Continental: Business travel still falling

Continental Airlines Inc. said declining business travel is hurting a key measure of revenue, and that the drop-off has gotten worse since January.

The nation's fourth-largest airline said drops in yield, or the money it collects for flying each passenger one mile, have "become significant."

Earlier this month Continental said its February revenue per available seat mile fell as much as 12.5 percent from February 2008, after falling 4.8 percent in January.

Based on that estimate, UBS analyst Kevin Crissey estimated that Continental's revenue per available seat mile might fall more than 18 percent this month compared with March 2008.

He said a silver lining to the revenue decline was Continental's better-than-expected cost controls and lower-than-expected first-quarter fuel expenses.

The gloomy outlook from Continental issued late Tuesday contrasts with slightly more optimistic comments made by US Airways Group Inc. President Scott Kirby on Monday. He said drops in new booking revenue that US Airways saw in January and the first half of February had stopped, and even improved a little in March. However, he also added that Easter travel plans account for some of the improvement, and that the overall outlook remained murky.

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Airlines have been reducing capacity as demand has fallen, and Continental said it will reduce its first-quarter flying 7.3 percent, a bigger cut than the 6.9 percent it had predicted in January. The carrier left unchanged its prediction for a full-year reduction of 4 percent to 5 percent.

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Continental also said it expects its load factor — the percentage of seats filled — will fall 3 to 4 percentage points for the first quarter.

It said domestic bookings for the next six weeks are running 4 to 5 percentage points higher than the same period last year. However, airlines generally have been reducing fares to keep travelers flying, so revenue has been falling faster than the number of travelers.