United Continental August Traffic Rises, Load Factor Declines
Chicago-based United Continental Holdings UAL, the parent company of United Airlines, reported modest traffic numbers for the month of August. The company’s load factor (percentage of seats filled by passengers) declined as traffic growth was outpaced by capacity expansion. The decline in load factor impacted the stock negatively.
Traffic – measured in revenue passenger miles (RPMs) – was 19.9 billion, up 0.6% from 19.8 billion recorded a year ago. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) inched up 1.9% to 23.3 billion. Load factor, on the other hand, decreased to 85.5% from 86.6% a year ago.
At the end of the first eight months of 2016, the carrier’s RPMs were up 0.2% to 141.3 billion and ASMs grew 1% to 170 billion, both on a year-over-year basis. Load factor contracted 70 basis points to 83.1% in the period. The company posted the August On-time Performance of 61.9% and a completion factor of 98.3%.
The carrier continues to expect consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenue) in the third quarter to decline in the band of 5.5% to 7.5%. Fuel price (inclusive of all cash-settled hedges) is projected in the band of $1.50–$1.55 per gallon. The company now expects its 2016 consolidated unit cost per available seat mile (CASM: excluding fuel, profit sharing and third-party business expenses) to increase in the band of 2.5% to 3.5% on a year-over-year basis. The previous outlook had projected an increase in the band of 2% to 3%. The increase in the full-year guidance for the metric was supported by the deal reached with flight attendants in August.
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Zacks Rank & key picks
United Continental carries a Zacks Rank # 3 (Hold). Some better-ranked stocks in the airline space include SkyWest Inc. SKYW, ANA Holdings Inc. ALNPY and Copa Holdings SA CPA. Both SkyWest and ANA Holdings carry a Zacks Rank #2 (Buy), while Copa Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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