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United Continental Traffic Figures Solid, Q1 View Upbeat

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United Continental Holdings, Inc.’s (UAL - Free Report) wholly owned subsidiary, United Airlines, reported encouraging traffic numbers for March. Traffic, measured in revenue passenger miles (RPMs), was 18.76 billion, up 6.5% from the year-ago figure.

On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) climbed 3.8% to 22.47 billion. Moreover, load factor (percentage of seats occupied by passengers) increased 220 basis points (bps) to 83.5% as traffic growth outpaced capacity expansion.

At the end of the first three months of 2018, the carrier registered a 4.7% rise in RPMs to 49.85 billion while ASMs rose 3.6% to 61.98 billion, both on a year-over-year basis. Thus, load factor expanded 80 bps to 80.4%.
The company posted an on-time performance of 70.5% and a completion factor of 98% for the month.

Moreover, in the recently released Airline Quality Rating (AQR) report for 2017, the legacy carrier showed improvement in each of the four metrics considered in the rating.

The AQR is a comprehensive study of the largest airlines in the United States, based on performance and quality. The four parameters used for arriving at the AQR scores are baggage service, consumer complaints, on-time performance and involuntary denied boardings.

This Zacks Rank #2 (Buy) carrier ranks 8th in overall AQR among the 12 rated airlines. Also, the rank tallies with the same in 2016, indicating that there wasn’t any movement on the whole year over year. Alaska Air Group, Inc.’s (ALK - Free Report) subsidiary Alaska Airlines clinched the top spot, followed by Delta Air Lines, Inc. (DAL - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bullish Q1 Outlook

Simultaneously, United Continental has issued a revised guidance for the first quarter of 2018. The carrier now expects first-quarter passenger revenue per available seat miles (PRASM) to increase approximately 2.7%. Prior outlook was a rise between 1% and 3%. Pre-tax margin (adjusted) for the quarter is anticipated to expand around 2%. Previously, the metric was projected to be flat year over year.

Additionally, capacity is estimated to grow 3.6% in the first quarter, lower than the earlier view of an expansion in the band of 3.5-4%. Also, effective income tax rate is now estimated at around 20%. Previously, it was predicted between 22% and 24%.

The carrier expects non-fuel unit costs (CASM excluding third-party business expenses, fuel & profit sharing) to inch up around 0.6% year over year. The past forecast was an increase in the band of 0-1%.

The airline continues to expect average fuel cost per gallon of $2.11 in the period to be reported.

The carrier is scheduled to report first-quarter 2018 earnings on Apr 18.

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