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United Continental Issues Impressive Operational Update
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Chicago-based United Continental Holdings (UAL - Free Report) presented a rosy picture at the J.P. Morgan Global High Yield & Leveraged Finance Conference Presentation. The company expects passenger revenue per available seat miles (PRASM) to continue improving on a sequential basis in 2017 as well, very similar to 2016. In fact, the metric is expected in the range of -1% to +1% (year over year) in the first quarter of 2017.
Moving forward, United Continental is aiming to return to unit revenue growth. Notably, the carriers like American Airlines Group (AAL - Free Report) and Alaska Air Group (ALK - Free Report) had already displayed growth with respect to unit revenues in the fourth quarter itself. Woes pertaining to this key metric seem to be easing.
Apart from unit revenues, United Continental also sounded bullish about the prospects of its “Basic Economy” product, which was launched recently. The move to introduce the product (cheapest tickets at the carrier) is expected to provide customers with more choice, thereby boosting revenues to the tune of $200 million in 2017. We note that American Airlines has also started selling “Basic Economy Fares”, as airline heavyweights seek to combat competition of low-cost carriers like Spirit Airlines (SAVE - Free Report) .
At the presentation, United Continental stated that it expects non-fuel unit costs to increase in the band of 3.5% to 4.5% in 2017, as the recent labor deals inked by the company have caused labor costs to surge. However, the rise in unit costs (non-fuel) is expected to be less than 1% (year-over-year) in the 2018-2020 time frame, thereby assuming an annual capacity growth of 1.5%.
Price Performance
Despite the presentation, shares of the carrier declined over 2% on Mar 2 to $73.28. However, shares of United Continental have outperformed the Zacks categorized Transportation-Airline industry over the last one year. While the stock has appreciated 27.1% in the last one year, the industry gained just 19.3% in the same period.
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United Continental Issues Impressive Operational Update
Chicago-based United Continental Holdings (UAL - Free Report) presented a rosy picture at the J.P. Morgan Global High Yield & Leveraged Finance Conference Presentation. The company expects passenger revenue per available seat miles (PRASM) to continue improving on a sequential basis in 2017 as well, very similar to 2016. In fact, the metric is expected in the range of -1% to +1% (year over year) in the first quarter of 2017.
Moving forward, United Continental is aiming to return to unit revenue growth. Notably, the carriers like American Airlines Group (AAL - Free Report) and Alaska Air Group (ALK - Free Report) had already displayed growth with respect to unit revenues in the fourth quarter itself. Woes pertaining to this key metric seem to be easing.
Apart from unit revenues, United Continental also sounded bullish about the prospects of its “Basic Economy” product, which was launched recently. The move to introduce the product (cheapest tickets at the carrier) is expected to provide customers with more choice, thereby boosting revenues to the tune of $200 million in 2017. We note that American Airlines has also started selling “Basic Economy Fares”, as airline heavyweights seek to combat competition of low-cost carriers like Spirit Airlines (SAVE - Free Report) .
At the presentation, United Continental stated that it expects non-fuel unit costs to increase in the band of 3.5% to 4.5% in 2017, as the recent labor deals inked by the company have caused labor costs to surge. However, the rise in unit costs (non-fuel) is expected to be less than 1% (year-over-year) in the 2018-2020 time frame, thereby assuming an annual capacity growth of 1.5%.
Price Performance
Despite the presentation, shares of the carrier declined over 2% on Mar 2 to $73.28. However, shares of United Continental have outperformed the Zacks categorized Transportation-Airline industry over the last one year. While the stock has appreciated 27.1% in the last one year, the industry gained just 19.3% in the same period.
Zacks Rank
Currently, United Continental holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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