73 |
|
|
|
0.00 |
|
|
|
53.73 |
|
16
|
|
737-900ER
|
|
|
33535 |
|
|
|
53.73 |
|
|
|
0.00 |
|
|
|
53.73 |
|
17
|
|
737-900ER
|
|
|
30131 |
|
|
|
53.73 |
|
|
|
0.00 |
|
|
|
53.73 |
|
18
|
|
737-900ER
|
|
|
33528 |
|
|
|
53.81 |
|
|
|
0.00 |
|
|
|
53.81 |
|
19
|
|
737-900ER
|
|
|
33536 |
|
|
|
53.81 |
|
|
|
0.00 |
|
|
|
53.81 |
|
|
|
|
|
Sub-total
|
|
$ |
376.09 |
|
|
$ |
0.00 |
|
|
$ |
376.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total
|
|
$ |
827.65 |
|
|
|
($1.51 |
) |
|
$ |
826.14 |
|
Legend for Portfolio Valuation
|
|
|
Weight Adjusted BV
|
|
Weight Adjusted Base Value |
Half Time BV
|
|
Half Time Base Value |
MX. Adj.
|
|
Maintenance Adjustments |
MX. Adj. CBV
|
|
Maintenance Adjusted Current Base Value |
New Delivery BV
|
|
New Delivery Base Value |
|
|
|
|
|
|
Continental Airlines, Inc.
Job File #09168
Page 14 of 15
|
|
![(MBA FOOTER)](h67165h6716511.gif) |
This report has been prepared for the
exclusive use of Continental Airlines, Inc. and shall not be
provided to other parties by mba without the express consent of Continental Airlines, Inc. mba
certifies that this report has been independently prepared and that it fully and accurately
reflects mbas opinion as to the Maintenance Adjusted Current Base Values and the New Delivery Base
Values, as requested. mba further certifies that it does not have, and does not expect to have, any
financial or other interest in the subject or similar aircraft and engine.
This report represents the opinion of mba as to the Maintenance Adjusted Current Base Values and
the New Delivery Base Values of the subject aircraft as requested and is intended to be advisory
only, in nature. Therefore, mba assumes no responsibility or legal liability for any actions
taken, or not taken, by Continental Airlines, Inc. or any other party with regard to the subject
aircraft and engine. By accepting this report, all parties agree that mba shall bear no such
responsibility or legal liability.
|
|
|
|
|
|
Sincerely,
Morten Beyer & Agnew, Inc.
|
|
|
|
|
|
|
|
June 10, 2009 |
Stephen P. Rehrmann, ATP/FE
Vice President Appraisal Group
Morten Beyer & Agnew, Inc.
ISTAT Certified Appraiser |
|
|
|
|
|
|
|
|
Continental Airlines, Inc.
Job File #09168
Page 15 of 15
|
|
![(MBA FOOTER)](h67165h6716511.gif) |
APPENDIX III
SUMMARY OF APPRAISED VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appraisers Valuations
|
|
|
|
|
|
|
|
|
|
|
|
|
AISI
|
|
|
BK
|
|
|
MBA
|
|
Aircraft
|
|
Registration
|
|
|
Manufacturers
|
|
|
Delivery
|
|
|
|
|
|
Maintenance
|
|
|
Maint. Adj.
|
|
|
|
|
|
Maintenance
|
|
|
Maint. Adj.
|
|
|
|
|
|
Maintenance
|
|
|
Maint. Adj.
|
|
Type
|
|
Number
|
|
|
Serial Number
|
|
|
Month
|
|
|
Base Value
|
|
|
Adjustment
|
|
|
Base Value
|
|
|
Base Value
|
|
|
Adjustment
|
|
|
Base Value
|
|
|
Base Value
|
|
|
Adjustment
|
|
|
Base Value
|
|
|
Boeing
777-224ER
|
|
|
N77006
|
|
|
|
29476
|
|
|
|
December 1998
|
|
|
$
|
70,410,000
|
|
|
$
|
3,870,000
|
|
|
$
|
74,280,000
|
|
|
$
|
73,300,000
|
|
|
$
|
6,620,000
|
|
|
$
|
79,920,000
|
|
|
$
|
74,150,000
|
|
|
$
|
1,730,000
|
|
|
$
|
75,880,000
|
|
Boeing
777-224ER
|
|
|
N78009
|
|
|
|
29479
|
|
|
|
April 1999
|
|
|
|
74,320,000
|
|
|
|
890,000
|
|
|
|
75,210,000
|
|
|
|
76,200,000
|
|
|
|
5,870,000
|
|
|
|
82,070,000
|
|
|
|
75,690,000
|
|
|
|
(1,130,000
|
)
|
|
|
74,560,000
|
|
Boeing
777-224ER
|
|
|
N78013
|
|
|
|
29861
|
|
|
|
September 1999
|
|
|
|
74,320,000
|
|
|
|
4,730,000
|
|
|
|
79,050,000
|
|
|
|
77,650,000
|
|
|
|
6,310,000
|
|
|
|
83,960,000
|
|
|
|
77,510,000
|
|
|
|
1,110,000
|
|
|
|
78,620,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boeing
757-224
|
|
|
N34131
|
|
|
|
28971
|
|
|
|
June 1998
|
|
|
|
24,240,000
|
|
|
|
130,000
|
|
|
|
24,370,000
|
|
|
|
23,100,000
|
|
|
|
2,800,000
|
|
|
|
25,900,000
|
|
|
|
23,000,000
|
|
|
|
3,050,000
|
|
|
|
26,050,000
|
|
Boeing
757-224
|
|
|
N33132
|
|
|
|
29281
|
|
|
|
June 1998
|
|
|
|
24,240,000
|
|
|
|
520,000
|
|
|
|
24,760,000
|
|
|
|
23,100,000
|
|
|
|
2,690,000
|
|
|
|
25,790,000
|
|
|
|
23,000,000
|
|
|
|
(1,210,000
|
)
|
|
|
21,790,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boeing
737-924ER
|
|
|
N37437
|
|
|
|
33532
|
|
|
|
July 2009
|
|
|
|
57,870,000
|
|
|
|
|
|
|
|
57,870,000
|
|
|
|
53,800,000
|
|
|
|
|
|
|
|
53,800,000
|
|
|
|
53,640,000
|
|
|
|
|
|
|
|
53,640,000
|
|
Boeing
737-924ER
|
|
|
N78438
|
|
|
|
33533
|
|
|
|
July 2009
|
|
|
|
57,870,000
|
|
|
|
|
|
|
|
57,870,000
|
|
|
|
53,800,000
|
|
|
|
|
|
|
|
53,800,000
|
|
|
|
53,640,000
|
|
|
|
|
|
|
|
53,640,000
|
|
Boeing
737-924ER
|
|
|
N57439
|
|
|
|
33534
|
|
|
|
August 2009
|
|
|
|
58,020,000
|
|
|
|
|
|
|
|
58,020,000
|
|
|
|
53,800,000
|
|
|
|
|
|
|
|
53,800,000
|
|
|
|
53,730,000
|
|
|
|
|
|
|
|
53,730,000
|
|
Boeing
737-924ER
|
|
|
N45440
|
|
|
|
33535
|
|
|
|
August 2009
|
|
|
|
58,020,000
|
|
|
|
|
|
|
|
58,020,000
|
|
|
|
53,800,000
|
|
|
|
|
|
|
|
53,800,000
|
|
|
|
53,730,000
|
|
|
|
|
|
|
|
53,730,000
|
|
Boeing
737-924ER
|
|
|
N53441
|
|
|
|
30131
|
|
|
|
August 2009
|
|
|
|
58,020,000
|
|
|
|
|
|
|
|
58,020,000
|
|
|
|
53,800,000
|
|
|
|
|
|
|
|
53,800,000
|
|
|
|
53,730,000
|
|
|
|
|
|
|
|
53,730,000
|
|
Boeing
737-924ER
|
|
|
N37434
|
|
|
|
33528
|
|
|
|
September 2009
|
|
|
|
