United Airlines January Traffic Gains on Favorable Factors
United Airlines – the wholly owned subsidiary of United Continental Holdings Inc. UAL – reported a rise in air traffic in the month of January. Measured in revenue passenger miles (RPMs), traffic stood at 15.42 billion, up 0.1% from 15.4 billion recorded in Jan 2015.
Also, consolidated capacity (or available seat miles/ASMs) fell 0.1% year over year to 19.06 billion. Meanwhile, the load factor or percentage of seats filled by passengers improved by 20 basis points on an annualized basis to 80.9%.
The company’s significant route expansion plans, introduction of ancillary products, fleet revamping and customer service enhancement bode well. Further, United Airlines has been reaping considerable benefits from its joint ventures and code share agreements. Thus, we believe that such bullish factors are considerably helping United Airlines boost its air traffic numbers.
Meanwhile, declining oil prices will likely result in increased capacity, thereby leading to discounted ticket prices in order to fill up seats. A stronger U.S. dollar is also expected to impact revenues because of United Airlines’ widespread global presence.
Owing to these varied factors, the carrier expects consolidated passenger revenue per available seat mile (PRASM or unit revenue) to decline in the range of 6% to 8% in the first quarter of 2016.
On the other hand, another U.S. legacy carrier, Delta Air Lines Inc. DAL, posted a 3.7% year-over-year increase in air traffic in January. However, unit revenue in the month deteriorated 3%.
Zacks Rank & Stocks to Consider
United Continental currently carries a Zacks Rank #2 (Buy). Other favorably ranked stocks in the same space are Hawaiian Holdings Inc. HA and Southwest Airlines Co. LUV. Both the companies sport a Zacks Rank #1 (Strong Buy).
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