United Loses $2.6 Billion Over the Worst Quarter in Airline History

In what is described as “the most difficult financial quarter in its 94-year history,” United Airlines posted an adjusted loss of $2.6 billion in the three-month period between April and June 2020. The airline’s burn rate was an average of $40 million per day, directly due to the COVID-19 pandemic.

United Airlines experienced what they describe as the “most difficult financial quarter” in their 94-year history between April and June 2020, posting an adjusted net loss of $2.6 billion. The Chicago-based airline reported the major drop after the markets closed on Tuesday, July 21, 2020.

Losses and Debt-Rounds Directly Related to COVID-19 Pandemic

The losses were directly tied to the lack of customers grounded by the COVID-19 pandemic. The airline said total operating revenues were down by 87.1 percent year-over-year, with an 87.8 percent decrease in capacity year-over-year. Without passengers, the airline burned an average of $40 million per day, which included $3 million dedicated to just principal payments and severance expenses for employees voluntarily leaving the airline.

To compensate for the losses, United was forced to take on debt, along with federal government assistance to hang on. Dating to the beginning of the novel Coronavirus crisis, United has raised over $16 billion through multiple means, including loans and grants from the CARES Act, running a financing round based on their MileagePlus loyalty program, and other loan facilities.

During the quarter, the airline also used creative means to earn revenue. The airline lifted their cargo revenue by 36.3 percent by offering cargo-only flights to and from select international markets, while optimizing aircraft capacity with low passenger demand.

Goals Include Reducing Cash Burn, Improving Liquidity

Looking forward to the next three months, the airline’s goals are to reduce their average daily cash burn rate, and improve liquidity. By the end of 2020’s third quarter, the airline expects to have $18 billion in liquidity, while lowering the burn rate to $25 million per day. An estimated $6 million will go to principal repayments and severance expenses to employees who are dismissed from the airline.

The carrier is also claiming to be the best among their competition in “matching actual capacity to demand,” and says they are projected to end the quarter with the lowest cash burn among “large network carriers.” The airline is hopeful that capacity will only decrease 65 percent year-over-year in the next quarter, while proactively managing flights on a rolling 60-day basis based on demand.

“While this unprecedented crisis has been difficult for our team, we expect United produced fewer losses and lower cash burn in the second quarter than any of our large network competitors,” United CEO Scott Kirby said in a press release. “We accomplished this by quickly and accurately forecasting the impact that COVID would have on passenger and cargo demand, accurately matching our schedule to that reduced demand, completing the largest debt financing deal in aviation history, and cutting expenses across our business.”

The airline will share more details on their quarterly performance on a call on Wednesday, July 22, 2020. American Airlines and Southwest Airlines will release their 2020 second quarter numbers on Thursday, July 23, 2020.