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UA Announces Q1 2020 Financial Results 30 April / Conference Call 01 May

UA Announces Q1 2020 Financial Results 30 April / Conference Call 01 May

Old Apr 29, 20, 9:30 pm
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UA Announces Q1 2020 Financial Results 30 April / Conference Call 01 May

United Airlines Announces First Quarter 2020 Financial Results
Company takes U.S. airline industry-leading steps to mitigate impacts of COVID-19

CHICAGO, April 30, 2020United Airlines (UAL) today announced first quarter 2020 financial results with a net loss of $1.7 billion, and an adjusted net lossĻ of $639 million. The company also outlined U.S. airline industry-leading efforts to manage through the most disruptive global crisis in the history of aviation. The company's total liquidity as of the close of business on Wednesday, April 29, 2020 was approximately $9.6 billion, including $2 billion under its undrawn revolving credit facility. The company currently expects daily cash burn≤ to average between $40 million and $45 million during the second quarter of 2020.

"Throughout the COVID-19 crisis we have maintained our focus - first on the safety of our customers and our people and second on swiftly taking action to keep United operating. We have been at the forefront of warning how deep of an impact we expect this crisis could have and how long we expect it could last. We've also led the industry in taking decisive steps to mitigate the operational and financial impacts of COVID-19 -- making deep schedule reductions, drastically reducing spending and aggressively raising liquidity," said Chief Executive Officer, Oscar Munoz. "While we are still in the midst of this crisis, we will not hesitate to make difficult decisions we believe will ensure the long term success of our company. When demand returns, we believe we'll be positioned to bounce back strongly and quickly because of our early and aggressive efforts to fight the worst financial crisis in aviation history."

COVID-19 Actions

The company took early and aggressive action intended to mitigate the impact of COVID-19 to position the company to bounce back quickly and make United stronger when demand returns.
  • First U.S. airline to make aggressive capacity reductions.
  • Suspended share repurchase program on Feb. 24, 2020, after spread of COVID-19 to Italy and terminated the program on April 24, 2020.
  • First U.S. airline to actively raise additional liquidity to manage the crisis. Since early March, the company raised $4.0 billion of new liquidity in three secured term loan facilities, new aircraft financings and an equity offering (excludes CARES Act Payroll Support Program funding and any Loan Program loans) as of the close of business April 29, 2020.
  • The company entered into an agreement with a subsidiary of BOC Aviation Limited for lease financing of six Boeing 787-9 and 16 Boeing 737 MAX 9 aircraft that are currently subject to purchase agreements between United and The Boeing Company and are scheduled to deliver in 2020, including two Boeing 787-9 aircraft that were delivered in April.
  • First U.S. airline to announce chief executive officer and president forgoing 100% of respective base salaries.
  • First U.S. airline to announce all other officers of the company will take salary reductions, with every officer base salary reduced by 50%.
  • Suspended merit salary increases for management and administrative employees and instituted a hiring freeze.
  • Offered voluntary unpaid leaves of absence for U.S.-based employees -- with more than 20,000 employees now participating.
  • Non-employee directors of the company waived 100% of cash compensation for the second and third quarters of 2020.
  • First major U.S. airline to require all flight attendants to wear masks on duty.
  • Postponed projects deemed non-critical to operation.
  • Slashed spending on vendors and outside contractors.
  • Reduced planned full-year adjusted capital expenditures by approximately $2.5 billion, bringing expected full-year adjusted capital expenditures to below $4.5 billion.3
  • Plan to only take delivery of aircraft that have financing in place.
Government Support
  • United has entered into an agreement to receive approximately $5.0 billion from the U.S. Treasury Department through the Payroll Support Program under the CARES Act in the form of a $3.5 billion grant and a $1.5 billion 10-year loan which will be used to protect the salaries and benefits of employees through Sept. 30, 2020. In connection with this funding, UAL will issue warrants to purchase approximately 4.6 million shares of UAL common stock to the federal government. The first installment of approximately $2.5 billion was received by United on April 21, 2020 and warrants to purchase approximately 2.3 million shares of UAL common stock were issued.
  • The company submitted an application to the Loan Program under the CARES Act. Under the Loan Program, the company expects to have the ability through Sept. 30, 2020 to borrow up to approximately $4.5 billion from the U.S. Treasury Department for a term of up to five years, with any loans issued expected to be senior secured obligations of the company. If the company borrows any amounts under the Loan Program, UAL expects to issue to the U.S. Treasury Department warrants to purchase shares of UAL common stock, with the number of warrants dependent on total borrowings.
First Quarter Results
  • Reported first quarter net loss of $1.7 billion, diluted loss per share of $6.86, and pre-tax loss of $2.1 billion.
  • Reported first quarter adjusted net loss of $639 million, adjusted diluted loss per share of $2.57, and adjusted pre-tax loss of $1.0 billion.Ļ
Additional COVID-19 Actions

