United falls on Buckingham downgrade as hubs lag

United Continental Holdings Inc. tumbled the most in more than two months after Buckingham Research Group cut its rating to neutral and said fares at two hubs are curbing the carrier’s profit margins.

The shares slid 3.1 percent to $24.75 at 10:46 a.m. in New York trading. An earlier drop of 4.7 percent decrease was the largest on an intraday basis since Nov. 14.

United’s domestic revenues at its hubs in San Francisco and Denver are a “drag on margins and unlikely to improve meaningfully,” Daniel McKenzie, an analyst at Buckingham in New York, wrote today in a research note. He previously recommended buying the stock.

Competitor Virgin America Inc. is five times bigger at San Francisco than it was in 2008, he wrote. United’s domestic system is 20 percent smaller than it was five years ago, a deeper retrenchment than that of peers, he said.

McKenzie did a five-year pricing study and found that domestic fares in Denver and San Francisco have increased just 10 percent and 18 percent respectively, while other hubs such as Houston and Chicago had increases of 40 percent and 28 percent over the same period.

AMR Corp.’s American Airlines, which is lowering its costs under bankruptcy court protection, is “yet another worry” for United as it tries to capture more corporate travel, McKenzie said.

United Airlines parent UAL Corp. merged with Continental Airlines Inc. in 2010 in an all-stock deal, surpassing Delta Air Lines Inc. as the world’s biggest carrier.