United Continental Holdings Inc.’s (UAL - Analyst Report) Sep 2013 airline traffic – measured in revenue passenger miles or RPMs, which imply revenue generated per mile per passenger – increased 1.0% year over year to 16.65 billion. Consolidated capacity (or available seat miles/ASMs) for the month was 20.13 billion, up 0.2% from Sep 2012. Shareholders reacted negatively to the news as the script ended in red with a drop of 2.36%.
The load factor (percentage of seats filled by passengers) improved to 82.7% from 82.1% in the same month, last year. The company registered a completion factor of 99.4%, with nearly 84.7% of the flights on schedule. Passenger revenue per available seat mile (PRASM) is estimated to be flat with last year. According to the company, an adjustment related to yields on certain interline tickets impacted the consolidated PRASM by a percentage point during the month.
For the first nine months of 2013, United Continental generated RPMs of 155.98 billion (down 1.0% year over year) and ASMs of 185.66 billion (down 2.6% year over year). Load factor was 84.0%, reflecting growth of 130 basis points.
On Sep 27, 2013 the company indicated weak PRASM expectations for September and cited that the reduction is due to lower passenger pay per mile in some of its trans-Atlantic route and addition of capacity in China by competitors.
Despite these headwinds, United is concentrating on improving its business prospects through a number of initiatives. The carrier is planning to expand its domestic service by connecting Elmira, Topeka and States College with Chicago from the beginning of next year.
Additionally, United got the approval from the U.S. Department of Transportation to start transcontinental services from San Francisco to Chengdu in China, thereby expanding its operations in the Asia Pacific region.
However, Delta Airlines Inc.’s (DAL - Analyst Report) recent tie-up with Virgin will give its archrival more control over the transatlantic route with nine daily roundtrip flights across the region. Other risk factors such as high non-fuel expenses and sluggish economic conditions are also detrimental to United’s operations.
Another major U.S. airline Southwest Airlines Co. (LUV - Analyst Report) recently reported improved September performance, yielding growth on every operating performance. However, 7–8% increase in PRASM remains the highlight of the quarter for the budget carrier.
United which operates with JetBlue Airways Corp. (JBLU - Analyst Report), carries a Zacks Rank #3 (Hold).