Employees
  • Committed to no involuntary furloughs or reduced pay rates in the U.S. through Sept. 30, 2020.
  • Diligently enacting safety and social distancing measures designed to mitigate the spread of COVID-19 and ensure the workplace is clean and safe.
  • Utilizing temperature checks for airport employees and Flight Attendants prior to beginning work.
  • Simplified catering on flights to all shelf-stable and packaged food, and sealed and canned beverages; suspended buy on board.
  • Adjusted flight attendant jump seat locations so crew members don't have to sit directly next to or across from each other.
  • Granting additional paid days off for front line employees at several airports to limit their potential exposure to COVID-19.
  • Covering all testing costs associated with COVID-19 for anyone enrolled in a United medical plan, reduced copays for telemedicine visits.
Customers
  • Waiving change fees for tickets purchased through May 31, 2020 for twelve months and waiving redeposit fees for MileagePlus award travel scheduled through May 31, 2020.
  • Extended MileagePlus Premier status to 2022.
  • Utilizing electrostatic spraying to disinfect aircraft interiors, and expect to spray every operated flight by mid-June.
  • In May, start testing touchless kiosks for printing bag tags and checking bags, eliminating the need to touch the screen.
  • Made several modifications to the boarding process, including: customers scanning their own tickets prior to boarding, boarding fewer customers at a time and boarding from back to front.
  • Continue to provide the only commercial air service between Australia and the United States and Israel and the United States.
  • Enacting social distancing on flights for flight attendants and customers, including blocking middle seats.
Community
  • Since March 19, United Cargo has operated more than 800 cargo-only flights worldwide, bringing more than 28 million pounds of food and supplies to destinations worldwide.
  • Operated more than 130 repatriation flights bringing more than 18,500 Americans home who were stranded abroad.
  • Donated more than 173,327 pounds of food to food banks, hospitals and other organizations from United's catering facilities and Polaris lounges.
  • In 2019, launched Miles on a Mission, which allows members to donate miles to organizations including those that now support COVID-19 efforts.
  • Working with governments worldwide to assist moving people/supplies.
  • Partnered with California, New Jersey and New York City to provide free round-trip flights for medical volunteers traveling to heavily impacted cities, and to date have booked flights for more than 1,000 volunteers and 800 medical professionals.
  • Houston employees led effort to convert Houston cargo facility into food distribution center to aid the Houston Food Bank's efforts to feed families in need during the COVID-19 crisis.
Earnings Call

UAL will hold a conference call to discuss first-quarter 2020 financial results as well as its financial and operational outlook for second quarter and full year 2020, on Friday, May 1, at 9:00 a.m. CT/10:00 a.m. ET. A live, listen-only webcast of the conference call will be available at ir.united.com.

The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.
Links
Q1 results (8K) PDF
Q1 call presentation {no powerpoints used? audio only, see webcast}
Q1 call transcript link -- audio behind paywall, use the webcast link instead
Q1 webcast recording link requires registration

United Investor Update 30 April 2020 – Second Quarter {none posted so far}
Q1 10K

Past results
UA Q4/Full Year 2019 Results/Conference Call 22 Jan 2020
UA Announces Q1 2019 Financial Results 16 April / Conference Call 17 April

Last edited by WineCountryUA; May 4, 20 at 5:20 pm
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Old Apr 30, 20, 2:42 pm
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United Airlines to Hold Webcast of First-Quarter 2020 Financial Results

April 24, 2020
CHICAGO, April 24, 2020 /PRNewswire/ -- United Airlines will hold a conference call to discuss first-quarter 2020 financial results on Friday, May 1, at 9:00 a.m. CT/10:00 a.m. ET. A live, listen-only webcast of the conference call will be available at ir.united.com. The company will issue its first-quarter and second-quarter investor update after market close on Thursday, April 30.

