United Continental Slips on Nominal May Traffic Rise - Analyst Blog

United Continental Holdings Inc.'s UAL May 2014 airline traffic – measured in revenue passenger miles or RPMs, which implies revenue generated per mile per passenger – increased 1.2% year over year to 18.16 billion. Growth in Latin American traffic offset the decline in the regional division.

Consolidated capacity (or available seat miles/ASMs) for the month was 21.29 billion, up a mere 0.2% from May 2013.

However, the news failed to excite shareholders as the stock dipped 3.48% on Monday trade on NYSE.

The load factor (percentage of seats filled by passengers) improved to 85.3% from 84.4% in the same month, last year. The company registered a completion factor of 98.8%, with nearly 76.4% of flights on schedule.

During the first five months of this year, United Continental generated RPMs of 81.16 billion (up 0.2% year over year) and ASMs of 98.47 billion (down 0.4% year over year) leading to a load factor of 82.4% (up 40 basis points).

However, arch rival Delta Airlines Inc. DAL recorded better May traffic, which moved up 5.8% as compared to last year. Strong demand in both the domestic and transatlantic markets propelled the May figure.

The airline behemoth has already started its restructuring effort and plans to reduce annual costs by $2 billion by cutting down on fuel cost through more efficient strategies. United Continental is focusing on augmentation of ancillary revenues by $700 million to $3.5 billion by 2017 and expects to touch the $3 billion-mark by the end of 2014.

Chicago-based United Continental remains constantly committed toward improving its level of services in air and on the ground. The premier carrier has installed satellite based Wi-Fi on 250 mainline aircraft besides offering lie-flat seats on all long-haul international flights and extra legroom for economy class passengers.

Expansion of its global and domestic route network with the introduction of non-stop flights, and continuous investments to upgrade its fleet by scrapping older aircraft for new fuel efficient ones should drive United Continental's 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 its domestic and international markets.

United Continental carries a Zacks Rank #3 (Hold). Another stock worth considering within this sector is Southwest Airlines Co. LUV, which carries a Zacks Rank #1 (Strong Buy).