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United Airlines’ Utilization Rate Continued to Expand

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Utilization rate

Disciplined capacity additions, promotional offers, and marketing strategies to drive traffic have helped United Airlines improve its utilization rate or load factor. United Airlines, United Continental’s (UAL) wholly-owned subsidiary, saw its utilization rate expand by 100 basis points YoY (year-over-year) to 82.7% in the fourth quarter.

In 2018, the company’s load factor increased by 120 basis points to 83.6%. An improvement in the utilization rate signifies efficient use of the capacity, which would likely have a favorable impact on the airline’s unit revenue. United Airlines’ load factor has been improving for the last eight months as well as the past four consecutive quarters.

The utilization rate of United Airlines’ top competitors (IYT) including Delta Air Lines (DAL) and Southwest Airlines (LUV) have fallen by ten basis points and 50 basis points, respectively, in 2018. American Airlines (AAL) hasn’t reported its 2018 numbers yet.

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Improving yields and unit revenues

Disciplined capacity enhancements and the improving load factor are driving United Airlines’ passenger revenue yield. The third-largest US air carrier posted improved yields in all four quarters in 2018.

In the first, second, third, and fourth quarters, the company reported yields of 16.35 cents, 16.48 cents, 15.96 cents, and 16.77 cents, respectively. The airline registered YoY improvements of 1.7%, 1.5%, 4.1%, and 3.8%, respectively. As a result, United Airlines’ unit revenues also increased. The airline registered YoY improvements of 3.4%, 2.8%, 4%, and 5%, respectively, in its first, second, third, and fourth- quarter unit revenues.

For fiscal 2018, United Airlines reported a yield of 16.38 cents, which is 2.8% higher than the yield of 15.93 cents in 2017. The company’s unit revenue for the year increased 4.3%.

Delta Air Lines reported its fourth-quarter results on January 15. The company’s unit revenue for the quarter grew 2.7% YoY to 15.43 cents. Other major US air carriers haven’t published their fourth-quarter numbers yet.

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