The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.



) -- The stock of

United Continental Holdings

(UAL) - Get Report

has gained about 18% since the start of this month as the sector exhibited strength following expected benefits from

American Airlines'


bankruptcy and some positive macro cues. Traffic declines in November, however, weighed on the sentiment for the stock.

The November operational results released earlier in the month show that United and Continental's combined consolidated traffic in November 2011 decreased 3.6% compared to a year ago, on a combined consolidated capacity decrease of 4%, with slightly lower load factor as compared to the same period last year. The carrier was however able to grow year-over-year unit revenue and reports that its consolidated and mainline passenger revenue increased an estimated 10.5% to 11.5% and 9.5% to 10.5%, respectively, as compared to November 2010.

Capacity has been largely curtailed on domestic routes with about 7% year-over-year reduction in available seat miles this November vs. 0.8% reduction for international markets.


our full analysis of United Continental


A comparison of 2011 year-to-date capacity to the last year data shows a 2.5% expansion in the international markets and about 2.8% reduction in the domestic seat miles. The company is optimizing its network in favor of international markets in order to capitalize on the market opportunities enabled both by the merger and next-generation aircraft technology.

United will take delivery of five Boeing 787 Dreamliners next year, with the first coming into service in the second half of 2012. The aircraft is being viewed as a game changer, creating new profitable market opportunities for the carrier, especially on long haul routes, with its excellent operating economics. On the other hand, domestic capacity is being reduced with the conversion of 14 Boeing 767 300 aircraft from the domestic configuration to the carrier's international configuration.

The carrier also announced this month that United Airlines will launch daily service between its Washington/Dulles hub and Doha, Qatar, via Dubai, effective May 1, 2012, subject to government approval.

In Q3, United Continental registered an impressive 15% year-over-year growth in unit revenues for its Middle East operations, driven by nearly 12% hike in air fares in the region. In its current market outlook, Boeing notes that despite the civil unrest in many Middle Eastern countries, the region's economy is forecast to grow 6% in 2011, outpacing the world average.

While air transport markets in the rest of the world shrank during the global economic downturn of 2009, international air travel continued to grow for Middle East carriers, demonstrating the region's prominence in global air travel. International traffic continued to grow during 2010, rising 17.8% for Middle Eastern carriers -- far exceeding the world average of 8.2% growth.

We currently have

a Trefis price estimate of $26 for UAL

, which represents a 22% premium to the market price on the last close.



to find out how a company's products impact its stock price at Trefis.

Like our charts? Embed them in your own posts using the

Trefis Wordpress Plugin


This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.