To Our Customers and Co-workers:

Continental earned a $566 million pretax profit in 2007, after accruing $158 million in profit sharing for our more than 45,000 co-workers who made that profit possible. We achieved $14.2 billion in revenue, an increase of 8.4 percent over 2006, almost twice our consolidated capacity growth of 4.3 percent. Our decade-long investment in a modern fleet is paying huge dividends, and we continued to make our fleet more fuel efficient by adding winglets to our aircraft, increasing the fuel efficiency of those aircraft by up to 5 percent. At year end we had winglets on more than 200 mainline aircraft. Thanks to these investments and the tremendous efforts of our co-workers to make our operation more efficient, we can now fly a revenue passenger mile using 35 percent less fuel than we could 10 years ago. This results in tremendous cost savings, as well as greatly reduced carbon dioxide and other emissions. Our fuel efficiency will continue to grow as we retire older aircraft and take delivery of 32 new Boeing 737 aircraft in 2008. The fuel efficiency of our fleet is increasingly important, as jet fuel prices continue to reach new highs. We flew against some strong headwinds in 2007. Fuel costs continue to be the single largest cost at Continental — more than the annual cost of wages, salaries, and benefits, more than the annual cost of our fleet, and more than the annual cost of our facilities throughout the entire world. Moreover, we had to compete with major network competitors operating with substantially lower cost structures than ours — cost structures they gained by using bankruptcy to default on their pension, debt, and other obligations and dramatically lower their costs. Despite our formerly bankrupt competitors’ cost advantages, we competed effectively with them by continuing to grow our network while consistently delivering our great product and service. However, because of the significant cost advantage these competitors have, we must continue our focus on operating our business more efficiently, removing non-value-added costs, and continuing to drive consistency, simplicity, and technological innovation throughout our company.

Go Forward Plan
Our Go Forward Plan again guided us in 2007. It is a straightforward business plan that all our co-workers understand, with clear and measurable goals that we set and communicate each year. Our Go Forward Plan has four cornerstones — Fly to Win (our market plan), Fund the Future (our financial plan), Make Reliability a Reality (our product plan), and Working Together (our people plan).

As we do each year, let’s review what we accomplished in 2007, and where we are headed
in 2008:

Continental’s profit-sharing plan paid out $158 million to employees on Valentine’s Day. Chairman and CEO Larry Kellner presented checks to co-workers at Newark Liberty, including Facilities Technician Hernan Castro. They were joined at the celebration by Michael Strahan, star defensive end for the Super Bowl champion New York Giants.

Fly to Win
We continued to expand our network in 2007. In a network business like the airline business, the scope and scale of the network drives competitive advantages. We increased our mainline capacity by 5.6 percent and our consolidated capacity (that is, including regional operations) by 4.3 percent in 2007. Geographically, we increased our domestic mainline capacity by 4.5 percent, while growing our mainline international capacity by 6.8 percent. Despite similar international expansion by some of our competitors, we continue to have the highest percentage of mainline capacity (47 percent in the fourth quarter of 2007) dedicated to international flying of any U.S. airline. We expect to continue growing our international network in the years ahead. In 2007, we launched new service between our New York hub and both Athens and Mumbai, continuing our strategy of providing nonstop service to international cities from our powerhouse hub at Newark Liberty International Airport. We operate the only true hub in the New York area. Even with the recently announced caps on service to our hub at Liberty, we will be able to continue to grow our service there, as we continue to substitute mainline aircraft, and larger modern turboprop operations, for the more than 190 daily regional jet operations we conducted there last summer.

We are excited that we will finally be able to serve London Heathrow Airport, the most important business airport in the European Union. At the end of March, we launched twice-a-day widebody service from both our New York and Houston hubs to London Heathrow, and we will continue offering twice-a-day service to London Gatwick from New York and once-a-day service to Gatwick from Houston. We’ll also keep our seasonal summer service between Cleveland and Gatwick. As time passes, we will look to grow our London Heathrow slot portfolio to expand our service pattern.

In the coming years, you will see us continue to make major investments in our hubs in New York and Houston. We already have the most modern and fuel efficient fleet among the major network carriers, and we also have the best fleet order on the books among those carriers. We recently announced orders for eight more new Boeing 777 aircraft and 19 more new Boeing 737 aircraft. As a result, as of February 20, 2008, and taking into account the five new Boeing 737s already delivered to us through that date, we had firm orders for a total of 111 new aircraft: 78 new Boeing 737s, 25 new Boeing 787 Dreamliners, and eight new Boeing 777s. This is the best order book among the major network carriers, at a time when both Boeing and Airbus are essentially sold out of aircraft positions for years to come. Our current fleet, the new aircraft we have on firm order, our full-service hubs in the New York, Houston, and Cleveland markets, and our planned investment in those hubs, will continue to permit us to grow our airline.

