Arstyman states, "The other thing is that all airlines when expanding take on debt to pay for planes, it is just that Continental just did a major fleet expansion, if UAL or AA were doing a major expansion, then they would carry a lot of debt too. If Delta wanted to buy another 777, they wouldnt go and pay cash for it because they have the money in the bank, they would take terms on it, like everyone else."
This statement is inaccurate. It is true that Continental bought more planes than UAL or AA during the same period in the 90's. What is not true is that Continental took on the same kind of debt as AA or UA to finance these purchases.
For the most part, AA and UA funded their purchases of new aircraft in the 90's through cash flow. In some cases, they did opt for capital leases or sale-lease back arrangements when the financing terms where no more prejudicial to them than had it been in an all cash transaction.
On the other hand, Continental spent beyond its means. Its wholesale replacement of its fleet in the 90's was financed through more expensive operating leases and also through capital leases whose terms on average were less favorable than those that AA and UA negotiated. Though Continental's cash-flow improved through much of the 90's, Continental seems to have opted for operating and capital leases since it did not require as much upfront capital as if they had paid cash or entered into any number of sale-lease back arrangements. As a result, they were able to accelerate the delivery of planes.
Continental's cashflow through much of the late 90's gave them ample resources to pay the lease payments. Post 9/11, Bethune and Co. are now realizing the error of their ways. It is easier to park a plane one owns. One also loses less per flight on a fully-owned plane. A plane one owns is also considered a tangible asset, or collateral for a loan.
As long as current cash flow can cover the current lease payments, Continental will be OK; however, some baloon payments, like those that face UAL, will be due by the end of the decade. Unless the airline business returns to '97 levels, Bethune and Co. are going to have a lot of trouble making those payments.