US airline November traffic growth up, capacity expansion slowed (Part 3 of 8)
Latin America drives growth
United’s consolidated traffic and capacity declined in November, but increased slightly on a year-to-date basis. In contrast to the performance of other airlines, United’s traffic in the domestic region declined, but increased in the international markets. This was supported by the growth in the Latin American and Pacific regions. United’s load factor remained flat as traffic and capacity declined.
Performance update in November
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Higher cargo traffic growth: United’s revenue passenger mile (or RPM) increased by 0.3% to 15,282 million in November driven by the 3.6% increase in international mainline RPM. The Latin American and Pacific regions were the highlights as passenger traffic increased by 15% and 3.3%, respectively. Domestic traffic declined by 3.6%, and traffic in the Atlantic region declined by 1.4%. There has been considerable improvement in United’s recent cargo traffic. Cargo revenue ton miles grew by 15.8% in October and by 8.2% in November.
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Capacity decline in domestic region: United’s overall capacity also decreased by 0.4% in November 2014 to 19,136 million. This was due to a 3.8% fall in domestic capacity, which offset a 3.3% increase in international capacity. United Continental Holdings (UAL) was the only airline to report a decline in capacity.
All other airlines reported positive capacity growth, including Delta Air Lines (DAL), American Airlines (AAL), Alaska Air Group (ALK), JetBlue Airways (JBLU), and Southwest Airlines (LUV). Capacity in United’s Latin American and Pacific regions increased by 17.5% and 4.4%, respectively. However, load factor declined by 1.7% and 0.8% in these two regions and improved by 1.8% in the Atlantic region.
Summary of year-to-date performance
United’s passenger traffic and capacity showed marginal improvements on a year-to-date basis.
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United’s overall passenger traffic increased by 0.2% and cargo traffic increased by 12.2%.
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During the period, overall capacity improved only by 0.1% in spite of a 2% increase in international capacity, as this was offset by the 1.4% decline in domestic seat miles. Capacity utilization also remained flat.
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The company has revised its fuel cost per gallon projected for the fourth quarter from $2.76–$2.81 to $2.71–$2.76 this month.
United is part of more than 30 ETFs. ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN) hold between 38% and 44% of their holdings in airline stocks.