06-02-2004, 01:47 PM
Join Date: Aug 2003
Still puzzled over dbaker's hatred of AirTran? Well read the article above one more time, then read this one:
Headwinds Slow Continental Air |
By Eric Gillin
TheStreet.com Staff Reporter
6/2/2004 10:53 AM EDT
Continental Airlines' (CAL:NYSE - commentary - research) filled fewer seats this May than it did a year earlier, prompting Wall Street to deepen its loss estimates, in the latest sign that the long-awaited industry recovery is in jeopardy.
Continental announced late Tuesday that it filled 74.7% of its seats during the month of May, down from 75.9% a year earlier. The carrier said that traffic, a sign of demand measured in revenue passenger miles, rose 11.9% year over year, but capacity, a sign of supply measured in available seat miles, rose 13.8%. In reaction, shares of the carrier fell 5 cents, or 0.4%, to $10.40.
With supply outpacing demand, fuel prices high and Continental filling fewer seats than a year ago, a key industry metric called revenue per available seat mile, or RASM, is showing weakness. The carrier said that May RASM fell between 3% and 4% from last year, reversing April's gain of 3.1% and falling just in line with most analyst expectations.
"Continental's disappointing May unit revenue comparisons suggest that Continental will underperform the industry for the 12th straight month, despite a rebound in its Asian operations," said Glenn Engel, analyst for Goldman Sachs, in a research note. "We estimate that industry [RASM] rose 4.4% in May, down from a 9.8% gain in April."
Continental's underperformance prompted analysts to drop their estimates. Engel deepened his second-quarter and fiscal 2004 loss estimates on the carrier, concluding that the carrier will make a 1-cent profit in 2005. Elsewhere, Morgan Stanley analyst William Greene dropped his estimates for 2004 and 2005, telling investors estimates at other brokerages were likely to come down in the coming months, with Continental failing to post a profit until 2006.
This is a far cry from three quarters ago, when Wall Street predicted the company would post a profit in 2004, well ahead of other network carriers. A key component of the falling estimates -- aside from sky-high fuel costs -- is the industry's lack of pricing power, as measured in yield, which is being undermined as low-cost carriers aggressively expand to new markets.
And that last sentence says it all really, dbaker has a deep fear that AirTran is undermining his beloved Continental. And I have no beef against Continental, by the way. dbaker claims to not dislike low-cost carriers per se and sites Southwest as a perfect example. Wouldn't be that dbaker and Southwest (and Continental for that matter) are all based in Tejas would it?
dbaker's motivation is quite transparent