Hot January for Continental Airlines
By Eric Gillin
TheStreet.com Staff Reporter
02/03/2004 01:40 PM EST
Click here for more stories by Eric Gillin
Continental Airlines (CAL:NYSE - commentary - research) filled a record number of seats in January, but rising fuel costs and a lack of pricing power continue to sap the power of a revenue recovery.
Continental late Monday reported that it filled 71.4% of its seats in January, setting a new record for the month as demand for air travel continues to outpace the rising supply of flights. The carrier said that traffic, as measured in revenue passenger miles, rose 8.5% over January 2003, while capacity, as measured in available seat miles, rose 3.2%.
Elsewhere, American Airlines, unit of AMR (AMR:NYSE - commentary - research), announced that it filled 68.9% of the seats on its planes in January, a gain of two percentage points over last year. As with Continental, American's revenue environment was strong, with traffic up 3.8%, led by an 11.6% jump in international traffic. Capacity was under control as well, up just 0.8% over year ago levels.
Despite that, airline stocks stumbled early Tuesday. The Amex Airline Index dropped 2.1%, with Continental down 39 cents, or 2.6%, to $14.71, and American off 28 cents, or 1.7%, to $15.87.
But while Continental and American control capacity and fill more seats on their planes, the carriers-- and the rest of the industry -- have been using deeply discounted tickets and fare sales to spur demand, pushing down the amount of revenue they generate per seat mile, a metric called RASM. Continental, which is the only carrier to announce RASM results on a monthly basis, said that it increased between 0.5% and 1.5% in January from last year, a marginal increase at best.
While this is the ninth consecutive month of RASM gains for Continental, its growth has been shrinking towards zero over the last two months. From July through November, Continental's monthly RASM was up more than 4% year-over-year, but dropped to a gain of 1.7% in December.
Continental's RASM Recovery
Since the end of the war in Iraq, Continental has had some pricing power as travel demand comes back. But in the last two months, the growth has slowed, thanks to fare sales and deep discounting.
Month RASM % Change*
Jan. 2004 0.5% and 1.0%
Dec. 2003 1.7
Nov. 2003 5.5
Oct. 2003 4.4
Sep. 2003 5.3
Aug. 2003 4.4
Jul-03 4.8
Jun-03 0.4
May-03 2
Apr-03 -1
Mar-03 -11.7
Feb. 2003 -0.4
* -- From prior year.
Source: Credit Suisse First Boston research, company reports
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By Eric Gillin
TheStreet.com Staff Reporter
02/03/2004 01:40 PM EST
Click here for more stories by Eric Gillin
Continental Airlines (CAL:NYSE - commentary - research) filled a record number of seats in January, but rising fuel costs and a lack of pricing power continue to sap the power of a revenue recovery.
Continental late Monday reported that it filled 71.4% of its seats in January, setting a new record for the month as demand for air travel continues to outpace the rising supply of flights. The carrier said that traffic, as measured in revenue passenger miles, rose 8.5% over January 2003, while capacity, as measured in available seat miles, rose 3.2%.
Elsewhere, American Airlines, unit of AMR (AMR:NYSE - commentary - research), announced that it filled 68.9% of the seats on its planes in January, a gain of two percentage points over last year. As with Continental, American's revenue environment was strong, with traffic up 3.8%, led by an 11.6% jump in international traffic. Capacity was under control as well, up just 0.8% over year ago levels.
Despite that, airline stocks stumbled early Tuesday. The Amex Airline Index dropped 2.1%, with Continental down 39 cents, or 2.6%, to $14.71, and American off 28 cents, or 1.7%, to $15.87.
But while Continental and American control capacity and fill more seats on their planes, the carriers-- and the rest of the industry -- have been using deeply discounted tickets and fare sales to spur demand, pushing down the amount of revenue they generate per seat mile, a metric called RASM. Continental, which is the only carrier to announce RASM results on a monthly basis, said that it increased between 0.5% and 1.5% in January from last year, a marginal increase at best.
While this is the ninth consecutive month of RASM gains for Continental, its growth has been shrinking towards zero over the last two months. From July through November, Continental's monthly RASM was up more than 4% year-over-year, but dropped to a gain of 1.7% in December.
Continental's RASM Recovery
Since the end of the war in Iraq, Continental has had some pricing power as travel demand comes back. But in the last two months, the growth has slowed, thanks to fare sales and deep discounting.
Month RASM % Change*
Jan. 2004 0.5% and 1.0%
Dec. 2003 1.7
Nov. 2003 5.5
Oct. 2003 4.4
Sep. 2003 5.3
Aug. 2003 4.4
Jul-03 4.8
Jun-03 0.4
May-03 2
Apr-03 -1
Mar-03 -11.7
Feb. 2003 -0.4
* -- From prior year.
Source: Credit Suisse First Boston research, company reports
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