United Airlines sees weak demand until coronavirus vaccine found

Prolonged travel downturn could lead to more job losses as US government stimulus measures expire in the autumn.

United Airlines, which is more exposed than its peers to harder-hit international travel, reported an adjusted net loss of $2.6bn for the June quarter [File: Chris Helgren/Reuters]
United Airlines, which is more exposed than its peers to harder-hit international travel, reported an adjusted net loss of $2.6bn for the June quarter [File: Chris Helgren/Reuters]

United Airlines Holdings Inc has warned that travel demand will remain suppressed until there is a widely accepted treatment or vaccine against the coronavirus, which plunged the carrier into a deep quarterly loss.

Coronavirus infections are surging in the United States, causing some regions to scale back reopening plans and reinstate quarantines in a fresh blow to airlines.

United, which is not blocking middle seats, plans to fly about 35 percent of its 2019 summer schedule in the third quarter and is expecting its planes to be about 45 percent full in July. They were about one-third full in the second quarter.

The setback does not bode well for airline jobs in the autumn, when a US government stimulus package expires. To avoid furloughs, airlines have rolled out a number of packages to encourage employees to leave voluntarily.

Chicago-based United said on Tuesday that more than 6,000 employees had opted for such packages. But after sending out 36,000 notices of potential furloughs earlier this month, that relatively low take-up suggests United might have to sideline a significant number of workers.

US airline unions have urged policymakers to pass another round of aid through March, but the carriers say they are not counting on fresh funds.

Delta Air Lines and Southwest Airlines, which offered cash buyouts, have reported strong employee response for voluntary departures, meaning they could have a less costly workforce on the other side of the crisis since union contracts force airlines to furlough junior workers first.

While early data from trials of three potential COVID-19 vaccines released on Monday was encouraging, it is still far from clear whether the efforts will result in a vaccine capable of ending the global pandemic that has claimed more than 600,000 lives globally.

Cash burn

With the timing of a recovery uncertain, investor focus has turned to airlines’ cash on hand and their ability to capitalise on demand once it returns.

United had $15.2bn in liquidity as of July 20 and reiterated its forecast for liquidity to exceed $18bn at the end of September as it taps additional capital.

The airline burned through about $40m per day in the second quarter but sees that amount slowing to roughly $25m in the third quarter as it matches its flight schedule to demand.

United, which is more exposed than its peers to harder-hit international travel, reported an adjusted net loss of $2.6bn for the June quarter, or a $9.31 per-share loss, versus a $4.21 per-share profit a year ago, as revenue dropped 87 percent to $1.475bn.

Analysts on average expected a loss of $9.02 per share and revenue of $1.321bn, according to data from Refinitiv.

Still, United chief executive Scott Kirby said in a statement that he believed the quarterly losses and cash burn were lower than large network competitors.

Delta said last week that it was burning about $27m per day in June and July. American Airlines and Southwest report on Thursday.

Source : Reuters

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