United Airlines To Redefine Business Travel With New Service

United Airlines, the subsidiary of United Continental Holdings, Inc. (NYSE:UAL) recently announced its new business traveler focused service, United Polaris. The airline aims to redefine the intercontinental travel experience with this service, which will be available from Dec 1 on Boeing (NYSE:BA) 777-300ER aircraft. The service will also be subsequently provided on Boeing 787-10, Airbus A350-1000 aircraft as well as Boeing 767-300 and 777-200 retrofits.

United Polaris has been designed to making flying more comfortable with its sleep-enhancing interiors. United Polaris, will have “exclusive-to-United” seats designed in partnership with Acumen Design Associates and PriestmanGoode. These specially designed seats will be manufactured by Zodiac Seats UK. Each seat will feature a 180-degree flat bed recline, with up to six foot six inch bed space and direct access to the aisle.

Sleep-focused & Luxury Add-on Services

Apart from the custom-made seats, United Airlines has collaborated with other luxury product providers to enhance the traveling experience for its customers. Saks Fifth Avenue will provide personalized upholstery,, while Soho House & Co.’s Cowshed Spa will supply special amenity kits. Customers will also enjoy pre-departure delicacies, an upgraded wine experience, and regionally influenced in-flight menus. The menu has been developed in partnership with The Trotter Project and its acclaimed chefs including Bill Kim of Urbanbelly.

United Airlines will also introduce an exclusive line of United Polaris business class lounges across nine locations globally. Being the first and only U.S. carrier to provide such lounges at present, this United Continental affiliate expects to offer a luxurious pre-boarding experience to its customers. Some features of the lounge include private daybeds, boutique restaurant settings, spa-like showers and custom designed chairs. The first lounge will open on Dec 1 at Chicago O’Hare International Airport, while the remaining eight are expected to become operational in 2017.

The renewed customer focus of United Airlines is expected to result in higher business travel market share. Product innovation is a key to maintaining competitiveness in the airline industry as evident from the initiatives undertaken by several major airlines such as Emirates Airline, Etihad Airways and Singapore Airlines to name a few.

May Traffic Declines as Capacity Rises

United Airlines posted a 1.2% decrease in revenue passenger miles or RPMs (a measure of air traffic) for May 2016, while consolidated capacity (measured in average seat miles or ASMs) inched up 0.5%. Domestic traffic climbed 1.6% whereas international traffic dipped 3.3%. Another important metric, load factor (percentage of seats filled by passengers) declined 140 basis points on a year-over-year basis in May to 82.5%. Traffic contraction despite an increase in capacity resulted in the downside. The company registered a completion factor of 98.9%, with 68.4% of its flights on schedule in May. Onboard passengers for May 2016 increased 0.4%

At the end of the first five months of 2016, United Continental recorded RPMs of 80.98 billion (down 0.5% year over year) and ASMs of 100.46 billion (up 0.9% year over year).

Performance Outlook

The Chicago-based carrier still expects consolidated passenger revenue per available seat mile or PRASM (a measure of unit revenue) to decline in the range of 6.5% to 8.5% in the second quarter. The strong U.S. dollar, lower fuel surcharges, reduced travel demand were some of the factors behind the declining PRASM. Most airlines have been benefiting from low fuel prices but slow economic recovery continues to hamper revenues. Moreover, the company expects average fuel cost per gallon (including all cash-settled hedges) in the range of $1.45–$1.50 per gallon (earlier range was $1.39–$1.44 per gallon).

United Continental has been struggling with a host of issues corporate issues with changes in top management and employee protests. It is expected that the company might finally sign a new contract with over 24,000 flight attendants soon with talks being extended to the week of Jun 20. With the launch of United Polaris and the aim to win back customers with a better flying experience, it remains to be seen if United Continental’s efforts start paying off.

Zacks Rank and Stocks to Consider

United Continental currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Air France – KLM SA (OTC:AFLYY) and SkyWest Inc. (NASDAQ:SKYW) with a Zacks Rank #1 (Strong Buy) and International Consolidated Airlines Group (LON:ICAG), S.A. (OTC:ICAGY) with a Zacks Rank #2 (Buy).