United Continental cutting capacity, analyst says
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United Continental Holdings Inc. will cut capacity in cities such as Chicago and Denver in its first network adjustments after the merger that formed the world's largest airline, a Hudson Securities analyst said. |
United Continental Holdings Inc. will cut capacity in cities such as Chicago and Denver in its first network adjustments after the merger that formed the world's largest airline, a Hudson Securities analyst said.
The combined carrier's available seats in the U.S. will decline 1.9 percent in the first quarter while the rest of the nation's airlines collectively boost capacity about 2 percent, Hudson's Daniel McKenzie wrote today in a note to clients. He cited APGDat scheduling data and his firm's estimates.
For Chicago-based United, the cuts will contribute to a quarterly profit, McKenzie said. The reductions will benefit Southwest Airlines Co., the second-largest carrier in Denver behind United, as well as Alaska Air Group Inc., whose main hub is in Seattle, and US Airways Group Inc., which has a hub in Phoenix, he said.
“United Continental management appears serious about continuing to cut unprofitable, domestic flying,” McKenzie said. The moves will help the company post first-quarter earnings of 20 cents a share, its first profit in that period since 2000, according to the analyst. He recommends buying United Continental shares.
The carrier will trim first-quarter capacity 1.8 percent at Chicago O'Hare, the second-busiest U.S. airport, 5.6 percent at Denver, 9.9 percent at Phoenix, 6.9 percent at Seattle and 2.8 percent at Los Angeles, said McKenzie, who is based in Chicago.
United hasn't announced capacity plans for the quarter, said Mike Trevino, a spokesman. The airline plans to increase available seats by as much as 2 percent for all of next year, according to an Oct. 21 forecast, he said.
During the first quarter, the airline plans to boost capacity by about 3 percent at Houston, a Continental hub, and by 12 percent at New York's LaGuardia, where it's competing with Delta Air Lines Inc. and AMR Corp.'s American Airlines, according to McKenzie.
United Continental was formed in October by the merger of United Airlines parent UAL Corp. and Continental Airlines Inc. in a stock transaction valued at $3.47 billion. The combined airline passed Delta as the world's biggest carrier.
