Benzinga  May 23  Comment 
Despite some volatility, shares of United Continental Holdings Inc (NYSE: UAL) have ultimately lost more than 22 percent year-to-date, widely underperforming all major U.S. stock indexes. Moreover, over the past month alone, the stock has tumbled...
Reuters  May 13  Comment 
* Appaloosa lp cuts share stake in general motors co by 81.0 percent to 2.4 million shares
Motley Fool  May 6  Comment 
Weak unit revenue trends continue to plague United Airlines.
Reuters  Apr 30  Comment 
United Continental Holdings Inc said in a proxy statement Friday that it cut the pay of one of its top officers in connection with an internal probe that resulted in its chief executive's resignation last year.
Forbes  Apr 25  Comment 
As the saying goes, there are many possible reasons for an insider to sell a stock, but only one reason to buy -- they expect to make money. So let's look at two noteworthy recent insider buys.
Forbes  Apr 25  Comment 
A company's own top management tend to have the best inside view into the business, so when company officers make major buys, investors are wise to take notice. Presumably the only reason an insider would take their hard-earned cash and use it to...


United Continental Holdings (UAL) is a holding company and its principals are United Airlines (UAUA) and Continental Airlines (CAL). The merger between United Airlines and continental took place on October 1st, 2010. Due to the merger, United Continental Holdings is the largest airline in the world.[1][2] The combined entity operates approximately 5,800 flights a day to more than 375 U.S. domestic and international destinations.[3] The company's hub and spoke system allows it to transport passengers between a large number of destinations with substantially more frequent service than if each route were served directly.

Business Overview

United Airlines operates approximately 3,300 flights daily to more than 230 destinations worldwide on its Mainline United and United Express services. United Airlines operates around 650 airlines.[4][5] In 2010, United planned to buy 25 next-generation Airbus and 25 next-generation Boeing aircraft to improve efficiency in fuel costs.[6] In addition to its airline travel services, United also earned revenue through its United Cargo and airline services businesses.

Continental Airlines was the world's fifth largest airline by Revenue Passenger Miles.[7] Continental provides service to around 40 cities in Mexico and Central America, more destinations than any other U.S. airline.[7] In addition to its own flights, CAL also earned revenue through its code-sharing alliances, particularly its SkyTeam Alliance with airlines like Air France-KLM (AFLYY) and Delta Air Lines Inc. (DAL).[8] [9]

Business Growth[10]

  • Revenue: Revenue has grown from $16,335 in 2009 to $23,229 in 2010, which represents a 42% increase.
  • Net income: Net income has grown from a loss of $651 in 2009 to a profit of $252 in 2010.

Business Segments[11]

Prior to the merger, the companies had segments such as mainline services and cargo services. After consolidation and the merger, the holding company reports one segment and a few geographic segments:

  • U.S and Canada: 61.7% of total revenues
  • Pacific: 17% of total revenues
  • Atlantic: 16.7% of total revenues
  • Latin America: 45% of total revenues.

Key Trends and Forces

Airline industries are more sensitive to the economy than other industries

Typically, airline companies and aircraft manufacturers are more prone to swings in revenue and equity market prices due to the release of economic indicators.[12] Consumers tend to reduce travel if personal economic conditions are suboptimal, forcing airlines to cut capacity and production. Indicators such as unemployment indices, personal income, and even home sales affect airline industries in exaggerated fashion.

Fuel Costs

Like other airlines, fuel costs are United's largest operating expense, accounting for a quarter of the company's total operating expenses.[13] Uncertainty in oil prices, forces UAL to enter into hedging agreements for its fuel. However, this poses a risk if oil prices drop significantly from the hedged fuel price. As a result of volatile oil prices, United faces uncertainty in costs.

Aging Fleet Leads to Rising Operating Expenses

United's fleet of airlines, along with its competitors, gets older over time. Airplanes are deemed safe to operate for only certain amount of years based on the aircraft model. Maintenance expense is expected to increase significantly as the fleet ages, resulting in the need for additional repairs over time. Eventually, the aircraft need to be replaced.


United competes primarily with large carriers like American Airlines (AMR) and Delta Air Lines Inc. (DAL) but also competes with low-cost carriers like Southwest Airlines Company (LUV), both domestically and internationally. Because of high fuel and other operating expenses, United has the highest Cost per Available Seat Mile in the airline industry, 13.5 cents.[14] To combat its increasing operating expenses, United has implemented several strategies prevalent throughout the airline industry including cutting food and beverage services and charging customers extra fees to check in baggage.

