According to media reports, Chicago, IL-based United Continental Holdings, Inc. (NYSE:UAL) has decided to cancel flights to Africa, starting July this year. Apparently, weak energy markets have been denting profits for the carrier, compelling it to consider the cancellation of its sole flight to Africa, connecting Houston and Lagos. Reports have stated that the last flight to the Nigerian city of Lagos will operate on Jun 30.
The route has been in operation for long but has not been able to rake in profits. In spite of this, the carrier maintained its services to the city, keeping the convenience of its Texas fliers in mind. Foreign-exchange related issues have also been a major undermining factor.
The persistent slump in oil prices has dealt a major blow to the Nigerian economy. Its foreign exchange reserves have been on the decline, prompting the country to put a cap on the amount that can be transferred overseas. In fact, the Nigerian economy owed approximately $575 million (in airfares) to carriers as of Mar 31, 2016, according to a Bloomberg report. The report also revealed FX reserves declining to as low as $26.5 billion leading to dollar repatriation being limited.
Given this gloomy background, it is of little surprise that United Continental has decided to discontinue its Nigerian service. With the daily flight being cancelled, passengers will now have to turn to United Continental‘s partner Deutsche Lufthansa (DE:LHAG) AG’s flights to travel to Nigeria via Frankfurt. After United Continental’s exit, Delta Air Lines (NYSE:DAL) will be the sole major U.S.-based carrier to offer services to Africa.
Zacks Rank & Stocks to Consider
United Continental currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include SkyWest, Inc. (NASDAQ:SKYW) and Air France-KLM SA (OTC:AFLYY) , both sporting a Zacks Rank #1 (Strong Buy).
DELTA AIR LINES (DAL): Free Stock Analysis Report
SKYWEST INC (SKYW): Free Stock Analysis Report
AIR FRANCE-ADR (AFLYY): Free Stock Analysis Report
UNITED CONT HLD (UAL): Free Stock Analysis Report
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