Continental's closely watched traffic

Continental's traffic figures are always closely examined as the carrier posts unit revenue performance for the month. The airline is also ususally among the first to release traffic data, and industry analysts today have already supplied their assessment of the carrier's performance in November.

FTN Equity Capital analyst Michael Derchin predicts a consolidated revenue per available seat mile (RASM) at Continental fell 6% last month, while JP Morgan analyst Jamie Baker estimates a consolidated unit revenue drop of 7.5%.

While those numbers are far from pleasing they are a marked improvement from consolidated RASM decreases of 14-15% in October and a 19.2% slide in September.

The sequential 7.4% improvement in US mainline carrier revenue from September to October was encouraging to Baker, who sees it as clear evidence a recovery is under way. He explains you'd have to return to prior recovery periods to see a similar level of improvement, such as the 2003 post-war start of 8.6% or the post-SARS 9.8% improvement the follow year.

That improvement should carry over into next year as JP Morgan expects mainline revenue to grow 8.5% following a 19.5% drop this year as total revenue should rise 7.5% compared with a 17% plummet this year.

So what's driving this? Baker says JP Morgan gets constantly challenged by investors, which is welcome, about the company's confidence in a recovery. "The answer is simple," he says. "If one assumes typical 2005-2008 'monthality' from here, 2010 mainline revenue should naturally translate into a 5% to 7% 'improvement (versus our +8.5%) simply by lapping the breakdown in sequential trends witnessed during the first half of 2009."