Back to top

Analyst Blog

United Continental Holdings Inc.’s (UAL - Analyst Report) Oct 2013 airline traffic – measured in revenue passenger miles or RPMs, which imply revenue generated per mile per passenger – increased 3.1% year over year to 16.97 billion. Consolidated capacity (or available seat miles/ASMs) for the month was 20.70 billion, up 4.3% from Oct 2012.

The load factor (percentage of seats filled by passengers) declined to 81.9% from 82.9% in the same month, last year. The company registered a completion factor of 99.5%, with nearly 85.0% of the flights on schedule. Passenger revenue per available seat mile (PRASM) is estimated to be flat with last year. According to the company, Oct PRASM was impacted by 3% due to government shutdown, superstorm Sandy’s impact in Oct 12 and deprecation of Yen.

For the first ten months of 2013, United Continental generated RPMs of 172.95 billion (down 0.6% year over year) and ASMs of 206.36 billion (down 2.0% year over year). Load factor was 83.8%, reflecting growth of 110 basis points.

United reported weak third quarter 2013 financial results. The company’s adjusted earnings per share of $1.51 were much lower than the Zacks Consensus Estimate of $1.64. Revenues of $10.2 billion also failed to beat the Zacks Consensus Estimate of $10.3 billion.

The company is facing increased competitive pressure in the Pacific region, in particular China. Improved travel demand in China has propelled capacity addition from competitors thus challenging United’s dominance in the region. The carrier expects further capacity addition by competitors in the upcoming months thus aggravating its challenges.

Archrival Delta Air Lines Inc.’s (DAL - Analyst Report) recent tie-up with Virgin will give the former 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.

Low-cost carrier Southwest Airlines Co.’s (LUV - Analyst Report) earnings of 34 cents per share were ahead of the Zacks Consensus Estimate of 32 cents.

United, which operates with JetBlue Airways Corp. (JBLU - Analyst Report), carries a Zacks Rank #4 (Sell).

Please login to Zacks.com or register to post a comment.