Continental's November Traffic Performance Shows Ominous Signs

(MoneyWatch)  For October, Continental announced a strong 9 to 10 percent increase in revenue per available seat mile (RASM) thanks to big capacity cuts, but it warned it had already seen weakness in future bookings and November RASM would likely only increase 4 to 6 percent. Now that November results have been released, even that downgraded forecast appears optimistic. Demand is diminishing quickly, and that's not good for anyone.

For November, Continental saw RASM increase a measly 1 to 2 percent. Some of this was due to load factor weakness. The airline's 77.3 percent load was 2.8 points less than last November. Load factors declined across the board though the best performance was in Latin America where there was only a 1 point decrease. Transatlantic flying saw the biggest decrease at 3.1 points.

This drop in load factor is more alarming considering how far down capacity has gone. Domestic ASMs were down more than 12 percent over last November while Pacific saw a similar decrease. Transatlantic capacity was up slightly, so that might explain the large load factor decrease there. It's also possible that Continental thought it could charge a lot more for the reduced capacity and failed in their efforts. December may give us a clearer picture on that.

On top of all this, Continental's average fuel price for November was still at $2.77 per gallon. That's a full dollar over where it should be selling on the spot market now, and it clearly means that the fourth quarter is not going to be a pretty one.