We are, however, being responsible with our growth. Because of high fuel prices, we are disposing of our less fuel-efficient aircraft, like our Boeing 737-500s, and our older aircraft, like our Boeing 737-300s, as opportunities arise for us to do so. As a result, we expect to grow our mainline capacity by only 2.5 percent in 2008, which includes shrinking our mainline domestic capacity slightly. Our long-term goal, however, is to grow our mainline capacity, on average, between 5 percent and 7 percent annually as we capitalize on the advantages of our investments in our fleet, our facilities, our product, and our people.

We continue to focus on reducing our distribution costs, and providing increasingly sophisticated self-service options for our customers. An ever growing number of our customers prefer to buy their tickets directly from us on continental.com, which is our lowest-cost distribution channel, with ticket sales on continental.com growing 19 percent in 2007 to $3.5 billion. We continue to expand the functionality and ease of use of continental.com and expect its sales to continue to grow in 2008. We are also focused on increasing our ancillary revenues in 2008, as we also look to simplify and standardize various fees that we charge.

Ongoing modernization of the Continental fleet has resulted in consistent improvement in fuel efficiency. Using newer airplanes has made the most impact. Additional fuel savings come from technical modifications (such as addition of winglets), aircraft weight reduction programs, and efficient operating procedures.

Fund the Future
We ended 2007 with $2.8 billion in unrestricted cash and short-term investments, and had total cash and short-term investments of $3 billion. For 2008, as we continue to grow, we have increased our targeted level of yearend unrestricted cash and short-term investments to $3 billion.

We have a goal of financing the majority of our aircraft deliveries well in advance of their delivery dates. In 2007, we completed a $1.15 billion enhanced equipment trust certificate financing, at an attractive average interest rate of 6.27 percent, to cover the vast majority of new aircraft to be delivered to us in 2008. We are now using the proceeds of that financing to finance our acquisition of 30 of the 32 new Boeing aircraft being delivered to us in 2008.

We also continue to invest in the retirement security of our co-workers. In 2007, we contributed $336 million to our pension plans, well in excess of the legally required minimum. We intend to continue to fund the pension plans of our co-workers in amounts greater than the law requires, unless circumstances change that would make it imprudent to do so.

We continue to improve the product on our aircraft. We are putting advanced digital inflight entertainment systems throughout the cabins of our 757-200 and 777 aircraft, as well as 110 volt in-seat power for computers and other personal electronic devices, which don’t require use of an adaptor. In addition, we recently announced an agreement with LiveTV to install live television and wireless texting and e-mail capabilities on all our new narrowbody aircraft. We also took delivery of two new Boeing 777 aircraft in the first half of 2007, bringing our 777 widebody fleet size to 20.

We now have blended winglets on our entire fleet of 141 Boeing 737-700, and -800 aircraft, on all 41 of our 757- 200 aircraft, and on 11 of our 737-300 aircraft, and are installing winglets on the portion of our 737-500 aircraft that we will keep for the next few years. All the new 737-800 and 737-900ER aircraft that Boeing is delivering to us in 2008 will have winglets installed upon delivery. Winglets increase the fuel efficiency of aircraft by up to 5 percent, and are a natural and permanent hedge against high fuel prices. Winglets are also environmentally friendly, as they reduce takeoff and landing noise, and carbon dioxide and nitrogen oxide emissions.

We also downsized our regional jet fleet by 25 aircraft in 2007, and diversified the suppliers of regional jet feed by introducing aircraft operated by Chautauqua Airlines, a subsidiary of Republic Airlines. In 2008, we are introducing 15 new 74-seat Bombardier Q400s into our system, operated by Colgan Air Inc., a subsidiary of Pinnacle Airlines Corp.

President Jeff Smisek awarded checks to co-workers, including Customer Service Agent Ted Ellis, at the Houston hub on profit-sharing day. Continental employees get a share of every dollar the company earns. The plan pays out 30 percent of the first $250 million of pretax income, 25 percent of the next $250 million, and 20 percent of amounts over $500 million. It’s the best plan in the industry.

Make Reliability a Reality
In 2007, despite operating a large number of our flights in the New York airspace, which is the most delayed and congested airspace in the nation, we delivered solid operational performance for our customers. With passenger traffic at record levels, we recorded a DOT on-time arrival rate of 74.3 percent and a systemwide mainline segment completion factor of 99.2 percent for the year, operating 79 days without a single mainline flight cancellation.

