DALLAS -- A plan by Continental Airlines to emerge from bankruptcy with the backing of an Air Canada investor group could boost international traffic at the new Denver International Airport, but the impact on domestic operations is not yet clear, city officials and analysts agreed.
Houston-based Continental's board voted unanimously yesterday to accept a $450 million infusion from an organization commonly known as the Air Canada group. A spokesman said the airline intends to submit a formal re-organization plan next week that foresees emergence from bankruptcy court protection in early 1993.
In exchange for their badly needed cash, investors would be given a 55% stake in the company, while
the airline's creditors would receive a 35.6% stake in the reorganized carrier.
Initial reaction in the municipal market to the plan was mixed, with airport officials saying they cannot project the size hub that Continental might operate at Denver until a formal reorganization plan is approved.
"We really don't know yet," said Gennifer P. Sussman, finance director for the airport, which is scheduled to open next October.
However, she said the alliance with Air Canada could boost nonstop traffic from Denver, noting that the international gates are in Concourse A adjacent to Continental's planned domestic flight base.
"It could be very advantageous," she said.
At the city's Stapleton International Airport, which will be closed next year, there is limited nonstop international traffic. Carriers now offer daily flights to London and Mexico. However, because of previous restrictions, such flights to Canada, a major trading partner for Colorado, have been restricted.
Rating analysts said yesterday they were not yet certain of how Continental's domestic operations would be expanded, downscaled, or left alone after the carrier emerges from bankruptcy.
However, rating agencies have said in recent years that they had discounted Continental as a major factor in the finances of the new airport.
"We weren't banking on Continental that much," said Todd Whitestone, managing director at Standard & Poor's Corp, which rates the airport bonds BBB. "It wasn't like this would dramatically pull down Denver if they did reduce operations there."
Fitch Investor's Service rates the debt BBB, while Moody's Investors Service assigns them conditional Baal.
As far as investors were concerned, the decision by Continental can only benefit bondholders.
"We believe the airport works even with only one major carrier there; the numbers prove that," said one portfolio manager who asked not to be identified. "Besides, if you have Air Canada flying more people north, it makes sense to me that they would continue to bring a lot of traffic through Denver."
In late secondary market trading yesterday, Denver Airport AMT 6 3/4s of 2022 were quoted 93 7/8-94 to yield 6.532%, unchanged on the day. The decision to accept the Air Canada offer comes nearly two years after the December 1990 bankruptcy filing by Continental Airlines, which triggered market concerns about the viability of the costly new airport if it had to rely only on Chicago-based United as its major operator.
Despite concerns, Denver officials pushed into the market with millions in new-debt issues, wrapping up $3 billion of construction bond sales this fall.