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United Continental (UAL) Revises 2017 CASM & Capacity Views
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Chicago-based United Continental Holdings, Inc. (UAL - Free Report) , the parent company of United Airlines, tweaked its views pertaining to a couple of key metrics at the JPMorgan Aviation, Transportation & Industrials Conference. The carrier raised its consolidated capacity guidance while trimming its view for Cost Per Available Seat Mile (CASM) for full-year 2017.
United Continental now expects consolidated capacity in the band of 2.5% to 3.5% (the previous guidance had hinted at a growth in the band of 1% to 2%). The rise in the guidance was driven by expansion both on the domestic as well as international fronts. Domestic capacity is now projected to expand in the range of 3.5% to 4.5% (old guidance: 1.5% to 2.5%). On the international front, the metric is now expected to expand in the range of 1% to 2% compared with the earlier projected range of 0.5% to 1.5%.
Will Capacity Woes Return?
Capacity-related woes have been plaguing airline stocks for quite some time. The decision of one of the largest carriers to hike capacity guidance in the country may reignite such fears. However, United Continental tried to prevent such panic by saying that the carrier would incur no additional capital expenses for the projected capacity increase. During the presentation, the carrier said that it lagged its peers in terms of fleet utilization “during peak periods.” However, only time will reveal the extent to which the explanation is able to bring down investors’ capacity-related fears.
We note, that fears related to capacity over expansion had gripped investors in January too, when American Airlines Group (AAL - Free Report) , at its fourth-quarter earnings call hinted at increasing domestic capacity in 2017.
2017 CASM View Trimmed
With labor deals are very much in vogue in the airline space, labor costs have been on the rise. In fact, increased consolidated unit cost or cost per available seat mile (CASM) had hurt the earnings picture in the fourth quarter. The scenario is unlikely to be different in the first quarter of 2017.
At United Continental, unit costs in the first quarter are projected to increase in the band of 4.5% to 5.5% due to higher labor costs. However, the carrier trimmed its unit costs projection for full-year 2017. CASM is now expected to increase in the range of 5.6% and 7.2% (old view: 6.6% and 8.2%).
Another positive aspect of the presentation was that the carrier maintained its guidance for the first quarter with respect to passenger revenue per available seat mile (PRASM: a key measure of unit revenue). The carrier still expects the key metric in the range of a decline of 1% to an increase of 1% (year over year) in the first quarter. This is a welcome contrast to the actions of peers like Delta Air Lines (DAL - Free Report) and Southwest Airlines (LUV - Free Report) , which have trimmed their respective unit revenue view for the first quarter. United Continental, in fact, expects to display year-over-year growth with respect to the metric in the second quarter.
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United Continental (UAL) Revises 2017 CASM & Capacity Views
Chicago-based United Continental Holdings, Inc. (UAL - Free Report) , the parent company of United Airlines, tweaked its views pertaining to a couple of key metrics at the JPMorgan Aviation, Transportation & Industrials Conference. The carrier raised its consolidated capacity guidance while trimming its view for Cost Per Available Seat Mile (CASM) for full-year 2017.
United Continental now expects consolidated capacity in the band of 2.5% to 3.5% (the previous guidance had hinted at a growth in the band of 1% to 2%). The rise in the guidance was driven by expansion both on the domestic as well as international fronts. Domestic capacity is now projected to expand in the range of 3.5% to 4.5% (old guidance: 1.5% to 2.5%). On the international front, the metric is now expected to expand in the range of 1% to 2% compared with the earlier projected range of 0.5% to 1.5%.
Will Capacity Woes Return?
Capacity-related woes have been plaguing airline stocks for quite some time. The decision of one of the largest carriers to hike capacity guidance in the country may reignite such fears. However, United Continental tried to prevent such panic by saying that the carrier would incur no additional capital expenses for the projected capacity increase. During the presentation, the carrier said that it lagged its peers in terms of fleet utilization “during peak periods.” However, only time will reveal the extent to which the explanation is able to bring down investors’ capacity-related fears.
We note, that fears related to capacity over expansion had gripped investors in January too, when American Airlines Group (AAL - Free Report) , at its fourth-quarter earnings call hinted at increasing domestic capacity in 2017.
2017 CASM View Trimmed
With labor deals are very much in vogue in the airline space, labor costs have been on the rise. In fact, increased consolidated unit cost or cost per available seat mile (CASM) had hurt the earnings picture in the fourth quarter. The scenario is unlikely to be different in the first quarter of 2017.
At United Continental, unit costs in the first quarter are projected to increase in the band of 4.5% to 5.5% due to higher labor costs. However, the carrier trimmed its unit costs projection for full-year 2017. CASM is now expected to increase in the range of 5.6% and 7.2% (old view: 6.6% and 8.2%).
Another positive aspect of the presentation was that the carrier maintained its guidance for the first quarter with respect to passenger revenue per available seat mile (PRASM: a key measure of unit revenue). The carrier still expects the key metric in the range of a decline of 1% to an increase of 1% (year over year) in the first quarter. This is a welcome contrast to the actions of peers like Delta Air Lines (DAL - Free Report) and Southwest Airlines (LUV - Free Report) , which have trimmed their respective unit revenue view for the first quarter. United Continental, in fact, expects to display year-over-year growth with respect to the metric in the second quarter.
United Continental Holdings, Inc. Price
United Continental Holdings, Inc. Price | United Continental Holdings, Inc. Quote
Zacks Rank
United Continental carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>