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United Continental Rallies despite Flat June Traffic

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Despite June traffic remaining flat year over year, shares of United Continental Holdings Inc. (UAL - Free Report) spiked almost 5% in the after hour trade on Wednesday on NYSE reflecting optimism surrounding its upcoming second-quarter results.   

With the peak summer travel season in full gear, United Continental expects per mile revenue figure to rise 3.5% year over year during the second quarter, which betters its previous guidance of a gain between 1–3%. Better than expected results in Pacific and the U.S. accounts for the increased guidance. Further, cost per mile (excluding fuel) is also expected to remain flat compared to the previous guidance which had estimated higher year-over-year costs.

June 2014 airline traffic – measured in revenue passenger miles or RPMs, which implies revenue generated per mile per passenger – remained flat year over year at 19.12 billion. Growth in Latin American traffic offset the decline in the Atlantic and regional division.

Consolidated capacity (or available seat miles/ASMs) for the month was 21.96 billion, up a mere 0.8% from June 2013. The load factor (percentage of seats filled by passengers) deteriorated to 87.1% from 87.7% in the same month last year. The company registered a completion factor of 98.7%, with nearly 70.1% of flights on schedule.

During the first half of 2014, United Continental generated RPMs of 100.28 billion (up 0.2% year over year) and ASMs of 100.43 billion (down 0.2% year over year) leading to a load factor of 83.3% (up 30 basis points).

Notably, arch rivals Delta Airlines Inc. (DAL - Free Report) , American Airlines Group Inc. (AAL - Free Report) and Southwest Airlines Co. (LUV - Free Report) have all recorded better traffic in the month of June.

The airline behemoth has already initiated its restructuring effort and plans to reduce annual costs by $2 billion. In that regard, the carrier has already outsourced several of its airport job roles in a bid to trim cost and improve profitability. United Continental is also focusing on augmentation of ancillary revenues by $700 million to $3.5 billion by 2017 and expects to reach $3 billion by the end of 2014.

Chicago-based United Continental remains constantly committed toward improving its level of services in air and on the ground. The premier carrier offers lie-flat seats on all long-haul international flights and extra legroom for economy class passengers.

United Airlines has been expanding its global and domestic route network with the introduction of flights to Latin and Central America, which will allow the carrier to improve its traffic and capacity, and thus cater to the increasing demand within these markets. However, political crisis in Iraq and its subsequent effect on fuel price remains an immediate concern for the carrier.

United Continental carries a Zacks Rank #3 (Hold).

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