Continental traffic fell 9 percent in May

HOUSTON - Continental Airlines Inc. said traffic dropped 9 percent in May and a key revenue measurement fell about 20 percent compared with a year earlier, a sharper drop than in April.

The airline also said late Monday that it took a $30 million hit from the swine flu outbreak, which caused it to cut capacity between Mexico and the United States by about half.

Still, Continental shares rose sharply Tuesday after the stock was upgraded by JPMorgan, which said the shares had become too cheap.

Houston-based Continental said paying passengers flew 9.31 billion miles in May, down from 10.20 billion miles in the same month last year. Continental's flagship mainline saw an 8.1 percent decrease while traffic on its regional subsidiaries, including Continental Connection and Continental Express, fell 16.2 percent.

Total capacity declined 8.8 percent to 9.31 billion available seat miles, compared with 10.20 billion miles a year earlier. Mainline capacity fell 8.1 percent; regional capacity declined 14.3 percent.

The average plane was 80.9 percent full in May, compared with 81.2 percent a year earlier.

Continental said unit revenue, the amount of revenue per available seat mile — a closely watched measurement of financial performance in the airline industry — fell 19.5 to 20.5 percent in May. Excluding regional operations, the decline was 19 to 20 percent, it said.

The May unit-revenue decline was worse than in April, and swine flu may have been partly to blame.

Continental is a major carrier on U.S.-Mexico routes, which were hit hard by the outbreak of swine flu in Mexico. The company estimated that the flu cut passenger revenue by $30 million in May.

While traffic was down from a year ago, Continental benefited from cheaper fuel. The airline said it paid $1.99 a gallon in May and expects to pay $2.07 a gallon for the entire second quarter, a savings of more than one-third from the same quarter last year.

JPMorgan analyst Jamie Baker upgraded Continental shares to "overweight" from "neutral" on Tuesday, saying they had fallen more than any other airline recently — down 33 percent since April 21. He called the drop "a classic overcorrection," and said the shares could rise in the near term.

Shares of Continental jumped $1.10, or 11 percent, to $11.15 on Tuesday.

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