58,170,000
|
|
|
|
|
|
|
|
58,170,000
|
|
|
|
53,800,000
|
|
|
|
|
|
|
|
53,800,000
|
|
|
|
53,810,000
|
|
|
|
|
|
|
|
53,810,000
|
|
Boeing
737-924ER
|
|
|
N53442
|
|
|
|
33536
|
|
|
|
September 2009
|
|
|
|
58,170,000
|
|
|
|
|
|
|
|
58,170,000
|
|
|
|
53,800,000
|
|
|
|
|
|
|
|
53,800,000
|
|
|
|
53,810,000
|
|
|
|
|
|
|
|
53,810,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boeing
737-824
|
|
|
N26232
|
|
|
|
28942
|
|
|
|
June 1999
|
|
|
|
25,240,000
|
|
|
|
1,730,000
|
|
|
|
26,970,000
|
|
|
|
27,650,000
|
|
|
|
250,000
|
|
|
|
27,900,000
|
|
|
|
27,640,000
|
|
|
|
(1,270,000
|
)
|
|
|
26,370,000
|
|
Boeing
737-824
|
|
|
N35236
|
|
|
|
28801
|
|
|
|
September 1999
|
|
|
|
25,240,000
|
|
|
|
2,960,000
|
|
|
|
28,200,000
|
|
|
|
28,200,000
|
|
|
|
960,000
|
|
|
|
29,160,000
|
|
|
|
28,040,000
|
|
|
|
(530,000
|
)
|
|
|
27,510,000
|
|
Boeing
737-824
|
|
|
N14240
|
|
|
|
28952
|
|
|
|
October 1999
|
|
|
|
25,240,000
|
|
|
|
1,510,000
|
|
|
|
26,750,000
|
|
|
|
28,750,000
|
|
|
|
1,230,000
|
|
|
|
29,980,000
|
|
|
|
28,170,000
|
|
|
|
30,000
|
|
|
|
28,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boeing
737-724
|
|
|
N24729
|
|
|
|
28945
|
|
|
|
July 1999
|
|
|
|
20,450,000
|
|
|
|
(320,000
|
)
|
|
|
20,130,000
|
|
|
|
22,450,000
|
|
|
|
150,000
|
|
|
|
22,600,000
|
|
|
|
23,440,000
|
|
|
|
510,000
|
|
|
|
23,950,000
|
|
Boeing
737-724
|
|
|
N16732
|
|
|
|
28948
|
|
|
|
August 1999
|
|
|
|
20,450,000
|
|
|
|
(180,000
|
)
|
|
|
20,270,000
|
|
|
|
22,450,000
|
|
|
|
160,000
|
|
|
|
22,610,000
|
|
|
|
23,560,000
|
|
|
|
(1,460,000
|
)
|
|
|
22,100,000
|
|
Boeing
737-724
|
|
|
N14735
|
|
|
|
28950
|
|
|
|
September 1999
|
|
|
|
20,450,000
|
|
|
|
1,320,000
|
|
|
|
21,770,000
|
|
|
|
22,450,000
|
|
|
|
(270,000
|
)
|
|
|
22,180,000
|
|
|
|
23,680,000
|
|
|
|
(1,190,000
|
)
|
|
|
22,490,000
|
|
Boeing
737-724
|
|
|
N24736
|
|
|
|
28803
|
|
|
|
September 1999
|
|
|
|
20,450,000
|
|
|
|
1,380,000
|
|
|
|
21,830,000
|
|
|
|
22,450,000
|
|
|
|
1,040,000
|
|
|
|
23,490,000
|
|
|
|
23,680,000
|
|
|
|
(1,150,000
|
)
|
|
|
22,530,000
|
|
III-1
APPENDIX IV
LOAN TO VALUE RATIO TABLES
The following tables set forth loan to Aircraft value ratios for
the Equipment Notes issued in respect of each of the 17 aircraft
that may be financed pursuant to the Offering as of initial
issuance and the Regular Distribution Dates thereafter. The LTV
was obtained by dividing (i) the outstanding balance
(assuming no payment default) of such Equipment Notes determined
immediately after giving effect to the payments scheduled to be
made on each such Regular Distribution Date by (ii) the
appraised value of the Aircraft securing such Equipment Notes
(see Description of the Aircraft and the
Appraisals The Appraisals), subject to the
Depreciation Assumption. The Depreciation Assumption
contemplates that the value of each Aircraft at issuance of the
Equipment Notes included in each table depreciates by
approximately 3% of the initial appraised value per year, for
the first 15 years after the year of delivery of such
Aircraft, and 4% of such appraised value per year, for any
subsequent year prior to the final expected Regular Distribution
Date. Other rates or methods of depreciation may result in
materially different loan to Aircraft value ratios, and no
assurance can be given (i) that the depreciation rates and
method assumed for the purposes of the tables are the ones most
likely to occur or (ii) as to the actual future value of
any Aircraft. Thus, the tables should not be considered a
forecast or prediction of expected or likely loan to Aircraft
value ratios, but simply a mathematical calculation based on one
set of assumptions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N77006
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
75,880,000
|
.00
|
|
|
$
|
41,734,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
74,218,394
|
.16
|
|
|
|
40,397,992
|
.73
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
72,556,788
|
.32
|
|
|
|
39,062,267
|
.99
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
70,895,182
|
.48
|
|
|
|
37,726,845
|
.34
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
69,233,576
|
.64
|
|
|
|
36,391,746
|
.20
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
67,571,970
|
.80
|
|
|
|
35,056,994
|
.03
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
65,910,364
|
.96
|
|
|
|
33,722,614
|
.66
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
64,248,759
|
.12
|
|
|
|
32,388,636
|
.52
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
62,587,153
|
.28
|
|
|
|
31,055,091
|
.01
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
60,925,547
|
.45
|
|
|
|
29,718,160
|
.47
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
58,710,072
|
.99
|
|
|
|
28,108,845
|
.80
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
56,494,598
|
.54
|
|
|
|
26,479,128
|
.59
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
54,279,124
|
.09
|
|
|
|
24,848,255
|
.47
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
52,063,649
|
.64
|
|
|
|
23,218,708
|
.69
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
49,848,175
|
.18
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N78009
