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Could United Continental’s Utilization Improve in 2017?

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Load factor improves

In August 2017, United Continental’s (UAL) utilization (load factor) fell 0.2 percent points. This fall was expected, as capacity growth for the month was higher than traffic growth.

The load factor, the most commonly used measure of an airline’s capacity utilization, is calculated by multiplying capacity by traffic. A higher load factor indicates better utilization of aircraft capacity.

As shown in the above graph, United’s load factor has fallen during most months of 2017, with the exception of April, when it improved by 2.6 percent points. Year-to-date, in August 2017, United’s load factor had fallen 0.2% to reach 82.9%.

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Yields improve

United Continental’s yield improved in the first two quarters of 2017. In 2Q17, its average yield improved by 0.4% YoY to 15.1 cents. In 2Q17, the average yield improved by 2.0% YoY to 15.3 cents.

Unit revenue also improves

As a result, the airline’s unit revenue has also improved. In 1Q17, United’s unit revenue improved by 0.1% YoY to 14.1 cents. In 2Q17, its unit revenue improved 2.1% YoY to 14.8 cents.

Investors can gain exposure to United Continental with the PowerShares Dynamic Leisure and Entertainment Portfolio ETF (PEJ) which invests ~4.9% of its holdings in the stock. It also holds 5.0% in Delta Air Lines (DAL) and 2.7% in JetBlue Airways (JBLU), but has no holdings in American Airlines (AAL). Continue to the next article to find out if United Continental could continue improving its yield and unit revenue.

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