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United Drops $2.1 Billion in First Quarter 2020

United Airlines Dreamliner

We now know how much money United Airlines is losing due to the lack of passengers from the novel Coronavirus outbreak: $2.1 billion. In a filing with the U.S. Securities and Exchange Commission, the Chicago-based carrier announced a non-adjusted pre-tax loss in the first quarter of 2020 at $2.1 billion and an adjusted pre-tax loss of $1 billion.

Severe drop due to COVID-19

In their filing, United admitted that much of the problems were due to COVID-19. As a result, the airline is re-evaluating their schedule on a 60-day rolling basis and making adjustments as needed. United anticipates cutting nearly their entire capacity through June 2020.

“As previously disclosed, the Company has experienced, and continues to experience, a material decline in demand for both international and domestic travel resulting from the spread of coronavirus (“COVID-19”),” the airline writes in their 8-K filing. “The Company has cut approximately 80% of its capacity for April 2020 and currently expects to cut 90% of its capacity for May 2020, with similar cuts expected for June 2020.”

Some of the biggest contributors to that $2.1 billion loss include $63 million of “special charges,” specifically $50 million “impairment” tied to flights to China. The airline also expects to take a $697 million credit loss for a loan tied to Avianca through the airline’s majority shareholder, BRW Aviation. The loan is currently in default.

However, it doesn’t mean that United is out of cash. According to the filing, the airline holds over $6 billion in “cash, cash equivalents, short term investments and undrawn amounts,” including a $2 billion credit facility as of Apr. 16, 2020. The airline also made an agreement with the U.S. Treasury to get up to $5 billion in support under the CARES act.

CARES Act loan results in U.S. government equity stake

Although United expects to get $5 billion to support airline payroll, the loan will come with some terms. Of the money, $3.5 billion is expected to be in the form of direct grants, while $1.5 billion would come out of a promissory note repayable over 10 years.

The payouts to United will come at an exchange of airline stock. If United borrows an additional $4.5 billion from the U.S. Treasury outside of the $5 billion support package, the carrier will issue the government a warrant to purchase airline common stock. The full $4.5 billion would give the Treasury the option to purchase up to 14.2 million shares of United stock.

7 Comments
E

“huge strides” indeed - like beating their passengers and then sending an email from CEO to employees, saying "well done, continue"

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Intl359Widget May 1, 2020

Delta continues to outperform their peer legacy carriers (AA - 2.2b, UA -2.1b, and DL -600m).

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mrcimino1 April 21, 2020

So much for the "Friendly Skies"! United has been the least consumer-friendly USA carrier since the day they merged with Continental 10 years ago, and they continue this "consumer be damned" approach even today with their recent surreptitious change in their refund policy to make it extremely difficult for travelers to get a refund of their non-refundable ticket after United has cancelled their flight.

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BC Shelby April 21, 2020

..if they would have banked up the savings s from that 2017 tax corporate break instead of using it for stock buybacks as so many corporations did, they likely would be able to sustain themselves through this crisis without further government assistance. That goes for American and Delta as well.

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Jackie_414 April 21, 2020

Hay, Bagwell, do you mean "huge strides" as in destroying the Mileage Plus program, eroding the value of miles earned, and ramping up airfares into the stratosphere?