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
75,210,000
|
.00
|
|
|
$
|
41,366,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
73,598,357
|
.14
|
|
|
|
40,060,498
|
.89
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
71,986,714
|
.29
|
|
|
|
38,755,358
|
.26
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
70,375,071
|
.43
|
|
|
|
37,450,068
|
.44
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
68,763,428
|
.57
|
|
|
|
36,144,618
|
.86
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
67,151,785
|
.71
|
|
|
|
34,838,997
|
.93
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
65,540,142
|
.86
|
|
|
|
33,533,192
|
.90
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
63,928,500
|
.00
|
|
|
|
32,227,189
|
.72
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
62,316,857
|
.14
|
|
|
|
30,920,972
|
.89
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
60,705,214
|
.29
|
|
|
|
29,610,686
|
.74
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
59,093,571
|
.43
|
|
|
|
28,292,454
|
.81
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
56,944,714
|
.29
|
|
|
|
26,690,098
|
.72
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
54,795,857
|
.14
|
|
|
|
25,084,808
|
.93
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
52,647,000
|
.00
|
|
|
|
23,478,864
|
.14
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
50,498,142
|
.86
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
IV-1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N78013
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
79,050,000
|
.00
|
|
|
$
|
43,478,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
77,356,071
|
.43
|
|
|
|
42,105,869
|
.40
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
75,662,142
|
.86
|
|
|
|
40,734,092
|
.15
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
73,968,214
|
.29
|
|
|
|
39,362,158
|
.09
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
72,274,285
|
.71
|
|
|
|
37,990,056
|
.12
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
70,580,357
|
.14
|
|
|
|
36,617,774
|
.05
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
68,886,428
|
.57
|
|
|
|
35,245,298
|
.48
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
67,192,500
|
.00
|
|
|
|
33,872,614
|
.65
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
65,498,571
|
.43
|
|
|
|
32,499,706
|
.25
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
63,804,642
|
.86
|
|
|
|
31,122,520
|
.76
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
62,110,714
|
.29
|
|
|
|
29,736,983
|
.82
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
59,852,142
|
.86
|
|
|
|
28,052,816
|
.17
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
57,593,571
|
.43
|
|
|
|
26,365,565
|
.04
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
55,335,000
|
.00
|
|
|
|
24,677,625
|
.45
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
53,076,428
|
.57
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N34131
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
25,440,000
|
.00
|
|
|
$
|
13,992,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
24,870,447
|
.76
|
|
|
|
13,537,293
|
.27
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
24,300,895
|
.52
|
|
|
|
13,082,829
|
.54
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
23,731,343
|
.28
|
|
|
|
12,628,625
|
.62
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
23,161,791
|
.04
|
|
|
|
12,174,699
|
.93
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
22,592,238
|
.81
|
|
|
|
11,721,072
|
.68
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
22,022,686
|
.57
|
|
|
|
11,267,766
|
.05
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
21,453,134
|
.33
|
|
|
|
10,814,804
|
.51
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
20,883,582
|
.09
|
|
|
|
10,362,215
|
.06
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
20,124,179
|
.10
|
|
|
|
9,816,138
|
.04
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
19,364,776
|
.12
|
|
|
|
9,271,347
|
.80
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
18,605,373
|
.13
|
|
|
|
8,720,374
|
.70
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
17,845,970
|
.15
|
|
|
|
8,169,645
|
.93
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
17,086,567
|
.16
|
|
|
|
7,620,057
|
.91
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
16,327,164
|
.18
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N33132
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
24,113,333
|
.33
|
|
|
$
|
13,262,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
23,573,482
|
.59
|
|
|
|
12,831,339
|
.04
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
23,033,631
|
.84
|
|
|
|
12,400,575
|
.06
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
22,493,781
|
.09
|
|
|
|
11,970,057
|
.35
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
21,953,930
|
.35
|
|
|
|
11,539,803
|
.37
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
21,414,079
|
.60
|
|
|
|
11,109,832
|
.25
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
20,874,228
|
.86
|
|
|
|
10,680,165
|
.05
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
20,334,378
|
.11
|
|
|
|
10,250,824
|
.93
