Coming Attractions: Fuel Prices go up and the Capacity Cuts Follow

Discussion in 'United Airlines | MileagePlus' started by Renard, Mar 7, 2011.  |  Print Topic

  1. Renard
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    Renard Silver Member

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    Let the speculation begin.

    ANNOUNCES CONSOLIDATED CAPACITY REDUCTION DUE TO RISING FUEL PRICES


    CHICAGO, March 7, 2011 /PRNewswire via COMTEX/ --
    United Continental Holdings, Inc. (NYSE: UAL) today reported February 2011 operational results for United Air Lines, Inc. and Continental Airlines, Inc.


    United and Continental's combined consolidated traffic (revenue passenger miles) in February 2011 decreased 1.1 percent versus pro forma February 2010 results on a consolidated capacity (available seat miles) increase of 1.8 percent. The carriers' combined consolidated load factor in February 2011 was down 2.3 points compared to the pro forma results from the same period last year.

    United and Continental's February 2011 combined consolidated passenger revenue per available seat mile (PRASM) increased an estimated 10.5 to 11.5 percent compared to the pro forma results from February 2010, while combined mainline PRASM in February 2011 increased an estimated 11.0 to 12.0 percent compared to the pro forma results from the same period last year.

    In addition, the company's results were impacted by the required implementation of Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2009-13, Multiple Deliverable Revenue Arrangements--A Consensus of the FASB Emerging Issues Task Force, which defines whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This standard has been implemented by the company prospectively as of Jan. 1, 2011, and is applied to new sales of air transportation that include a mileage credit.The standard has the effect of decreasing the value of the mileage credit component that the company defers under the deferred revenue accounting method for its frequent flyer program and, therefore, increases the passenger revenue recorded at the time the air transportation is provided.The implementation of this accounting standard is estimated to have increased the company's year-over-year PRASM by approximately 1 point in February. For additional information regarding this accounting standard, please see the company's Form 10-K filed with the Securities and Exchange Commission.

    Consolidated Capacity Reduction

    Due to the recent increase in fuel prices, the company plans to reduce consolidated capacity from its previous 2011 projections by approximately 1 percent effective with its May schedule and 4 percent effective with its September schedule. With these reductions, fourth quarter 2011 consolidated domestic capacity is expected to decrease 5 percent and consolidated international capacity is expected to increase 2 percent compared to the pro forma capacity for the same period last year. The capacity changes will be accomplished through reducing flight frequencies, indefinitely postponing the start of flights to certain markets and exiting less profitable routes.

    The company now expects its full-year 2011 consolidated capacity to be roughly flat year-over-year, down from its prior guidance of up 1 to 2 percent. The company now expects full-year 2011 international capacity to be up 2.5 to 3.5 percent and full-year 2011 domestic capacity to be down 1.5 to 2.5 percent year-over-year.

    Concurrent with the capacity reductions, the company is also analyzing the removal of certain less fuel-efficient aircraft from its fleet and will be taking other cost saving measures.

    About United Continental Holdings, Inc.

    United Continental Holdings, Inc. (NYSE: UAL) is the holding company for both United Airlines and Continental Airlines. Together with United Express, Continental Express and Continental Connection, these airlines operate a total of approximately 5,675 flights a day to 372 airports on six continents from their hubs in Chicago, Cleveland, Denver, Guam, Houston, Los Angeles, New York/Newark Liberty, San Francisco, Tokyo and Washington, D.C. United and Continental are members of Star Alliance, which offers 21,000 daily flights to 1,160 airports in 181 countries. United and Continental's more than 80,000 employees reside in every U.S. state and in many countries around the world.For more information about United Continental Holdings, Inc., go to UnitedContinentalHoldings.com. For more information about the airlines, see united.com and continental.com, and follow each carrier on Twitter and Facebook.
     
  2. rggale
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    rggale Gold Member

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    To me this means:
    Transferring 1 or 2 of the UA Domestic heavies or a few 752s to Int'l Ops.
    Getting rid of 735's in favor of either new UA-owned and piloted E-Jets, A319s, or 73Gs.
     
  3. Renard
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    Renard Silver Member

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    I agree about the 735s.

    What new routes might they delay? RNO? PSP?

    What about CLE? (just wondering as every little crisis is DL's favorite time to roll-up the carpet a little more at CVG)
     
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  4. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    Wow... where's the discussion/speculation!?

    My guess would be that the CO 735's will be phased out, since the reduction is on domestic routes.
     
  5. Billiken
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    Billiken Silver Member

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    My guess would be that routes where UA competes with LCCs would be higher up on the "kill list".
    (Like CO quitting CLE-BNA service a couple of years ago...surrender to WN.)
     
  6. jupper
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    jupper Silver Member

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    I agree on the 735's being retired earlier. Guess E+ on the CO-fleet also factors in there as well.

    I'm guessing capacity wise we'll see less tatl 757 and 777 aircraft on the CO side be used domestically, but higher utilization for actual intercontinental flights (new routes, frequencies, right-sizings etc.).

    Do wonder about the smaller markets, the route-aligning is still only very fresh, that could be a multi-year process though...
     
  7. WaterSki
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    WaterSki Silver Member

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    Expensive oil + capacity dicipline by the airlines really puts a strain on things for mileage runner and inexpensive top-tier status seekers.

    Pre-2007: Cheap oil and tons of capcacity = :D :D :D
    2007-2008: Expensive oil and lots of capacity. Fares skyrocketed.
    2009-2010: Cheap oil and reduced capacity. Great fares still available except for peak times (i.e. Summer).
    2011: Expensive oil and reduced capcaity. Deals are truly few and far between.
     

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