Unit Revenue Up at Continental
Continental Airlines
(CAL) - Get Report
reported higher unit revenue in February as it filled more seats on its planes.
The nation's fifth-largest airline said mainline revenue per available seat mile, or RASM, jumped between 2% and 3% in February from a year before. RASM measures the amount of money an airline brings in for each seat flown one mile. The mainline number excludes shorter, regional flights.
The airline industry closely monitors Continental's report because it's the only major U.S. carrier to disclose monthly revenue figures. Airline revenue has been under pressure from overcapacity and price competition. Last week,
Northwest
(NWAC)
raised fares by $5 or $10 one-way, in part to help offset high jet fuel costs. Most other major U.S. airlines, including Continental, have followed Northwest's lead.
This is the second month in a row Continental has reported a year-over-year RASM increase, following a sharp decline in December. Still, it was in line with the expectations of J.P. Morgan's Jamie Baker, one of the Wall Street analysts who keeps close tabs on the monthly report.
Baker had forecast a 2.5% increase in February mainline RASM and incorporated that into his forecast for a first-quarter loss of $2.55 a share at Continental. (J.P. Morgan does and seeks to do business with companies covered in its research reports.)
Continental's February mainline load factor was 74.4%, up 4.2 percentage points from a year ago. The figure measures the average percentage of plane seats filled. The increase resulted from a 5.1% increase in traffic, which measures passenger demand, and a 1% decrease in capacity.
J.P. Morgan's Baker expects Continental will increase capacity, or the number of seats it flies, by 5.5% in March, following February's decline.
"Accordingly, RASM gains are expected to become increasingly elusive," he wrote in a research note. "However, given seasonally strong March trends (Spring Break, Easter weekend falling entirely in March) plus recent fare increase activity (most domestic leisure fares are up $5 or $10 one-way), we expect March Continental mainline RASM to fall roughly between January and February trends ... or around plus-3%."
Including regional flights, Continental said RASM rose between 1% and 2% in February, as traffic jumped 6.6% and capacity rose 0.1%.