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
19,794,527
|
.36
|
|
|
|
9,821,837
|
.49
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
19,074,726
|
.37
|
|
|
|
9,304,237
|
.76
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
18,354,925
|
.37
|
|
|
|
8,787,857
|
.70
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
17,635,124
|
.38
|
|
|
|
8,265,617
|
.21
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
16,915,323
|
.38
|
|
|
|
7,743,608
|
.32
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
16,195,522
|
.39
|
|
|
|
7,222,680
|
.68
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
15,475,721
|
.39
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
IV-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N37437
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
53,800,000
|
.00
|
|
|
$
|
28,258,000
|
.00
|
|
|
|
52
|
.5
|
%
|
January 8, 2010
|
|
|
52,993,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
53
|
.3
|
|
July 8, 2010
|
|
|
52,186,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
54
|
.1
|
|
January 8, 2011
|
|
|
51,379,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
55
|
.0
|
|
July 8, 2011
|
|
|
50,572,000
|
.00
|
|
|
|
27,704,698
|
.56
|
|
|
|
54
|
.8
|
|
January 8, 2012
|
|
|
49,765,000
|
.00
|
|
|
|
27,150,947
|
.11
|
|
|
|
54
|
.6
|
|
July 8, 2012
|
|
|
48,958,000
|
.00
|
|
|
|
26,597,195
|
.67
|
|
|
|
54
|
.3
|
|
January 8, 2013
|
|
|
48,151,000
|
.00
|
|
|
|
26,043,444
|
.22
|
|
|
|
54
|
.1
|
|
July 8, 2013
|
|
|
47,344,000
|
.00
|
|
|
|
25,489,692
|
.78
|
|
|
|
53
|
.8
|
|
January 8, 2014
|
|
|
46,537,000
|
.00
|
|
|
|
24,935,941
|
.33
|
|
|
|
53
|
.6
|
|
July 8, 2014
|
|
|
45,730,000
|
.00
|
|
|
|
24,382,189
|
.89
|
|
|
|
53
|
.3
|
|
January 8, 2015
|
|
|
44,923,000
|
.00
|
|
|
|
23,828,438
|
.44
|
|
|
|
53
|
.0
|
|
July 8, 2015
|
|
|
44,116,000
|
.00
|
|
|
|
23,274,687
|
.00
|
|
|
|
52
|
.8
|
|
January 8, 2016
|
|
|
43,309,000
|
.00
|
|
|
|
22,720,935
|
.56
|
|
|
|
52
|
.5
|
|
July 8, 2016
|
|
|
42,502,000
|
.00
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N78438
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
53,800,000
|
.00
|
|
|
$
|
28,258,000
|
.00
|
|
|
|
52
|
.5
|
%
|
January 8, 2010
|
|
|
52,993,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
53
|
.3
|
|
July 8, 2010
|
|
|
52,186,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
54
|
.1
|
|
January 8, 2011
|
|
|
51,379,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
55
|
.0
|
|
July 8, 2011
|
|
|
50,572,000
|
.00
|
|
|
|
27,704,698
|
.56
|
|
|
|
54
|
.8
|
|
January 8, 2012
|
|
|
49,765,000
|
.00
|
|
|
|
27,150,947
|
.11
|
|
|
|
54
|
.6
|
|
July 8, 2012
|
|
|
48,958,000
|
.00
|
|
|
|
26,597,195
|
.67
|
|
|
|
54
|
.3
|
|
January 8, 2013
|
|
|
48,151,000
|
.00
|
|
|
|
26,043,444
|
.22
|
|
|
|
54
|
.1
|
|
July 8, 2013
|
|
|
47,344,000
|
.00
|
|
|
|
25,489,692
|
.78
|
|
|
|
53
|
.8
|
|
January 8, 2014
|
|
|
46,537,000
|
.00
|
|
|
|
24,935,941
|
.33
|
|
|
|
53
|
.6
|
|
July 8, 2014
|
|
|
45,730,000
|
.00
|
|
|
|
24,382,189
|
.89
|
|
|
|
53
|
.3
|
|
January 8, 2015
|
|
|
44,923,000
|
.00
|
|
|
|
23,828,438
|
.44
|
|
|
|
53
|
.0
|
|
July 8, 2015
|
|
|
44,116,000
|
.00
|
|
|
|
23,274,687
|
.00
|
|
|
|
52
|
.8
|
|
January 8, 2016
|
|
|
43,309,000
|
.00
|
|
|
|
22,720,935
|
.56
|
|
|
|
52
|
.5
|
|
July 8, 2016
|
|
|
42,502,000
|
.00
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N57439
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
53,800,000
|
.00
|
|
|
$
|
28,258,000
|
.00
|
|
|
|
52
|
.5
|
%
|
January 8, 2010
|
|
|
52,993,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
53
|
.3
|
|
July 8, 2010
|
|
|
52,186,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
54
|
.1
|
|
January 8, 2011
|
|
|
51,379,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
55
|
.0
|
|
July 8, 2011
|
|
|
50,572,000
|
.00
|
|
|
|
27,704,698
|
.56
|
|
|
|
54
|
.8
|
|
January 8, 2012
|
|
|
49,765,000
|
.00
|
|
|
|
27,150,947
|
.11
|
|
|
|
54
|
.6
|
|
July 8, 2012
|
|
|
48,958,000
|
.00
|
|
|
|
26,597,195
|
.67
|
|
|
|
54
|
.3
|
|
January 8, 2013
|
|
|
48,151,000
|
.00
|
|
|
|
26,043,444
|
.22
|
|
|
|
54
|
.1
|
|
July 8, 2013
|
|
|
47,344,000
|
.00
|
|
|
|
25,489,692
|
.78
|
|
|
|
53
|
.8
|
|
January 8, 2014
|
|
|
46,537,000
|
.00
|
|
|
|
24,935,941
|
.33
|
|
|
|
53
|
.6
|
|
July 8, 2014
|
|
|
45,730,000
|
.00
|
|
|
|
24,382,189
|
.89
|
|
|
|
53
|
.3
|
|
January 8, 2015
|
|
|
44,923,000
|
.00
|
|
|
|
23,828,438
|
.44
|
|
|
|
53
|
.0
|
|
July 8, 2015
|
|
|
44,116,000
|
.00
|
|
|
|
23,274,687
|
.00
|
|
|
|
52
|
.8
|
|
January 8, 2016
|
|
|
43,309,000
|
.00
|
|
|
|
22,720,935
|
.56
|
|
|
|
52
|
.5
|
|
July 8, 2016
|
|
|
42,502,000
|
.00
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
IV-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N45440
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
53,800,000
|
.00
|
|
|
$
|
28,258,000
|
.00
|
|
|
|
52
|
.5
|
%
|
January 8, 2010
|
|
|
52,993,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
53
|
.3
|
|
July 8, 2010
|
|
|
52,186,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
54
|
.1
|
|
January 8, 2011
|
|
|
51,379,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
55
|
.0
|
|
July 8, 2011
|
|
|
50,572,000
|
.00
|
|
|
|
27,704,698
