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Continental Airlines yield contractions continue in Oct-2009, but on the improve

Continental Airlines Chairman and CEO, Jeff Smisek
Continental Airlines Chairman and CEO, Jeff Smisek

Continental Airlines' yield contractions continued in Sep-2009, for the ninth consecutive month of double-digit declines and ten consecutive months of declines, reflecting continued fare-cutting and weakness in premium travel.

For Oct-2009, the Houston-based carrier estimates that consolidated passenger revenue per available seat mile (RASM) was down by 14.0% to 15.0%  (mainline RASM down by 15-16%). This represents the smallest monthly contraction for the carrier in six months, since Apr-2009’s 13.1% decline (which was positively impacted by Easter falling in April this year, compared to March in 2008). 

Continental Airlines’ consolidated PRASM growth (% change year-on-year): Oct-2008 to Oct-2009

Looking at a two-year range, Continental’s Oct-2009 RASM reduction was 4.5%, an improvement from contractions of 6.1% in Sep-2009, 11.9% in Aug-2009 and 12.6% in Jul-2009, and the smallest two-year range reduction reported in the past nine months. 

Continental Airlines’ consolidated PRASM growth (two year range): Feb-2009 to Oct-2009

For Sep-2009, Continental Airlines confirmed that consolidated passenger RASM decreased by 19.2%, at the higher end of the carrier’s estimates of a 18.5%-19.5% reduction, while mainline passenger RASM decreased at a greater level that anticipated, at 21.1%, compared to estimates of a 20-21% reduction.

Load factors remain strong

In other traffic developments in the month, Continental Airlines reported a consolidated (mainline plus regional) load factor of 82.5%, a 3.5 ppt load factor improvement, with a mainline load factor of 83.0%, also up 3.5 ppts.

Domestic load factors gained 2.4 ppts to 85.4% with international mainline load factors up 4.5 ppts to 80.4%, meaning that all four Oct-2009 load factors were at record levels for the carrier for the month. Meanwhile, Continental's regional operations had an Oct-2009 load factor of 78.2% (+3.3 ppts), the only segment to see a load factor below 80%.

The load factor improvement occurred as Continental decreased consolidated capacity (ASMs) by 2.6% in the month, while traffic (RPMs) was up by 1.7% (mainline capacity was down 2.4% with traffic up by 1.9%).

Remains concerned about economic recovery; FY2009 load factors of 81% expected on continued capacity reductions

During the month, Continental Airlines CEO, Larry Kellner, stated he remains concerned the economy “could go deeper” into a downturn, adding that he “wouldn't claim we're seeing recovery”, and the economy is “kind of bumping along the bottom”.

Looking forward, Continental has stated that it expects 2009 load factors to average 81% (82% for Mainline operations), on a 5.2% capacity (ASMS) reduction.  While no RASM figures were disclosed, contractions are expected to continue, as the US enters the weak Winter season and price discounting continues in the US market.

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