June 6 (Bloomberg) -- Continental Airlines Inc., the fourth- largest U.S. carrier, ordered 34 Boeing Co. jets valued at as much as $3.4 billion to help support international growth.

The order, announced by Houston-based Continental at its annual shareholders meeting today, is for 10 Boeing 787s and 24 Boeing 737-800s.

Continental is ordering aircraft even as rivals such as AMR Corp.'s American Airlines and UAL Corp.'s United Airlines, have stayed out of the new-plane market for five years while the industry amassed more than $40 billion in losses. Continental doesn't face low-fare competitors on its international routes.

``It makes sense, especially given the revenue performance of international versus domestic flights,'' Susan Donofrio, a New York-based analyst for Cathay Financial Inc., said in an interview. ``It also allows Continental to keep their edge over other airlines in terms of aircraft age and fuel efficiency.''

Continental now has ordered twenty 787s, making it the largest U.S. customer for the newest wide-body jets from Chicago- based Boeing. In total, it has 88 pending orders for Boeing jets, including existing orders for two 777s and 42 737s. The first of the 787s will be delivered to Continental in 2009, while the latest order of 737s will begin arriving in 2008.

Shares of Continental fell 38 cents to $23.62 at 4:01 p.m. in New York Stock Exchange composite trading, while Boeing fell $1.48 to $80.65.

Fuel Efficiency

Continental will use the 787s to replace 10 less fuel- efficient and smaller 767-200 jets on international routes, the airline said. Continental plans to increase global capacity 9.1 percent this year, including increases of 16 percent and 13 percent across the Atlantic and to Latin America, respectively.

``These aircraft will give us the ability to seize long-haul market opportunities, remove less efficient aircraft from our fleet and maintain our role as a global network leader,'' Chief Executive Officer Larry Kellner said in a statement.

Continental has worked to build a newer and more fuel- efficient aircraft fleet. Its 356 jets at the end of 2005 had an average age of about 6.6 years.

Since 1998, Continental has improved fuel efficiency nearly 25 percent for each seat flown a mile through a combination of new aircraft, fuel-saving technology and operational changes. The average price of a gallon of jet fuel has more than quadrupled during that time, to $1.96 from 46 cents.

Boeing 787

Higher fuel prices have helped push airlines to the 787. Half of the aircraft by weight will be made of carbon fiber composites, which are lighter than the aluminum traditionally used for construction. The aircraft is about 20 percent more fuel efficient than the Boeing 767 it will replace.

The first test flight for the 787 is scheduled for ``late summer'' of next year, and its first delivery to All Nippon Airways Co. is set for ``early summer 2008,'' Boeing 787 program manager Michael Bair said last month.

Of 350 firm orders for Boeing's 787 before today, only 39 were from North American carriers. Boeing and Airbus SAS have relied on orders from Asian and European carriers in recent years as losses grew at U.S. airlines.

``This could light a fire under the other U.S. carriers if they want to maintain any competitive position,'' said Mary Anne Sudol, an analyst at Caris & Co. in New York. ``Fuel efficiency can give you a big edge and Boeing is peddling that in a big way with the 787.'' She has a ``buy'' rating on the stock.

International Orders

Continental's decision to order planes now is wise, because delivery slots in future years have been allotted primarily to non-U.S. carriers, said Donofrio, who rates Continental shares as ``overweight.''

ACE Aviation Holdings Inc.'s Air Canada has fourteen 787s on order with the first delivery in 2010, and Northwest Airlines Corp. has 18 on order with deliveries starting in 2008.

The 787 carries a list price of $138 million to $188 million, while 737s list for $47 million to $80.5 million based on the model. List prices don't include discounts traditionally given to airlines.

Continental shareholders today approved a company proposal authorizing the airline to double its common shares issued to 400 million. The carrier's preferred shares would remain at 10 million.

The vote gives Continental the ability to issue shares without the cost and delay of a special shareholder meeting, the airline told shareholders. Continental said it had no current plans to issue additional shares, which it said could be used in stock splits, acquisitions and equity offerings.

Continental currently is authorized to issue as many as 200 million common shares. As of Feb. 28, there were 112.4 million shares issued and outstanding, 25.5 million shares in the company's treasury, 17.9 million shares reserved for outstanding convertible debt, and 17.4 million shares reserved for Continental's incentive and employee stock option plans, the airline said.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; James Gunsalus in New York at jgunsalus@bloomberg.net.

Last Updated: June 6, 2006 17:07 EDT