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United Continental’s Utilization Rate Continues to Improve

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Expanding load factor

Promotional offers and marketing efforts to drive traffic along with disciplined capacity additions helped United Continental (UAL) improve its utilization rate or load factor. YTD through November, UAL’s utilization rate has expanded by 130 basis points to 83.7%. An increase in utilization would mean efficient use of capacity, which would likely have a favorable impact on airlines’ unit revenues.

UAL’s load factor has been improving for the last seven months. The company’s utilization rate increased by 80 basis points, 130 basis points, and 160 basis points in the first three quarters of 2018.

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The load factors of Southwest Airlines (LUV) and Delta Air Lines (DAL), United Continental’s top peers in the airline industry (JETS), have decreased by 40 basis points and ten basis points YTD through November. American Airlines (AAL) and JetBlue Airways (JBLU) haven’t reported their November numbers yet.

Improving yield and unit revenues

Disciplined capacity addition and the improving load factor are driving United Continental’s passenger revenue yield. The company posted an improved yield in the first three quarters of 2018. For the first quarter, second quarter, and third quarter, United Continental reported a yield of 16.35 cents, 16.48 cents, and 15.96 cents, respectively, and registered a YoY improvement of 1.7%, 1.5%, and 4.1%.

As a result, United Continental’s unit revenues also increased. The company registered a YoY improvement of 3.4%, 2.8%, and 4% in its first, second, and third quarter unit revenues.

United Continental’s peers have also recorded an improved passenger revenue yield in the third quarter. Delta Air Lines, Southwest Airlines, and American Airlines’ third-quarter yield improved 4.2%, 2.3%, and 2.2%, respectively.

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