United Airlines, a subsidiary of United Continental Holdings (UAL) has resumed its normal flight schedule after its flights were disrupted on June 17. The carrier’s network connectivity failed miserably following computer failure. As a result, most of its flights were cancelled and United Airlines came to a complete halt for two days.
The computer malfunction led to customer service issues like reservation and check-in problems. On a usual day, fog, maintenance or shortage of staff curtail 15 to 30 flights of the carrier. However, the technical snag led to the cancellation of approximately 100 flights globally within two days, mostly affecting Chicago's O'Hare International and Denver International, the two largest hubs of United Airlines.
The carrier returned to its normal services on June 19, after the computer malfunction was fixed. Flight officials said that operations were resumed at United Airlines’ Charlotte, North Carolina hub.
United Airlines merged with Continental Airlines to form a new company, United Continental Holdings in October 2010. The merger created the largest airway in the U.S., overtaking Delta Airlines (DAL), which acquired Northwest Airlines in 2008. United and Continental continue to operate as separate carriers, and will do so until they receive their single operating certificate, which is expected by year-end 2011.
We believe that the recent disruption in United Airlines’ flights will not leave a significant impact on United Continental’s consolidated revenues as we foresee a profitable summers.
Passengers were reported to have paid higher prices on leisure travels in May compared to the same month last year, which resulted in approximately 14% to 15% jump in revenue per available seat mile. The average occupancy level in May flights was above 83% and is expected to further increase in the months ahead.
Additionally, fuel price volatilities have also contributed in higher fares. To enhance profitability, United Continental reduced flight capacity by 1% in May and plans to reduce 4% additional capacity in September. The strategy will not only boost occupancy level but will also push fares going forward.
We currently maintain our long-term Neutral rating on United Continental supported by Zacks #3 Rank (Hold).
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