United Continental Holdings Inc.’s (UAL) March 2014 airline traffic – measured in revenue passenger miles or RPMs, which imply revenue generated per mile per passenger – increased 0.7% year over year to 17.47 billion. Growth in the U.S. and Latin American traffic offset the decline from other regions.
Consolidated capacity (or available seat miles/ASMs) for the month was 21.10 billion, up 2.7% from March 2013. The news failed to excite shareholders as the stock closed 2.34% down on Tuesday on NYSE.
The load factor (percentage of seats filled by passengers) deteriorated to 82.8% from 84.4% in the same month, last year. Higher growth in international capacity resulted in a higher number of empty seats for the carrier. The company registered a completion factor of 98.9%, with nearly 79.4% of flights on schedule.
In the first three months this year, United generated RPMs of 46.38 billion (down 0.3% year over year) and ASMs of 57.22 billion (down 0.3% year over year). Load factor came in at 81.1%, flat as compared to March 2013.
The airline behemoth chalked out plans to overhaul its finances as it underperformed its domestic peers in recent times. The passenger airline plans to reduce its annual costs by $2 billion by cutting fuel and sourcing costs, improving maintenance and optimizing distribution channels.
Expansion of its global and domestic route network with the introduction of non-stop flights and continuous investments to upgrade its fleet by scraping the older aircraft for new fuel efficient ones will drive its bottom line going forward.
However, the mega merger between American Airlines and U.S. Airways Group to form American Airlines Group Inc. (AAL) remains a major competitive threat to the company in both domestic and international markets.
United Continental carries a Zacks Rank #3 (Hold). Other stocks worth considering within this sector are Southwest Airlines Co. (LUV) and Alaska Air Group Inc. (ALK). Both the stocks carry a Zacks Rank #1 (Strong Buy).