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Passengers Drop and Not Enough People Leaving the Airline: Inside United’s Historically Worst Quarter

FRANKFURT, GERMANY - JULY 17, 2014: United Airlines aircraft logo at an aircraft in Frankfurt. United Airlines is headquartered in Chicago, Illinois.

What contributed to United Airlines’ worst quarter in its 94-year history? The airline says passenger revenue was down 93 percent, aircraft were only one-third full, and 3,000 employees of an estimated 36,000 needed left the airline – leaving them in a financially depressed state.

The COVID-19 pandemic is ravaging airline finances, as carriers around the world struggle to stay afloat. For United Airlines, their historically-bad quarter came from a lack of passengers and too much space aboard aircraft. The Chicago-based airline revealed their numbers in an 8-K filing with the U.S. Securities and Exchange Commission.

Passengers Down 93 Percent, Load Factor Drops 53 Percent, and Payroll Drops by 3,000

In their reporting numbers, United revealed the airline only earned $681 million in passenger revenue during the second quarter of 2020. Over the same period in 2019, the airline earned $10 billion in passenger revenue. Compared year-over-year, the airline lost 93 percent of passenger revenue.

An excerpt from the United Airlines 8-K report. Image courtesy: United Airlines

Even with a 36 percent increase in cargo revenue, the quarter brought a total revenue drop of 87.1 percent at $1.475 billion. This meant the airline was flying aircraft with significantly less passengers during the height of the COVID-19 pandemic.

During the second quarter, the airline only carriers 2.8 million passengers – significantly less than the same time in 2019, when United flew over 42 million passengers. Consolidated passenger load decreased by 52.9 percent. Domestic aircraft held only one-third of their capacity, while international aircraft held one-quarter of their total passenger load availability.

According to United’s filing, passengers, available seat miles, and load factors were all down in 2020’s second quarter. Image courtesy: United Airlines

And while the airline is offering buyout and retirement packages to reduce their staff, it appears that not enough people have left. Compared to the same time period last year, United’s employee headcount has only decreased by 3,000 people. Earlier in July, the airline sent over 30,000 WARN notices to employees. As a result, United may be forced to make cuts once they are allowed to under the CARES act on Oct. 1, 2020.

Lack of Demand May Lead to Airfare Drop Until COVID-19 Vaccine Available

With the continued lack in demand, United executives say the reduced number of passengers will force airlines to cut airfare prices, while trimming internal expenses. While United was able to trim two-thirds of their normal operating expenses in the third quarter, carrier chief executive Scott Kirby doesn’t see sales numbers returning to 2019 levels until a COVID-19 vaccine becomes available.

“My guess is that pricing is going to go lower for the short-term,” Kirby said on CNBC program “Squawk Box.” “All of the normal pricing metrics…in this pandemic are a little bit irrelevant.”

While this may be good news for flyers, it will add additional stress to the aviation industry, airports, and other stakeholders. Both Moody’s Investor Services and the Minneapolis-St. Paul Metropolitan Aviation Authority both project the airline industry may not return to a sense of “normal” until 2022.

bayareascott July 23, 2020

UA isn't blaming anybody except the pandemic. That comment is ridiculous.

cscasi July 23, 2020

For all those who complain about the airlines (airfare drop does not suit them) and the ones blaming United for everything that has happened to it; just fly another airline. Times are hard right now and things are the way they are. Whining is not going to solve anything!

White Eagle July 23, 2020

The chickens (and vultures) are coming home to the UA roost. UA, as usual, blames: 1) PAX; 2) Employees; and 3) Bad luck, for its financial miseries & poor performance. In fact, UA will blame anything/anybody---except UA's own inept management and shoddy treatment of its PAX & personnel. As UNITED heads deeper into its own hole, it will be interesting to watch their antics and excuse-making.

Jackie_414 July 23, 2020

Airfare drop? Have you looked at United's fares from the west coast to Narita. Outrageous!