United Continental Feb Traffic Dips - Analyst Blog

United Continental Holdings Inc.'s UAL Feb 2014 airline traffic – measured in revenue passenger miles or RPMs, which imply revenue generated per mile per passenger – decreased 0.3% year over year to 13.68 billion. Consolidated capacity (or available seat miles/ASMs) for the month was 17.29 billion, down 0.9% from Feb 2013.

The load factor (percentage of seats filled by passengers) improved to 79.2% from 78.7% in the same month, last year. The company registered a completion factor of 96.7%, with nearly 70.0% of flights on schedule.

In the first couple of months this year, United generated RPMs of 28.91 billion (down 1.0% year over year) and ASMs of 36.11 billion (down 1.9% year over year). Load factor, moved up 80.1% from the year-ago figure of 79.3%.

The harsh winter storms forced the carrier to cancel more than 11,000 flights during the month, which reduced its consolidated capacity. Earlier, the Chicago-based carrier announced that it had to cancel more than 22,500 flights in the first two months of 2014, which is nearly four times the flight cancellation during same period last year.

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 JetBlue Airways Corp. JBLU. Southwest carries a Zacks Rank #1 (Strong Buy) while JetBlue carries a Zacks Rank of #2 (Buy).