United's September Traffic Down

Yesterday, United Airlines, a wholly owned subsidiary of UAL Corp. (UAUA) announced preliminary mainline traffic results for September. The company reported mainline passenger load factor of 81.2%. Total scheduled mainline revenue passenger miles (RPMs) decreased 1.1% on a capacity decrease of 3.7% in scheduled mainline available seat miles (ASMs) compared with the same period in 2008.
 
The airline has been threatened by volatile oil prices, increased competition, increasing maintenance expenses and a disgruntled workforce. During the second quarter, the company initiated a fleet modernization review to replace its older fleet types. This process could present a unique opportunity for the company to improve its cost structure and fleet strategy.
 
United Airlines is taking appropriate actions to respond to the current economic environment as indicated by its significant capacity reductions. However, consolidated passenger revenue per ASM was also down 1.1% and 3.7% during September.
 
In order to maintain liquidity flexibility, United Airlines raised more than $1309 million since Jan 1, in new liquidity through various activities. These include aircraft and engine financing, spare parts financing, airport facility relocations, equity issuances and asset sales.
 
Peer Continental Airlines (CAL) reported Thursday that its total traffic jumped 7% in September. Its traffic during the month jumped to 6.9 billion RPMs from 6.5 billion RPMs one year ago.
 
United Airlines expects to report third quarter results on Oct 20. Prior to the results, we maintain a Neutral recommendation on the shares.

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