|
.56
|
|
|
|
54
|
.8
|
|
January 8, 2012
|
|
|
49,765,000
|
.00
|
|
|
|
27,150,947
|
.11
|
|
|
|
54
|
.6
|
|
July 8, 2012
|
|
|
48,958,000
|
.00
|
|
|
|
26,597,195
|
.67
|
|
|
|
54
|
.3
|
|
January 8, 2013
|
|
|
48,151,000
|
.00
|
|
|
|
26,043,444
|
.22
|
|
|
|
54
|
.1
|
|
July 8, 2013
|
|
|
47,344,000
|
.00
|
|
|
|
25,489,692
|
.78
|
|
|
|
53
|
.8
|
|
January 8, 2014
|
|
|
46,537,000
|
.00
|
|
|
|
24,935,941
|
.33
|
|
|
|
53
|
.6
|
|
July 8, 2014
|
|
|
45,730,000
|
.00
|
|
|
|
24,382,189
|
.89
|
|
|
|
53
|
.3
|
|
January 8, 2015
|
|
|
44,923,000
|
.00
|
|
|
|
23,828,438
|
.44
|
|
|
|
53
|
.0
|
|
July 8, 2015
|
|
|
44,116,000
|
.00
|
|
|
|
23,274,687
|
.00
|
|
|
|
52
|
.8
|
|
January 8, 2016
|
|
|
43,309,000
|
.00
|
|
|
|
22,720,935
|
.56
|
|
|
|
52
|
.5
|
|
July 8, 2016
|
|
|
42,502,000
|
.00
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N53441
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
53,800,000
|
.00
|
|
|
$
|
28,258,000
|
.00
|
|
|
|
52
|
.5
|
%
|
January 8, 2010
|
|
|
52,993,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
53
|
.3
|
|
July 8, 2010
|
|
|
52,186,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
54
|
.1
|
|
January 8, 2011
|
|
|
51,379,000
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
55
|
.0
|
|
July 8, 2011
|
|
|
50,572,000
|
.00
|
|
|
|
27,704,698
|
.56
|
|
|
|
54
|
.8
|
|
January 8, 2012
|
|
|
49,765,000
|
.00
|
|
|
|
27,150,947
|
.11
|
|
|
|
54
|
.6
|
|
July 8, 2012
|
|
|
48,958,000
|
.00
|
|
|
|
26,597,195
|
.67
|
|
|
|
54
|
.3
|
|
January 8, 2013
|
|
|
48,151,000
|
.00
|
|
|
|
26,043,444
|
.22
|
|
|
|
54
|
.1
|
|
July 8, 2013
|
|
|
47,344,000
|
.00
|
|
|
|
25,489,692
|
.78
|
|
|
|
53
|
.8
|
|
January 8, 2014
|
|
|
46,537,000
|
.00
|
|
|
|
24,935,941
|
.33
|
|
|
|
53
|
.6
|
|
July 8, 2014
|
|
|
45,730,000
|
.00
|
|
|
|
24,382,189
|
.89
|
|
|
|
53
|
.3
|
|
January 8, 2015
|
|
|
44,923,000
|
.00
|
|
|
|
23,828,438
|
.44
|
|
|
|
53
|
.0
|
|
July 8, 2015
|
|
|
44,116,000
|
.00
|
|
|
|
23,274,687
|
.00
|
|
|
|
52
|
.8
|
|
January 8, 2016
|
|
|
43,309,000
|
.00
|
|
|
|
22,720,935
|
.56
|
|
|
|
52
|
.5
|
|
July 8, 2016
|
|
|
42,502,000
|
.00
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N37434
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
53,810,000
|
.00
|
|
|
$
|
28,258,000
|
.00
|
|
|
|
52
|
.5
|
%
|
January 8, 2010
|
|
|
53,002,850
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
53
|
.3
|
|
July 8, 2010
|
|
|
52,195,700
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
54
|
.1
|
|
January 8, 2011
|
|
|
51,388,550
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
55
|
.0
|
|
July 8, 2011
|
|
|
50,581,400
|
.00
|
|
|
|
27,704,698
|
.56
|
|
|
|
54
|
.8
|
|
January 8, 2012
|
|
|
49,774,250
|
.00
|
|
|
|
27,150,947
|
.11
|
|
|
|
54
|
.5
|
|
July 8, 2012
|
|
|
48,967,100
|
.00
|
|
|
|
26,597,195
|
.67
|
|
|
|
54
|
.3
|
|
January 8, 2013
|
|
|
48,159,950
|
.00
|
|
|
|
26,043,444
|
.22
|
|
|
|
54
|
.1
|
|
July 8, 2013
|
|
|
47,352,800
|
.00
|
|
|
|
25,489,692
|
.78
|
|
|
|
53
|
.8
|
|
January 8, 2014
|
|
|
46,545,650
|
.00
|
|
|
|
24,935,941
|
.33
|
|
|
|
53
|
.6
|
|
July 8, 2014
|
|
|
45,738,500
|
.00
|
|
|
|
24,382,189
|
.89
|
|
|
|
53
|
.3
|
|
January 8, 2015
|
|
|
44,931,350
|
.00
|
|
|
|
23,828,438
|
.44
|
|
|
|
53
|
.0
|
|
July 8, 2015
|
|
|
44,124,200
|
.00
|
|
|
|
23,274,687
|
.00
|
|
|
|
52
|
.7
|
|
January 8, 2016
|
|
|
43,317,050
|
.00
|
|
|
|
22,720,935
|
.56
|
|
|
|
52
|
.5
|
|
July 8, 2016
|
|
|
42,509,900
|
.00
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
IV-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N53442
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
53,810,000
|
.00
|
|
|
$
|
28,258,000
|
.00
|
|
|
|
52
|
.5
|
%
|
January 8, 2010
|
|
|
53,002,850
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
53
|
.3
|
|
July 8, 2010
|
|
|
52,195,700
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
54
|
.1
|
|
January 8, 2011
|
|
|
51,388,550
|
.00
|
|
|
|
28,258,000
|
.00
|
|
|
|
55
|
.0
|
|
July 8, 2011
|
|
|
50,581,400
|
.00
|
|
|
|
27,704,698
|
.56
|
|
|
|
54
|
.8
|
|
January 8, 2012
|
|
|
49,774,250
|
.00
|
|
|
|
27,150,947
|
.11
|
|
|
|
54
|
.5
|
|
July 8, 2012
|
|
|
48,967,100
|
.00
|
|
|
|
26,597,195
|
.67
|
|
|
|
54
|
.3
|
|
January 8, 2013
|
|
|
48,159,950
|
.00
|
|
|
|
26,043,444
|
.22
|
|
|
|
54
|
.1
|
|
July 8, 2013
|
|
|
47,352,800
|
.00
|
|
|
|
25,489,692
|
.78
|
|
|
|
53
|
.8
|
|
January 8, 2014
|
|
|
46,545,650
|
.00
|
|
|
|
24,935,941
|
.33
|
|
|
|
53
|
.6
|
|
July 8, 2014
|
|
|
45,738,500
|
.00
|
|
|
|
24,382,189
|
.89
|
|
|
|
53
|
.3
|
|
January 8, 2015
|
|
|
44,931,350
|
.00
|
|
|
|
23,828,438
|
.44
|
|
|
|
53
|
.0
|
|
July 8, 2015
|
|
|
44,124,200
|
.00
|
|
|
|
23,274,687
|
.00
|
|
|
|
52
|
.7
|
|
January 8, 2016
|
|
|
43,317,050
|
.00
|
|
|
|
22,720,935
|
.56
|
|
|
|
52
|
.5
|
|
July 8, 2016
|
|
|
42,509,900
|
.00
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N26232
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
26,970,000
|
.00
|
|
|
$
|
14,834,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
26,392,071
|
.43
|
|
|
|
14,365,531
|
.91
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
25,814,142
|
.86
|
|
|
|
13,897,513
|
.79
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
