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United Continental Holdings Inc. (UAL - Analyst Report) experienced weak consolidated traffic and capacity for November, as compared with the prior-year month. The company’s revenue suffered primarily due to the effects of hurricane Sandy.

On a year-over-year basis, airline traffic – measured in revenue passenger miles or RPMs, which implies revenue generated per mile per passenger – dipped 2.3% to 15.2 billion. Consolidated capacity (or available seat miles/ASMs) for the month was 18.7 billion, down 2.6% from the second last month of 2011.

The load factor (percentage of seats filled by passengers) improved slightly to 81.5% from 81.2% in November 2011. Passenger revenue per available seat mile (PRASM) declined 1% year over year.

For the first eleven months of 2012, United Continental generated RPMs of 189.3 billion (down 0.7% year over year) and ASMs of 229.2 billion (down 1.1% year over year), while load factor was 82.6%, up 30 basis points.

Headquartered in Chicago, United Continental Holdings was formed through the merger of United Airlines and Continental Airlines in 2010. The newly formed company became the world’s biggest airline, dethroning Delta Airlines (DAL - Analyst Report).

United Continental flies almost 5,557 aircraft a day to 378 U.S. domestic and international destinations. The airline’s departure hubs are located at Chicago, Cleveland, Denver, Guam, Houston, Los Angeles, New York/Newark, San Francisco, Tokyo and Washington, D.C.

We expect the company to benefit from industry leading growth momentum, strong execution, competitive cost-structure, as well as fleet and network optimization. Other positives for United Continental include active hedging strategies and a strong liquidity position.

However, we expect these aspects to be overshadowed by the concerns over escalating fuel prices, rising non-fuel expense, competitive threats, new advertising policy, unionized workforce and a sluggish global economy that might limit the upside potential of the stock.

United Continental currently retains a Zacks #3 Rank that implies a Hold rating for a period of 1–3 months.
 

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