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Hurricanes and Korea Tension Create a Storm at United Continental

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Hurricanes and Korea Tension Create a Storm at United Continental PART 1 OF 6

United Continental’s Capacity Is on Track for Higher Growth

United Continental’s capacity

In August 2017, United Continental’s (UAL) capacity grew 2.4% YoY (year-over-year), slower than the average 3.6% YoY capacity growth seen in the previous seven months. Year-to-date (or YTD), its capacity had grown 3.5%, which is almost double the growth seen in 2016. In fiscal 2016, United’s capacity grew 1.4% YoY.

United Continental&#8217;s Capacity Is on Track for Higher Growth

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Domestic

United continues to add capacity, mainly in the domestic region. In August 2017, United’s domestic region grew 4.8% YoY. YTD, its domestic capacity had increased 4.9% YoY. Legacy peers American Airlines (AAL), Delta Air Lines (DAL), and Alaska Air Group (ALK) are also adding domestic capacity.

Pacific region sees growth

United’s international capacity fell 0.5% YoY in August 2017 due to declining capacity in Latin American and Atlantic markets. Latin American capacity fell 2.5% YoY in August 2017, and the Atlantic region’s fell 0.5% YoY. The Pacific region’s capacity rose 0.8%. YTD, international capacity had grown 1.8% YoY in August.

Outlook

In March 2017, United Continental increased its capacity growth guidance for the year to 2.5%–3.5%. It had earlier planned to grow its capacity by 0%–1%. The change was mainly due to Alaska Air’s aggressive capacity growth in San Francisco, United’s biggest market.

Investors can gain exposure to United Continental with the First Trust NASDAQ Transportation ETF (FTXR), which has a 6.5% exposure to United. In the next part, we’ll find out if United has been able to fill its extra seats.

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