25,236,214
|
.29
|
|
|
|
13,429,442
|
.17
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
24,658,285
|
.71
|
|
|
|
12,961,313
|
.26
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
24,080,357
|
.14
|
|
|
|
12,493,122
|
.91
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
23,502,428
|
.57
|
|
|
|
12,024,866
|
.54
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
22,924,500
|
.00
|
|
|
|
11,556,539
|
.11
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
22,346,571
|
.43
|
|
|
|
11,088,135
|
.08
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
21,768,642
|
.86
|
|
|
|
10,618,271
|
.79
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
21,190,714
|
.29
|
|
|
|
10,145,559
|
.19
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
20,420,142
|
.86
|
|
|
|
9,570,960
|
.81
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
19,649,571
|
.43
|
|
|
|
8,995,310
|
.42
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
18,879,000
|
.00
|
|
|
|
8,419,425
|
.15
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
18,108,428
|
.57
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N35236
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
28,200,000
|
.00
|
|
|
$
|
15,510,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
27,595,714
|
.29
|
|
|
|
15,020,689
|
.65
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
26,991,428
|
.57
|
|
|
|
14,531,326
|
.99
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
26,387,142
|
.86
|
|
|
|
14,041,908
|
.39
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
25,782,857
|
.14
|
|
|
|
13,552,429
|
.89
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
25,178,571
|
.43
|
|
|
|
13,062,887
|
.14
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
24,574,285
|
.71
|
|
|
|
12,573,275
|
.36
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
23,970,000
|
.00
|
|
|
|
12,083,589
|
.29
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
23,365,714
|
.29
|
|
|
|
11,593,823
|
.11
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
22,761,428
|
.57
|
|
|
|
11,102,531
|
.13
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
22,157,142
|
.86
|
|
|
|
10,608,259
|
.88
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
21,351,428
|
.57
|
|
|
|
10,007,456
|
.24
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
20,545,714
|
.29
|
|
|
|
9,405,552
|
.61
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
19,740,000
|
.00
|
|
|
|
8,803,403
|
.39
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
18,934,285
|
.71
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
IV-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N14240
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
28,200,000
|
.00
|
|
|
$
|
15,510,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
27,608,391
|
.61
|
|
|
|
15,027,590
|
.08
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
27,016,783
|
.22
|
|
|
|
14,544,977
|
.13
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
26,425,174
|
.83
|
|
|
|
14,062,147
|
.09
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
25,833,566
|
.43
|
|
|
|
13,579,084
|
.58
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
25,241,958
|
.04
|
|
|
|
13,095,772
|
.73
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
24,650,349
|
.65
|
|
|
|
12,612,192
|
.98
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
24,058,741
|
.26
|
|
|
|
12,128,324
|
.91
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
23,467,132
|
.87
|
|
|
|
11,644,145
|
.94
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
22,875,524
|
.48
|
|
|
|
11,158,184
|
.64
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
22,283,916
|
.08
|
|
|
|
10,668,955
|
.58
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
21,692,307
|
.69
|
|
|
|
10,167,226
|
.95
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
20,903,496
|
.50
|
|
|
|
9,569,340
|
.51
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
20,114,685
|
.31
|
|
|
|
8,970,500
|
.95
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
19,325,874
|
.13
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N24729
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
22,226,666
|
.67
|
|
|
$
|
12,225,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
21,750,380
|
.95
|
|
|
|
11,839,002
|
.20
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
21,274,095
|
.24
|
|
|
|
11,453,296
|
.50
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
20,797,809
|
.52
|
|
|
|
11,067,546
|
.70
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
20,321,523
|
.81
|
|
|
|
10,681,749
|
.70
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
19,845,238
|
.10
|
|
|
|
10,295,902
|
.06
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
19,368,952
|
.38
|
|
|
|
9,910,000
|
.01
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
18,892,666
|
.67
|
|
|
|
9,524,039
|
.41
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
18,416,380
|
.95
|
|
|
|
9,138,015
|
.66
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
17,940,095
|
.24
|
|
|
|
8,750,789
|
.31
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
17,463,809
|
.52
|
|
|
|
8,361,214
|
.76
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