The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.

Last edited by WineCountryUA; Apr 30, 20 at 2:53 pm
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Old Apr 30, 20, 3:17 pm
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At $45 million per day, UA has 213 days of liquidity, not counting the government support (November 29). Adding in the other half of the initial paycheck protection grant, that goes to 269 days of liquidity (January 24). And if they max out the $4.5 billion in additional loans, they're up to 369 days of liquidity (May 4, 2021). However, some of their loans require that they have $2BB in liquidity, so if you adjust for that, and assume that they would tap the US Treasury loans before turning to Chapter 11, you get 324 days (March 20, 2021).

That's admittedly better than I expected. They must have gotten a really good deal on the planes they sold.
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Old Apr 30, 20, 3:22 pm
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That’s going to be a painful call to deliver, and listen to. My UAL holdings are not looking so hot at the moment.
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Old Apr 30, 20, 3:41 pm
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Originally Posted by LondonElite View Post
..My UAL holdings are not looking so hot at the moment.
Presently back to where UA was before announcing the stock offering, slight bump in today's aftermarket. The extra $1B is looking pretty good at the moment,
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Old Apr 30, 20, 4:52 pm
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Originally Posted by jsloan View Post
At $45 million per day, UA has 213 days of liquidity, not counting the government support (November 29). Adding in the other half of the initial paycheck protection grant, that goes to 269 days of liquidity (January 24). And if they max out the $4.5 billion in additional loans, they're up to 369 days of liquidity (May 4, 2021). However, some of their loans require that they have $2BB in liquidity, so if you adjust for that, and assume that they would tap the US Treasury loans before turning to Chapter 11, you get 324 days (March 20, 2021).
Looks like Wall Street disagrees with the above assessment given the stock did fine in after-market trading. Today's announcement was rock solid. It looks like they've set themselves up to not even need the 2nd government loan that is available to them. Well done by Kirby & Team!
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Old Apr 30, 20, 5:10 pm
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Originally Posted by spartacusmcfly View Post
Looks like Wall Street disagrees with the above assessment
That's... not possible. All I did was divide the amount of liquidity they claimed to have by the burn rate they claimed to have. There's nothing to disagree with; it's just math. I'm not saying that those burn rates will persist indefinitely.
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Old Apr 30, 20, 5:17 pm
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Originally Posted by spartacusmcfly View Post
Looks like Wall Street disagrees with the above assessment given the stock did fine in after-market trading. Today's announcement was rock solid. It looks like they've set themselves up to not even need the 2nd government loan that is available to them. Well done by Kirby & Team!
Notable is that UA expects to be burning cash at a rate of $40 to 45m per day throughout the quarter, which compares favorably to Delta ($50m/day target by May) and American (>$70m/day currently, expected to get to $50m by June). It's more in line with Southwest, which is reporting $30-35m/day cash burn. UA and DL each plan to end the quarter with around $10b in liquidity, while American will be at around $11b. The market reacted favorably to the disclosure that United isn't lighting cash on fire quite as efficiently as its peers... but it's close. United's international exposure still represents a lot of risk as we move forward, at least as compared to AA/DL/WN. That is priced into United's valuation right now, which is more aligned with AA, despite a healthier balance sheet and better cash burn rate, than DL/WN.

Cash is the name of the game right now and it's critically important that UA try to burn less of it as we hopefully are beginning the slow crawl up from the bottom.
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Old Apr 30, 20, 5:28 pm
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Originally Posted by LondonElite View Post
Thatís going to be a painful call to deliver, and listen to. My UAL holdings are not looking so hot at the moment.
On the contrary, you're looking good. Takeaways fall into two buckets: 'facts' and 'implied':

Facts:
1. The shareholder dilution looks to be ~15%. Warrants to the government and the recent $1B they raised. That's it! Not bad given demand basically evaporated for their services.
2. Looks like they've factored in the MAX progress and delivery payments into their operating assumptions this year. That's a big part of their ~$2.5B in CAPEX.
3. Any new birds they take delivery of will be financed (and not purchased). That explains why they sold 16 MAXs to the Chinese.
4. Burn from operations, when only counting 'needed' employees, is ~$15M/day (very healthy)
5. Cash position is very strong (between $9.5B and $14B depending on whether they take the 2nd govt loan)

Implications:
6. The implication of #2 is a lot of inefficient birds will be retired.
7. Oscar will not extend his term as CEO. (Would have been a required disclosure if he was extending)
8. Oscar has now publically implied three times, and with conviction every time, that all employees not involved in profitable/necessary operations will be furloughed or laid-off on Oct. 1.

