Jan. 29 (Bloomberg) -- Continental Airlines Inc., the fourth-biggest U.S. carrier, said its loss widened to $266 million in the final quarter of 2008 because of costs to lower the value of fuel-purchase contracts.

The net loss of $2.33 a share compares with $32 million, or 33 cents, a year earlier, the Houston-based company said in a statement today. Excluding the fuel writedown, pilot retirement costs and other items, the loss was $96 million, or 84 cents a share. On that basis, Continental beat an expected loss of 86 cents, the average of 11 analysts in a Bloomberg survey.

Continental’s fifth consecutive quarterly loss reflects the difficulty airlines have had in coping with record-high fuel prices early in the year followed by declining travel demand. It’s the fifth major U.S. carrier to report a loss for the fourth quarter of 2008.

“There are continuing hard times ahead,” Chief Executive Officer Larry Kellner said in the statement.

Continental dropped Boeing Co. 787s from its 2009 delivery schedule for new aircraft. First deliveries of the Dreamliner now have been pushed into early 2010 because of production delays and a Boeing machinists strike last year. In September, Continental still had two 787 deliveries set for 2009.

Sales fell 1.5 percent to $3.47 billion, the airline said, its first drop since the last quarter of 2007.

Fuel-Contract Costs

Continental said it agreed to lease four Boeing Co. 757-300 jets from Boeing Capital Corp. that will enter service in the first half of 2010. The airline reduced by one, to 13, the number of Boeing 737-900ER deliveries set for next year because of the strike. It also cut by one, to 11, Boeing 737 deliveries in 2010. It still expects to receive two 777s in 2010.

Continental had $125 million in costs to reduce the value of some fuel contracts after the bankruptcy of Lehman Brothers Holdings Inc., its partner in the purchase agreements. The airline had to write down the value when the spot market price fell below rates in the advance-purchase agreements.

The carrier had expenses of $44 million for pilot pensions and $5 million to write down the value of auction-rate securities. Continental had a $5 million gain on the sale of aircraft.

Continental and other major carriers locked in fuel prices in advance as rates soared in the first half of 2008, peaking on July 3. Prices then tumbled 65 percent through the end of the year, leaving airlines with agreements to pay above-market rates for fuel.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.

Last Updated: January 29, 2009 08:17 EST