The merger with Continental Airlines (CAL) leaves just three other major network carriers: American Airlines (AMR), US Airways Group (LCC) and Delta Air Lines Inc. (DAL).[15] This improves UAUA's competitive landscape substantially. American Airlines has the highest cost structure and has been unable to acquire a lower-cost company due to Delta acquiring Northwest and UAUA acquiring CAL. Though not as high as AMR, US Airways also has a high cost structure, reducing its ability to attract both customers and suitors for acquisition. [15]

AirTran Holdings (AAI): AirTran Holdings (Nasdaq:AAI) is one of America’s largest low-fare passenger airlines. The airline has managed to achieve low operating costs despite relying on a hub-and-spoke system, in which most of its flights originate and terminate at its hub in Atlanta, Georgia. Given AirTran's continued reliance on the hub and spoke system, airline management has cited other operational factors as cause for the airline having a cost structure that is among the lowest in the industry.[16]

American Airlines (AMR): AMR is the parent company of American Airlines, the second largest airline in the world based on available seat miles and revenue passenger miles On an average day, American Airlines flies approximately 3,400 flights between 250 countries. The company has been recording net losses for many years and has experiences very weak demand for air travel driven, particularly during significant economic downturns. [17]

Delta Air Lines Inc. (DAL): Delta Air Lines is the 2nd largest passenger airline in the world by available seat miles. In recent years, the company has faced financial difficulties due to price competition from discount airlines like JetBlue and Southwest. This has limited Delta's ability to raise prices to their natural supply/demand and cost reflective levels. As a result, Delta was forced into bankruptcy in September of 2005. Since exiting bankruptcy on April 30, 2007, the company has followed a revised operating strategy calling for a network shift towards more profitable international routings. [18]

JetBlue Airways (JBLU): JetBlue Airways is the 8th largest airline in the U.S. by revenue passenger miles. JetBlue differentiates itself from other airline travel companies with its low fares, made possible by low distribution and operating costs - largely due to the fact that it has the youngest fleet in all domestic airlines. JetBlue Airways specializes in cheap point-to-point flights with high levels of customer service to over 50 destinations in around 20 states, Puerto Rico, Mexico, and the Carribean.[19]

Southwest Airlines Company (LUV): Southwest Airlines is the largest domestic carrier by total passengers, carrying over 100 million passengers. Southwest thrives on maintaining low operating expenses, primarily through its extensive fuel hedging. Because of its low costs, Southwest was able to remain profitable for 37 consecutive years, a feat unmatched in commercial aviation history.[20]

US Airways Group (LCC) US Airways is a major domestic air carrier approximately operates 3,800 flights to 230 destinations across the U.S., Canada, the Caribbean, Latin America and Europe. The company’s finances suffered considerably due to reduced air travel following September 11th, forcing the airline to declare bankruptcy in 2002. However, unlike other carriers that improved and emerged stronger following Chapter 11 protection, US Airways never fully recovered. The combination of high fuel costs and tough labor negotiations forced the company into a merger with America West in 2005. While the US Airways name was maintained for brand purposes, the merger actually left America West executives and stockholders with more control over the new company.[21]


  1. Associated Press: Stocks rise early as airlines agree to combination
  2. DallasNews: United-Continental deal may inspire American or US Airways to pair up
  3. Wikinvest SEC Files: UAL 2010 10-K, Item 1, Business Overview
  4. UAUA 2008 10-K, Item 2, pg. 28
  5. United Airlines Investor Relations: 4th Quarter 2009 Report, Page 9
  6. 7.0 7.1
  7. CAL 2007 10-K, Item 1, "Alliances"
  8. Wikinvest SEC Files: CAL 2009 10-K, Item 6, "Selected Operating Data"
  9. Wikinvest SEC Files: UAL 2010 10-K, Item 8, Selected Financial Data
  10. Wikinvest SEC Files: UAL 2010 10-K, Item 8, Note 10
  11. MarketWatch: Airline Stocks Hammered by Latest Economic Data, 08-19-2010
  12. UAUA Q3 Earnings Press Release 10/21/2008
  13. 15.0 15.1
  14. Wikinvest Stock Summary: AirTran
  15. Wikinvest Stock Summary: AMR
  16. Wikinvest Stock Summary: DAL
  17. Wikinvest Stock Summary: JBLU
  18. Wikinvest Stock Summary: LUV
  19. Wikinvest Stock Summary: LCC
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