I don't know how many employees are needed to run the skeleton operation they're running today. My guess is it's 10,000 of the 100,000 employees. That means 90,000 could be furloughed on Oct 1. The only silver lining is UA's cash position is so strong, the employees will likely be furloughed vs laid-off. That's a big deal as furloughed employees retain health benefits. I feel for the employee base and hope the recovery is swift!

Originally Posted by EWR764 View Post
Notable is that UA expects to be burning cash at a rate of $40 to 45m per day throughout the quarter...
Careful with this number. It excludes the $30M/day the government is paying UA to pay employees that aren't working.

So United's true operating burn is more like $10-$15M/day.

Last edited by WineCountryUA; Apr 30, 20 at 8:24 pm Reason: merged consecutive posts by same member
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Old Apr 30, 20, 6:02 pm
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Originally Posted by spartacusmcfly View Post
I don't know how many employees are needed to run the skeleton operation they're running today. My guess is it's 10,000 of the 100,000 employees. That means 90,000 could be furloughed on Oct 1. The only silver lining is UA's cash position is so strong, the employees will likely be furloughed vs laid-off. That's a big deal as furloughed employees retain health benefits. I feel for the employee base and hope the recovery is swift!
90k employees on furlough is a DRAMATIC overstatement from what will actually happen in October. That suggests the current demand environment will deteriorate, and from that level, persist into 4Q and beyond. It goes without saying, that would be beyond apocalyptic for the industry, and we would be seeing multiple carriers fail. Chapter 11 filings in FY2020 would be essential across the board. I don't think anyone is that pessimistic about a recovery, even a slow one.

Even a 50% smaller mainline United would require about 10,000 flight attendants to properly staff. The general consensus is that US carriers will be around 20-30% smaller at the end of 2020 than they were in 2019. Assuming the company uses the next few months to aggressively push early-outs, buyouts, more VLOAs plus normal attrition, management restructuring, etc., and a conservative recovery profile, I think it's fair to anticipate involuntary furloughs in the 10-15% range, give or take. Still devastating, but nowhere near 90k... which would suggest an entity that is headed toward an imminent liquidation.

Originally Posted by spartacusmcfly View Post
Careful with this number. It excludes the $30M/day the government is paying UA to pay employees that aren't working.

So United's true operating burn is more like $10-$15M/day.
Are you sure about that? If UA's non-payroll-protected cash burn was only $10-15m/day (i.e., $10-15m on top of government grant) I think that would be pretty good news.​​​​ Notwithstanding the 20k employees who took various leaves of absence/buyouts, UA has indicated that the government grant does not cover 100% of its current payroll expense.
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Old Apr 30, 20, 6:49 pm
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Originally Posted by EWR764 View Post
90k employees on furlough is a DRAMATIC overstatement from what will actually happen in October...
That's why I asked the question. I don't know how many employees it takes to run an airline with a minimal route structure. The big variable is how many point-to-point non stops UA brings back by Oct 1. Take one of their most popular routes EWR-SFO. They fly that 12-14x a day. Will it even be flying Oct 1? If so how many times? Maybe 1-2 per day... Barring a cure/vaccine, I think the staff reductions are significant.

Originally Posted by EWR764 View Post
Are you sure about that? If UA's non-payroll-protected cash burn was only $10-15m/day (i.e., $10-15m on top of government grant) I think that would be pretty good news.​​​​
Yes, sure. $5B/165 days is $30M/day. Yes, it is good news.

