How you interpret the earnings news from Continental Airlines (NYSE:CAL) depends on how you perceive the proverbial glass of water. The "half-full" folks will see a 42% drop in the operating loss as a sign of better days ahead. The "half-empty" side will see lots of messages that collectively spell out "Life is tough."

Who's right?

The Optimist: Consolidated fourth-quarter revenue soared 16.7%, and the net loss per share fell 83.1% compared with the comparable year-ago quarter.

The Pessimist: The company lost money in the fourth quarter and for the year. The quarterly loss per share was "helped" by a 21.9% increase in shares outstanding in 2005; Continental sold 18 million shares for $11.35 per stub in October. If only the company had waited three months -- the stock hit a 52-week high of $22.27 last week.

The Optimist: The company notes that it is "growing and hiring new employees, in stark contrast to most of our competitors."

The Pessimist: The same press release notes: "The price of oil still hovers at record-high prices, JetBlue (NYSE:JBLU) has invaded our Newark [N.J.] hub, Delta is using its bankruptcy advantage to expand into our profitable international markets, and United Airlines, flush with $3 billion in exit financing and greatly reduced costs, is coming out of bankruptcy." That definitely sounds like the drumbeat of the "Life is tough" crowd.

The Optimist: Also from the press release: "Continental and the entire airline industry continue to suffer the burden of excessive fees and non-income-related taxes."

The Pessimist: Hey, the fees are what the fees are. Focus on what you can control.

The Optimist: In December, Continental withdrew 69 of 274 regional aircraft operated by ExpressJet (NYSE:XJT) because it believes it is being charged above market rates. Also in December, the company reached an agreement that, if approved, will reduce flight attendant pay and benefits. That's a clear sign the company is looking at all costs.

The Pessimist: Add up all the good news and analyst optimism about 2006, and you get projected 2006 earnings of $1.35 a share -- or 12.7 times forward earnings.

Count me among the pessimists
Although Continental has skirted bankruptcy, it still has to contend with long-term oil prices, increased competition in Newark, the competitiveness of major airlines using bankruptcy to restructure, and nearly $6 billion in total debt. And don't count on the company to turn things around. As late as last April, Continental was expected to break even in 2005 -- and it didn't happen.

I get the point that Continental is expanding into what is currently more profitable international markets while it reduces its operating costs. And although the company didn't mention it today, the long-term move to use Boeing's (NYSE:BA) fuel-efficient Dreamliners makes long-term operating sense, too.

But while Continental says the grass is greener internationally, Southwest (NYSE:LUV) has made a habit of annual profitability even though it operates only in the United States. Call me a skeptic, but when I read between the lines, I don't see Continental speaking optimistically. I hear the company clearly singing the blues. Investors would be wise to weigh what could go wrong before investing in this airline.

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Fool contributor W.D. Crotty does not own any shares of any of the companies mentioned. The Motley Fool has a disclosure policy.