United’s October revenue, capacity growth best in Latin America
US airlines continue to increase capacity in October to support growing demand (Part 3 of 8)
Latin America drives growth
United’s consolidated traffic and capacity increased slightly in October and on a year-to-date basis, while its load factor remained almost the same. The highlight in the company’s performance remains its growth in Latin America, similar to Delta Airlines (DAL). Despite the decline in the domestic market, traffic to Latin America drove the growth in international markets.
October performance update
Traffic growth driven by Latin American market: United’s revenue passenger mile (or RPM) increased by 0.4% to 17,040 million in October. The company’s 11% growth in traffic in the Latin American market drove its 1.7% increase in international mainline RPM. However, traffic declined by 0.5% in the domestic market as well as considerable recent improvement in cargo traffic. In October, cargo revenue ton miles grew by 15.8% to 227.4 million from 196.4 million a year ago.
Decline in capacity: In October 2014, United’s overall capacity also increased by 0.7% to 20,859 million despite the decline in domestic capacity. Because of weak traffic growth, its load factor did not improve in spite of lower capacity growth during the month. United (UAL) and American (AAL) recorded the lowest growth rate of 0.4% and 0.2% in October, compared to Alaska’s (ALK) 10%, JetBlue’s 10.4%, Southwest’s (LUV) 4.4%, and Delta’s (4.8%).
Positive growth in capacity came from the Latin American and Pacific regions, although the load factor improved only in the Latin American market. This occurred because demand in Latin America grew at a higher rate than supply.
Load factor in the Pacific market declined by 2.5% on low demand.
In the Atlantic market, load factor improved by 1% to 80.7%, although capacity and traffic declined.
Year-to-date performance summary
United’s traffic and capacity increased very slightly on a year-to-date basis.
United’s overall passenger traffic increased by 0.3% and cargo traffic increased by 12.7%.
During this period, overall capacity improved only by 0.1% in spite of a 2% increase in international capacity. This was offset by the 1.1% decline in domestic seat miles. Capacity utilization also remained flat.
The company projected its fuel cost per gallon for the fourth quarter to be $2.76 to $2.81.
United (UAL) is part of more than 30 ETFs. ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN) have between 38% to 44% of their holdings in airline stocks.
For a complete overview of United Continental Holdings, read Market Realist’s series, United Continental Holdings: A must-know company overview.
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