Humidity also plays a part in this scenario. Although it is not a major factor in computing density altitude, high humidity has an effect on engine power. The high level of water vapor in the air reduces the amount of air available for combustion and results in an enriched mixture and reduced power

http://www.pilotfriend.com/training/...g/aft_perf.htm

Even today, many people believe that "saturated" air is holding as much water vapor as it can and that warm air holds more water vapor than cool air.
http://www.atmos.umd.edu/~stevenb/vapor/

More on why saying warm air 'holds' more water vapor is wrong:

You often hear that condensation begins as the air cools because "cold air can hold less water than warm air." This isn't true. The air does not hold water in the way a sponge holds water - some teachers have been known to use this analogy. Air does not "hold" water the way liquid water holds salt. Scientists have known this since the 19th century, which means anyone book or teacher who tries to tell you that "warm air can hold more water vapor than cold air" is not only wrong, but is also way, way behind the times.

http://usatoday30.usatoday.com/weath...n/wevapcon.htm

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