Originally Posted by EWR764 View Post
Notwithstanding the 20k employees who took various leaves of absence/buyouts, UA has indicated that the government grant does not cover 100% of its current payroll expense...​​​
Correct, but it doesn't need to. It just needs to cover a large portion of it, which it does. The rest is covered by the loan (remember the govt aid is $3.5B grant + $1.5B loan). Additionally, because the money is solely going to employees, UA can loudly say the company got no benefit from the grant -- it was simply a pass-through to the employees. This is also why I don't think UA will ever draw down the 2nd loan from the govt. Notice what Boeing did today -- issued a $25B bond and publicly and loudly said, we don't need any govt help!
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Old Apr 30, 20, 7:46 pm
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Originally Posted by spartacusmcfly View Post
That's why I asked the question. I don't know how many employees it takes to run an airline with a minimal route structure.
It doesn't really matter how many employees it takes to run an airline with a minimal route structure, because UA isn't that airline -- or, at least it hasn't wanted to be in the past. Their stance has been that people fly UA for the network. The more flights you remove the network, the more you push people to your competition, And it truly is a network effect -- keep in mind what Kirby said when he was looking at the decision to pull out of JFK: they didn't realize how much business they'd lose on other routes because they dropped LAX-JFK and SFO-JFK.

If you look at Kirby's strategy pre-COVID, that's what they've been doing for the past three years: growing the network aggressively.

If they turn around and start trying to compete on something else, other than the network, they're in serious trouble both domestically and internationally. Domestically, AA has a newer fleet and worse service; DL has a comparably-aged fleet and better service. Internationally, among the full-service airlines, they hold up well next to AI and maybe LY and AC, but they're not offering a better product than SQ, CX, NH, EK, QR, LX... they're tied at best with QF, KL, AF, LH.. there are a ton I'm leaving out.

Their differentiator was MileagePlus, which they've constantly gutted for the past several years. They want high-margin travelers, but without the network, what are they offering them?

Originally Posted by spartacusmcfly View Post
Take one of their most popular routes EWR-SFO. They fly that 12-14x a day. Will it even be flying Oct 1? If so how many times? Maybe 1-2 per day... Barring a cure/vaccine, I think the staff reductions are significant.
If UA is flying EWR-SFO 2x per day on October 1, there is no way they'll avoid Chapter 11, and Chapter 7 is a distinct possibility. There's a reason that they were running it 12x per day -- it's one of those routes that if they're not flying it, their passengers will find somebody who does -- and then take that airline the rest of their business too.
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Old Apr 30, 20, 7:56 pm
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Originally Posted by spartacusmcfly View Post
That's why I asked the question. I don't know how many employees it takes to run an airline with a minimal route structure. The big variable is how many point-to-point non stops UA brings back by Oct 1. Take one of their most popular routes EWR-SFO. They fly that 12-14x a day. Will it even be flying Oct 1? If so how many times? Maybe 1-2 per day... Barring a cure/vaccine, I think the staff reductions are significant.
Significant, but not to 90% of staff.

Yes, sure. $5B/165 days is $30M/day. Yes, it is good news.
There's one question I've never seen an answer to. What is the effect of voluntary LOAs on the payroll protection grant? Does UA only receive the funds to support employees remaining on the payroll? Delta had significantly more employees (I think 30-40k) take leaves... even if the CARES Act does not cover the full payroll, such a significant percentage of non-earning employees on the rolls should more than make up for the shortfall?
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Old Apr 30, 20, 8:11 pm
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Originally Posted by EWR764 View Post
There's one question I've never seen an answer to. What is the effect of voluntary LOAs on the payroll protection grant? Does UA only receive the funds to support employees remaining on the payroll? Delta had significantly more employees (I think 30-40k) take leaves... even if the CARES Act does not cover the full payroll, such a significant percentage of non-earning employees on the rolls should more than make up for the shortfall?
I never understood why so many UA and Delta employees took voluntary furloughs. Why would you furlough yourself if the government was willing to pay your salary? Maybe an airline employee can explain to us how it works.
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Old Apr 30, 20, 10:14 pm
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Originally Posted by spartacusmcfly View Post
I never understood why so many UA and Delta employees took voluntary furloughs. Why would you furlough yourself if the government was willing to pay your salary? Maybe an airline employee can explain to us how it works.
For clarification, pilots are not voluntarily furloughing ourselves but rather opting for a leave of absence.

I took one for myself, if possible Iíd like to remain out through the remainder of the year. I have another business that has developed nicely requiring me to devote more time to it.

With all the international flying gone, I was bumped back on reserve. Not having a definitive schedule and being on call just doesnít work for me at this time. At my seniority, reserve is a sizable pay cut and it didnít make financial sense for me to stick around even with the government pay protections.
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