16,828,761
|
.90
|
|
|
|
7,887,673
|
.55
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
16,193,714
|
.29
|
|
|
|
7,413,265
|
.35
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
15,558,666
|
.67
|
|
|
|
6,938,663
|
.57
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
14,923,619
|
.05
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N16732
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
21,660,000
|
.00
|
|
|
$
|
11,913,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
21,195,857
|
.14
|
|
|
|
11,537,168
|
.01
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
20,731,714
|
.29
|
|
|
|
11,161,295
|
.84
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
20,267,571
|
.43
|
|
|
|
10,785,380
|
.70
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
19,803,428
|
.57
|
|
|
|
10,409,419
|
.55
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
19,339,285
|
.71
|
|
|
|
10,033,409
|
.05
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
18,875,142
|
.86
|
|
|
|
9,657,345
|
.54
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
18,411,000
|
.00
|
|
|
|
9,281,224
|
.96
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
17,946,857
|
.14
|
|
|
|
8,905,042
|
.85
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
17,482,714
|
.29
|
|
|
|
8,527,688
|
.80
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
17,018,571
|
.43
|
|
|
|
8,148,046
|
.42
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
16,399,714
|
.29
|
|
|
|
7,686,578
|
.09
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
15,780,857
|
.14
|
|
|
|
7,224,264
|
.88
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
15,162,000
|
.00
|
|
|
|
6,761,763
|
.03
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
14,543,142
|
.86
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
IV-6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N14735
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
22,146,666
|
.67
|
|
|
$
|
12,181,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
21,672,095
|
.24
|
|
|
|
11,796,390
|
.31
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
21,197,523
|
.81
|
|
|
|
11,412,072
|
.87
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
20,722,952
|
.38
|
|
|
|
11,027,711
|
.51
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
20,248,380
|
.95
|
|
|
|
10,643,303
|
.09
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
19,773,809
|
.52
|
|
|
|
10,258,844
|
.22
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
19,299,238
|
.10
|
|
|
|
9,874,331
|
.15
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
18,824,666
|
.67
|
|
|
|
9,489,759
|
.72
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
18,350,095
|
.24
|
|
|
|
9,105,125
|
.38
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
17,875,523
|
.81
|
|
|
|
8,719,292
|
.77
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
17,400,952
|
.38
|
|
|
|
8,331,120
|
.41
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
16,768,190
|
.48
|
|
|
|
7,859,283
|
.60
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
16,135,428
|
.57
|
|
|
|
7,386,582
|
.93
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
15,502,666
|
.67
|
|
|
|
6,913,689
|
.38
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
14,869,904
|
.76
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N24736
|
|
|
|
Assumed
|
|
|
Outstanding
|
|
|
|
|
Date
|
|
Aircraft Value
|
|
|
Balance
|
|
|
Loan to Value Ratio
|
|
|
At Issuance
|
|
$
|
22,530,000
|
.00
|
|
|
$
|
12,392,000
|
.00
|
|
|
|
55
|
.0
|
%
|
January 8, 2010
|
|
|
22,047,214
|
.29
|
|
|
|
12,000,572
|
.27
|
|
|
|
54
|
.4
|
|
July 8, 2010
|
|
|
21,564,428
|
.57
|
|
|
|
11,609,602
|
.73
|
|
|
|
53
|
.8
|
|
January 8, 2011
|
|
|
21,081,642
|
.86
|
|
|
|
11,218,588
|
.51
|
|
|
|
53
|
.2
|
|
July 8, 2011
|
|
|
20,598,857
|
.14
|
|
|
|
10,827,526
|
.43
|
|
|
|
52
|
.6
|
|
January 8, 2012
|
|
|
20,116,071
|
.43
|
|
|
|
10,436,413
|
.02
|
|
|
|
51
|
.9
|
|
July 8, 2012
|
|
|
19,633,285
|
.71
|
|
|
|
10,045,244
|
.46
|
|
|
|
51
|
.2
|
|
January 8, 2013
|
|
|
19,150,500
|
.00
|
|
|
|
9,654,016
|
.55
|
|
|
|
50
|
.4
|
|
July 8, 2013
|
|
|
18,667,714
|
.29
|
|
|
|
9,262,724
|
.63
|
|
|
|
49
|
.6
|
|
January 8, 2014
|
|
|
18,184,928
|
.57
|
|
|
|
8,870,213
|
.70
|
|
|
|
48
|
.8
|
|
July 8, 2014
|
|
|
17,702,142
|
.86
|
|
|
|
8,475,322
|
.52
|
|
|
|
47
|
.9
|
|
January 8, 2015
|
|
|
17,058,428
|
.57
|
|
|
|
7,995,318
|
.76
|
|
|
|
46
|
.9
|
|
July 8, 2015
|
|
|
16,414,714
|
.29
|
|
|
|
7,514,436
|
.18
|
|
|
|
45
|
.8
|
|
January 8, 2016
|
|
|
15,771,000
|
.00
|
|
|
|
7,033,357
|
.39
|
|
|
|
44
|
.6
|
|
July 8, 2016
|
|
|
15,127,285
|
.71
|
|
|
|
0
|
.00
|
|
|
|
0
|
.0
|
|
IV-7
PROSPECTUS
CONTINENTAL
AIRLINES, INC.
Pass Through Certificates
This prospectus relates to pass through certificates to be
issued by one or more trusts that we will form, as creator of
each pass through trust, with a national or state bank or trust
company, as trustee. The trustee will hold all property owned by
a trust for the benefit of holders of pass through certificates
issued by that trust. Each pass through certificate issued by a
trust will represent a beneficial interest in all property held
by that trust.
