United Airlines Posts Results

Yesterday, United Airlines (UAUA - Analyst Report) announced December mainline traffic results that were not too surprising in view of the grim economy and the company’s previous forecasts. United has been cutting capacity to weed out the more unprofitable air routes, with a capacity decrease of 12.7% in available seat miles. This is slightly above United’s investor guidance for the fourth quarter, which called for an 11.7% decrease in available seat miles and a 12.5-13.5% decline in revenue passenger miles.

United’s load factor, the percentage of seats filled with paying passengers, rose 1.1 points to 79.9% from 78.8% in the prior year. For the year, United reported declines of 6.5% in revenue passenger miles, of 4.5% in available seat miles, and of 1.8 points in the load factor to 81.0%.

Even harder hit by the slowing economy have been the cargo operations of the company. United’s cargo ton miles were off 29.6% in December, with freight falling 32.4% and mail down 16.6%. This is similar to the situation globally, where air cargo handles 35% of the value of goods traded internationally.

According to the International Air Transport Association (IATA), international airlines posted a 13.5% fall in cargo traffic in November and a drop of 4.6% in passenger traffic. The Asia-Pacific posted the largest decreases and Europe the smallest declines, with the North American market in the middle. The IATA forecast that industry losses in 2009 were likely to run about $2.5 billion.

We would remain on the sidelines for airlines for the time being, as we believe that global economic slowing will more than offset the benefits of falling oil prices. We currently have a Hold on United Airlines.

Read the full analyst report on UAUA.