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United Continental's April Traffic Falls, PRASM View Intact

United Continental Holdings UAL, the holding company of United Airlines, posted a 1.9% decrease in revenue passenger miles (RPMs: a measure of air traffic) for Apr 2016 on a 0.9% reduction in consolidated capacity (measured in average seat miles or ASMs). Domestic traffic climbed 0.6% while the metric decreased 3% on the international front. Another important metric, load factor (% of seats filled by passengers) declined 90 basis points on a year-over-year basis in April to 80.5% as traffic contraction was more than the decline in capacity. The company registered a completion factor of 98%, with 70.9% of its flights on schedule in April.

At the end of the first four months of 2016, United Continental recorded RPMs of 62.94 billion (down 0.3% year over year) and ASMs of 78.6 billion (up 1.1% year over year). Load factor stood at 80.1% against 81.2% in the first four months of 2015. Moreover, onboard passengers for Apr 2016 fell 1.6% while the same for the first four months of 2016 increased 0.9%.

The Chicago-based carrier still expects consolidated passenger revenue per available seat mile (PRASM: a measure of unit revenue) to decline in the range of 6.5% to 8.5% in the second quarter. The strong U.S. dollar, lower fuel surcharges, reduced travel demand were some of the factors behind the declining PRASM.

United Continental, like many other carriers, is benefiting from low fuel costs. The carrier expects average fuel price per gallon (including all cash-settled hedges) in the band of $1.39 to $1.44 per gallon for the second quarter of 2016.

Zacks Rank & Key Picks

United Continental carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include SkyWest Inc. SKYW, GOL Linhas Aereas Inteligentes S.A. GOL and Ryanair Holdings RYAAY. While SkyWest sports a Zacks Rank #1 (Strong Buy), GOL Linhas and Ryanair carry a Zacks Rank #2 (Buy).

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UNITED CONT HLD (UAL): Free Stock Analysis Report
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