We will describe the specific terms of any offering of pass
through certificates in a prospectus supplement to this
prospectus. You should read this prospectus and the applicable
prospectus supplement carefully before you invest.
This prospectus may not be used to consummate sales of pass
through certificates unless accompanied by a prospectus
supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is April 24, 2009.
FORWARD-LOOKING
STATEMENTS
This prospectus, any prospectus supplement delivered with this
prospectus and the documents we incorporate by reference may
contain statements that constitute forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include any
statements that predict, forecast, indicate or imply future
results, performance or achievements, and may contain the words
believe, anticipate, expect,
estimate, project, will be,
will continue, will result, or words or
phrases of similar meaning.
Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results
may vary materially from anticipated results for a number of
reasons, including those stated in our SEC reports incorporated
in this prospectus by reference or as stated in a prospectus
supplement to this prospectus under the caption Risk
Factors.
All forward-looking statements attributable to us are expressly
qualified in their entirety by the cautionary statements above.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the SEC under the Securities Exchange
Act of 1934. You may read and copy this information at the
Public Reference Room of the SEC, 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
(800) SEC-0330.
The SEC also maintains an internet world wide web site that
contains reports, proxy statements and other information about
issuers, like us, who file reports electronically with the SEC.
The address of that site is
http://www.sec.gov.
We have filed with the SEC a registration statement on
Form S-3,
which registers the securities that we may offer under this
prospectus. The registration statement, including the exhibits
and schedules thereto, contains additional relevant information
about us and the securities offered.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference information into
this prospectus. This means that we can disclose important
information to you by referring you to another document filed
separately with the SEC. The information incorporated by
reference is considered to be part of this prospectus, except
for any information that is superseded by subsequent
incorporated documents or by information that is included
directly in this prospectus or any prospectus supplement.
This prospectus incorporates by reference the documents listed
below that we previously have filed with the SEC and that are
not delivered with this prospectus. They contain important
information about our company and its financial condition.
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Filing
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Date Filed
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Current Report on
Form 8-K
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January 6, 2009
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Current Report on
Form 8-K
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February 3, 2009
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Annual Report on
Form 10-K
for the year ended December 31, 2008
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February 19, 2009
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Current Report on
Form 8-K
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March 3, 2009
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Current Report on
Form 8-K
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April 2, 2009
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Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009
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April 24, 2009
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Current Report on
Form 8-K
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April 24, 2009
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Our SEC file number is 1-10323.
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We incorporate by reference additional documents that we may
file with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act (excluding any information
furnished under Items 2.02 or 7.01 in any Current Report on
Form 8-K)
between the date of this prospectus and the termination of the
offering of securities under this prospectus. These documents
include our periodic reports, such as Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as well as our proxy statements.
You may obtain any of these incorporated documents from us
without charge, excluding any exhibits to those documents unless
the exhibit is specifically incorporated by reference in such
document. You may obtain documents incorporated by reference in
this prospectus by requesting them from us in writing or by
telephone at the following address:
Continental Airlines, Inc.
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
Attention: Secretary
(713) 324-5000.
CONTINENTAL AIRLINES, INC.
We are the worlds fifth largest airline as measured by the
number of scheduled miles flown by revenue passengers in 2008.
Including our wholly-owned subsidiary, Continental Micronesia,
Inc. (CMI), and regional flights operated on our
behalf under capacity purchase agreements with other carriers,
we operate more than 2,300 daily departures. As of
March 31, 2009, we served 121 domestic and 121
international destinations and offered additional connecting
service through alliances with domestic and foreign carriers. We
directly served ten Canadian cities, 25 European cities, seven
South American cities and six Asian cities from the
U.S. mainland as of March 31, 2009. In addition, we
provide service to more destinations in Mexico and Central
America than any other U.S. airline, serving
39 cities. Through our Guam hub, CMI provides extensive
service in the western Pacific, including service to more
Japanese cities than any other U.S. carrier.
We are a Delaware corporation, with executive offices located at
1600 Smith Street, Houston, Texas 77002. Our telephone number is
(713) 324-5000.
USE OF
PROCEEDS
Unless otherwise indicated in an accompanying prospectus
supplement, we intend to use the proceeds from the sale of the
securities for general corporate purposes, which may include
repayment of indebtedness and the funding of a portion of our
pension liabilities, and our working capital requirements.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table contains our consolidated ratio of earnings
to fixed charges for the periods indicated.
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Three
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Months
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Ended
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Year Ended December 31,
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March 31,
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2004
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2005
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2006
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2007
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2008
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2009
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Ratio of earnings to fixed charges
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(a
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(a
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1.25
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1.42
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(a
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(a
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For the years ended December 31, 2004, 2005, and 2008, and
the three months ended March 31, 2009, earnings
were insufficient to cover fixed charges by
$496 million, $109 million, $702 million, and
$135 million, respectively. |
The ratio of earnings to fixed charges is based on continuing
operations. For purposes of the ratio, earnings
means the sum of:
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our pre-tax income (loss) adjusted for undistributed income of
companies in which we have a minority equity interest; and
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our fixed charges, net of interest capitalized.
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Fixed charges represent:
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the interest expense we record on borrowed funds;
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the amount we amortize for debt discount, premium and issuance
expense and interest previously capitalized; and
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that portion of rentals considered to be representative of the
interest expense.
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LEGAL
OPINIONS
Unless otherwise indicated in the applicable prospectus
supplement, our counsel, Hughes Hubbard & Reed LLP,
New York, New York, will render an opinion with respect to the
validity of the certificates being offered by such prospectus
supplement.
EXPERTS
Our consolidated financial statements appearing in our Current
Report on
Form 8-K
filed on April 24, 2009 and the effectiveness of our
internal control over financial reporting included in our Annual
Report on
Form 10-K
for the year ended December 31, 2008 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in its reports thereon, which are
incorporated by reference herein. Our financial statements are
incorporated by reference in reliance upon such reports given on
the authority of Ernst & Young LLP as experts in
accounting and auditing.
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