United Continental Holdings Inc.’s (UAL) Dec 2013 airline traffic – measured in revenue passenger miles or RPMs, which imply revenue generated per mile per passenger – increased 4.1% year over year to 16.88 billion. Consolidated capacity (or available seat miles/ASMs) for the month was 19.77 billion, up 0.5% from Dec 2012. Shareholders reacted positively to the improved operational performance as the share price moved up 6.22% on Wednesday trade on Nasdaq.
The load factor (percentage of seats filled by passengers) improved to 85.4% from 82.4% in the same month, last year. The company registered a completion factor of 98.5%, with nearly 73.5% of flights on schedule.
Passenger revenue per available seat mile (PRASM) increased an estimated 11.5% to 12.5% as compared to Dec 2012. Better-than-expected PRASM growth came on strong yields and better traffic throughout the month. Further, winter storms forced the company to cancel 1,200 flights during the month, which reduced the consolidated capacity and boosted PRASM.
In 2013, United Continental generated RPMs of 205.17 billion (down 0.2% year over year) and ASMs of 245.35 billion (down 1.4% year over year). Load factor was 83.6%, reflecting growth of 100 basis points.
The airline behemoth chalked out plans to overhaul its finances as it financially 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.
The Chicago-based carrier has also introduced flat-bed cabin seats on every scheduled transcontinental flight between New York JFK and San Francisco/Los Angeles. In an attempt to improve its performance, the company has already opened a new hangar at Washington Dulles International Airport – a major hub for the carrier – to connect with the Middle Eastern market.
However, the merger of U.S. Airways and American Airlines will form American Airlines Group Inc. (AAL) – the world’s biggest passenger carrier – dethroning United. Despite these initiatives, the risks force us to maintain a cautious view on the carrier.
United Continental, which operates with Delta Air Lines Inc. (DAL) and JetBlue Airways Corp. (JBLU), carries a Zacks Rank #2 (Buy).
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