The airline industry is plagued with several pressures that limit the earning power of those within the industry.

Unions: Organized labor, which is common throughout the industry drives up labor costs that eats into airline profitability

Fuel Costs: Flight variable costs are predominantly made up of fuel costs. Given the roller-coaster ride that crude oil prices has taken over the past decade, airline profitability can vary significantly period to period based on fuel costs alone.

Highly Competitive: Airline margins are relatively thin due to over-capacity within the industry. Competitive pressures will likely lead to future consolidation within the industry, but at the present, the over-capacity prevents airlines from making lofty margins.

Cyclical Nature: In tougher economic times, personal and business travel decline as businesses cut costs and individuals stay closer to home. Airlines need to conserve cash during bad times in order to weather economic downturns given that demand will likely fall fast. This transition is usually not as effective as needed; thus, airlines likely end up with significant financial damange or fail to continue.

Declining Revenue Per Seat: As stated in the Q2 2009 quarterly report released July 21, 2009 - revenue per seat has declined 6.4% year over year, which is a direct decline to the bottom line.

Falling Margins: From 2006 to 2008, gross margins have registered at 35%, 22%, and 16% respectively. Given the industry pressures discussed above, no relief is in site that could revive continentals falling margin situation.

Negative CFO: Given that continental has significant debt levels, positive cash generation is vital to their short term success, which is a concern given the recent falling margins.

Institutional Ownership: Of total shares issued, institutional investors hold 76% of them; thus, implying that this stock is significantly held by the largest investors in the game. As a result, a significant influx of demand for shares of continental airlines is not expected; thus, no bump in share prices is expected as demand will likely decline or at best remain stagnant.

Management Doesn’t Have Skin in the Game: Currently senior management at continental airlines own less than 1% of total shares issued; thus, implying there is no management wealth at stake. I typically favor companies where management has a significant share of the business as it better aligns the incentives of management with those of the shareholders by putting them in the same shoes.

Heavily Followed by Analysts: Individual investors have to compete with an army of analysts as every major brokerage house/investment firm that covers the airline sector will have Continental Airlines within their list of covered stocks.