As ardent followers of the airline stock sector are aware, every month Continental Airlines leads the other airlines in reporting their traffic numbers for the previous month. But the other information the airline issues, along with its traffic numbers, is usually of more interest to us hard core airline fans.

That information, of course, is the RASM estimate the airline issues along with the traffic numbers.

For those of you who are new to this piece of the world, RASM stands for revenue per available seat mile and it is the most widely used “rule of thumb” measure of an airline’s revenue performance.

Last night Continental Airlines reported that it now expects mainline domestic revenue per available seat mile for November 2008 to grow only 4 percent to 6 percent, down significantly from previous expectations for growth in the “low-to-mid teens.”

Not surprisingly, the airline said that this was a result of lower yields. Translation: Lower ticket prices.

This news comes after most airlines over the last month insisted during their earnings call presentations that they were not seeing significant drops in demand.

We have a bit of what we might call an “inconjunct” here.

Jamie Baker, analyst with JP Morgan wrote this morning that while the news was not a complete surprise — it was still enough to push him to sharply reduce his fourth quarter forecast for the airline.

Baker now expects the company to report a loss of $0.56 per share, compared with prior expectations for profit of $0.40.

As Baker said in his note, it wasn’t a question of if — just a question of when the economic meltdown would catch up with airline demand. He expected the industry might have at least a month or so before the full effect hit.

The other problem today? Oil prices.

And here it gets a bit more complicated.

Is the price of oil rising because of a supply and demand issue?

No.

The reason the price of oil is up today is because the dollar is falling.

Remember that oil is priced in dollars. As a result, investors see commodities such as oil as a hedge against inflation and a weak dollar and pour money into the crude futures market when the greenback falls.

A weak dollar also makes oil less expensive to buyers dealing in other currencies.

There you go. There’s your commodity pricing/falling dollar lesson for the day. Unfortunately the end result — higher oil prices — then affects this sector negatively.

As of this posting oil has soared more than $7 today, and is now trading around $71.50.