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United Continental’s September Traffic Down, Q3 View Bullish


United Continental Holdings, Inc.’s UAL wholly owned subsidiary, United Airlines, reported traffic numbers for September. Traffic has been affected by back-to-back impact of natural calamities. Measured in revenue passenger miles (RPMs), traffic was 17.24 billion, down 1.6% from 17.52 billion, recorded a year ago.

On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) inched up 1.7% to 21.42 billion. However, load factor (percentage of seats occupied by passengers) decreased 270 basis points (bps) to 80.5% as capacity expanded while traffic declined.

At the end of the first nine months of 2017, the carrier registered a 2.7% rise in RPMs to 163.11 billion while ASMs increased 3.3% to 197.36 billion, both on a year-over-year basis. Load factor contracted 50 bps to 82.6% in the period as capacity growth exceeded traffic expansion.

The company posted an on-time performance of 74.3% and a completion factor of 97.3% for September.

View Tweaked

United Continental has raised guidance for the third quarter, following which, shares of the company rose 4.7% to $67.72 at the close of trading session on Oct 10.

The carrier now expects passenger revenue per available seat mile (PRASM: a key measure of unit revenue) to fall between 3.5% and 4%, better than the previous view of deterioration in the 3-5% range. The airline pegs pre-tax margin between 10% and 10.5% (previous projection had called for the metric to be in the 8-10% band).

Fuel price per gallon is now lowered to $1.70 (earlier view: $1.72-$1.77). Cost per available seat miles, excluding fuel, profit-sharing, third-party business expenses and other special items are now estimated to vary between 2.5% and 3% (earlier outlook had called for a rise of 2.5-3.5%).

The Chicago-based company now anticipates capacity to increase 3% year over year. Previous guidance had called for the metric to improve at 3-3.5%.

Other airline heavy weights like American Airlines AAL and Delta Air Lines DAL too have increased guidance for the quarter to be reported.

Zacks Rank & Key Pick

United Continental currently carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the airline space is Deutsche Lufthansa AG DLAKY, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Deutsche Lufthansa have surged 30.6% in a year.

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