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Is United Continental’s Traffic Lagging Capacity Growth?

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UAL’s traffic growth

For August 2016, United Continental’s traffic rose 0.6% YoY (year-over-year). That’s slower than its capacity growth in the same period last year. YTD (year-to-date) as of August 2016, UAL’s traffic showed minuscule growth of 0.2% YoY compared to 1% YoY for 2015.

Airline traffic is measured by revenue passenger miles (or RPM). RPM is the number of revenue passengers multiplied by the total distance traveled.

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UAL’s domestic market

United Continental’s (UAL) domestic market regained its growth momentum in August after slowing down in July. For August, its domestic traffic rose 2.7% YoY. YTD as of August 2016, the domestic region witnessed a 1.4% YoY rise.

American Airlines (AAL) has also seen a fall in domestic traffic. Other legacy players such as Delta Air Lines (DAL) and Alaska Air (ALK) have had good growth on domestic routes.

Latin America drives UAL’s international growth

UAL’s international traffic fell 0.6% in August 2016, contributed by the Latin American and Atlantic regions. Latin America fell 1.7% YoY in August 2016, and the Atlantic region fell 3.4% YoY. Traffic growth in both these markets was slower than capacity growths in the other regions. Pacific market traffic, on the other hand, rose 3.8% YoY in August 2016.

YTD as of August 2016, UAL’s international traffic has fallen 0.3% YoY. UAL forms 2.1% of the holdings of the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR).

Outlook for UAL

For 2016, we can expect UAL’s traffic growth to fall behind capacity additions, as expected by UAL itself. This will most likely impact utilization and yields, which is what we’ll look at in the next part of the series.

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