We paid on-time monthly bonuses to our co-workers 10 times in 2007, by finishing in the top three of the major network carriers for monthly on-time performance. We continue to be burdened with air traffic control delays affecting our Liberty hub, where in 2007 we had 193 days with ground delay or ground stop programs implemented by the FAA due to weather. On days without ground delay or ground stop programs, we typically achieve an on-time arrival rate over 80 percent at Liberty. On days with those programs, we typically have an on-time arrival rate below 50 percent. We continue to work with the professional men and women of the FAA and the DOT to implement operational changes, including the recently announced voluntary caps on air service to Liberty, which will improve the throughput of our nation’s antiquated air traffic control system. In the long run, however, the only way our nation will meet the growing demand for air travel is to invest in a modern air traffic control system, funded in a manner that eliminates the current unfair subsidy for private jet aviation.

Despite the challenges, including record load factors and increasing air traffic control delays, we continue to do well what we do every day — get our passengers where they want to go, safely, on time, and with their bags. Among the major network carriers as measured by the DOT for 2007, we ranked No. 2 for on-time performance, No. 2 for bag delivery, and No. 1 for fewest passenger complaints.

Online check-in continues to grow, as both domestic and international customers rely on the convenience and time-saving value of checking in online. There are many days when more than half of our domestic customers originating at one of our hubs check in online. Once checked in online, customers with bags to check can conveniently do so at our hubs with specially designated eService bag-drop kiosks, and be quickly on their way. For customers who prefer to check in at a kiosk at the airport, we now have nearly 1,400 kiosks, located at almost every airport we serve. Working with the TSA, we were the first airline to launch a completely paperless boarding process, allowing customers to check-in online and then, rather than print a boarding pass, use their PDA or cell phone to receive and display a securely encrypted barcode to pass through security and board our aircraft at our Houston hub. We are working with the TSA to expand this program to other airports.

We also continue to be one of the world’s leaders in interline eTicketing, which permits our customers to travel on multiple airlines on the same itinerary, while checking their luggage through to their final destination — all without the bother of paper tickets. By the end of 2007, we had interline eTicketing with 103 carriers. We expect to eliminate, and no longer accept, paper tickets later this year, as part of our effort to shed non-value-added costs.

Continental is focused on helping co-workers prepare for their future by appropriately funding company retirement plans. The value of the plan assets has more than doubled over the last five years, during which time the company has contributed nearly $1.5 billion to the plans.

Working Together
In 2007, our service and product continued to be ranked as the best in the business. For the fourth consecutive year, Fortune magazine named us the No. 1 World’s Most Admired Airline. OAG named us Best Airline Based in North America and Best Executive/Business Class, and for the 10th year in a row, Condé Nast Traveler magazine named us Best Trans-Atlantic and Trans-Pacific Business Class among U.S. airlines. These awards reflect the hard work and dedication of our co-workers.

Our co-workers continue to share in our success. On Valentine’s Day 2008, we passed out $158 million in profitsharing checks, a 42 percent increase over the amount of profit sharing we paid for 2006. We once again proved that when we work together, everybody wins. Our profit sharing program is the best in the industry, and we are proud to be able to share our profits with the more than 45,000 co-workers who helped us earn our $566 million of pretax profit in 2007. Additionally, each of our nonmanagement co-workers received $755 in on-time performance incentives in 2007.

During 2007, we continued our ontime bonus program and our perfect attendance program. Our business depends on having employees who enjoy coming to work every day, who are proud of the job they do, and who trust each other and management. Our culture of open and honest communication, treating each other with dignity and respect, and working together has gotten us through the most difficult times and is helping us to achieve our goal of sustained profitability and a more secure future for our co-workers.

In Summary
Despite the problems we faced, 2007 was a good year for Continental. We increased our profitability in large part because our co-workers continued their focus on the basics of our business and the keys to our success — delivering clean, safe, and reliable air transportation, and offering the product that people want and are willing to pay for, delivered by employees who enjoy coming to work and working together.

The year 2008 could prove to be a challenging one for the industry, as we deal with record fuel prices, a weak dollar, and a slowing economy. As of the date of this letter, jet fuel costs almost $120 per barrel. Despite these challenges, we know our co-workers remain focused on delivering on the 2008 Go Forward Plan. We once again ask you to stick with us as we stick with our plan.

Larry Kellner Chairman and Chief Executive Officer	Jeff Smisek President