United Airlines “Only” Lost $1.6 Billion Last Quarter

Filed Under: United

Airlines are in the process of reporting their second quarter results, which are expected to be rough across the board, given the extent to which travel demand fell. Well, United Airlines has just reported its second quarter results, and… they’re not that bad?

United Airlines reports $1.6 billion net loss

United Airlines has announced its second quarter results — it describes this as the most difficult quarter in the company’s 94-year history:

  • United Airlines reported a net loss of $1.6 billion, and an adjusted net loss of $2.6 billion
  • Operating revenue was down 87.1% year-over-year, on an 87.8% decrease in capacity
  • Operating costs were down 69% year-over-year, or 54% excluding special charges
  • The company currently has $15.2 billion in liquidity, and expects liquidity at the end of the third quarter to be $18 billion
  • Cash burn in the second quarter averaged $40 million per day, including $3 million of principal payments and severance expenses
  • United anticipates daily cash burn in the third quarter to be around $25 million, including $6 million of principal repayments and severance expenses

As a point of comparison, in the first quarter United Airlines reported a net loss of $1.7 billion, and an adjusted net loss of $630 million. The second quarter was significantly more challenging for airlines than the first quarter, as US travel demand really only started to drop off towards the second half of March.

United Airlines outperformed Delta in the second quarter

United’s performance is actually quite good

Last week Delta Air Lines reported its results for the second quarter, and the company had a $7.0 billion net loss, and an adjusted net loss of $3.9 billion. Ordinarily Delta outperforms its peers, but in this case United reported a significantly smaller loss.

United claims to have done the best job of the major US network airlines of matching actual capacity to demand, and it expects to finish the quarter with the lowest average daily cash burn among large network carriers.

United Airlines CEO Scott Kirby had the following to say:

“I am grateful for the professionalism and dedication of our United team members who persevered through an historic and challenging period to deliver for our customers. 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. 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. We believe this quick and aggressive action has positioned United to both survive the COVID crisis and capitalize on consumer demand when it sustainably returns.”

United did a good job matching capacity to demand

United is seeing a slowdown in the recovery

We saw a steady increase in travel demand starting in late March and early April, and every week we saw the number of passengers traveling in the US increase. That trend seems to have reversed, with last week being the first week in months where we saw fewer passengers in the US than the week before. This is happening as we’re seeing coronavirus cases increase in many states.

In the third quarter, United anticipates capacity to be cut by 65% compared to the same period last year. While the airline can’t fully anticipate what business will be like for the rest of the quarter, July is seeing a significant slowdown:

  • In May United had a load factor of 38%
  • In June United had a load factor of 57.8%
  • In July United anticipates having a load factor of 45% (with fewer than 15% of flights being more than 70% full)

That’s noteworthy, given the increase in demand we saw between May and June, only for that trend to be reversed in July. Most major airlines are also reporting slowdowns in future bookings.

We’re seeing a slowdown in the recovery in the third quarter

It’ll be interesting to see how American did

I’m looking forward to seeing American Airlines’ second quarter results, which haven’t yet been announced. While American, Delta, and United took different strategies, American arguably took the boldest strategy in recent weeks, for better or worse:

  • Both Delta and United operated limited schedules, with Delta blocking a significant number of seats to allow for some physical distancing
  • American has added back way more capacity than Delta and United, trying to capture just about all passengers who may be looking to travel

While American’s strategy seems to be a long-term one, I’m curious to see how this is reflected in the company’s second quarter results.

It’ll be interesting to see how American did in the second quarter

Bottom line

For the second quarter, United Airlines reported a net loss of $1.6 billion, and an adjusted net loss of $2.6 billion. The second quarter was incredibly rough for US airlines, so a big loss was expected.

United’s loss was significantly smaller than Delta’s, so that’s impressive. United claims to have done the best job of network airlines at matching capacity to demand, and based on the company’s results, that sounds about right to me. It’ll be interesting to see how American did, and also to see how the “big three” US carriers perform in the third quarter.

What do you make of United’s second quarter results?

  1. I fully expect AA results to be a “poop” show. This was not the time to ‘go big or go home’ as one of their executives apparently put their strategy recently.

    Analysts are really questioning the approach – see here: https://seekingalpha.com/article/4359563-american-airlines-managements-risk-taking-raises-bankruptcy-risk

    Unless they pull a rabbit out of a hat on the 23rd (earnings report), I imagine they may be forced soon to declare bankruptcy. I’m not sure there is all that much furniture left to burn at this point.

  2. American will be fine, Parker told us a few years ago that they’d never lose money again, and clearly he’s a genius, so it will not be a problem.

  3. Nothing “impressive” here. In the context of all the numbers listed here, I am shocked that you are not mentioning how we, the taxpayers, bailed out AA, DL and US. So far it has “only” been $50 billion in grants and loans.

  4. This is “good news” one could say??

    At least United is taking targeted active approach towards protecting their balance sheet, the best they can during these tough times. It should be noted 36% of revenues for United were Cargo, well done!! Up from 2% year over year

    It should be noted that Delta was weighed down by its foreign investments which tanked.

    I believe Southwest will have the smallest loss due, of the big 4.

  5. Delta’s Q2 results included restructuring charges for the aircraft they are retiring, as well as the write-down in the value of some of its investments (non-cash) in LATAM, Aeromexico, and Virgin Atlantic.

    Buried in United’s release is that they have only managed to get about 6,000+ of their 91,000 employees to sign up for their voluntary severance packages. If they cannot improve that, many employees will unfortunately be in a world of hurt come October 1.

  6. Hey Lucky,
    I’m not sure Pre tax income is the best comparison this quarter.
    Given AA’s ramp up in schedule and significant advanced bookings then demand drop off in July and United’s limited capacity Increase, the air traffic liability seems much more useful since it’ll show the revenue aa received but can’t be recognized until it’s flown (aka: all the aa vouchers now sitting out there that may or may not be used that wouldn’t show in a quarterly pre tax number).

  7. When will UA & DL unveil their Winter/Spring/Summer schedule? American already did and I’m curious about when DL and UA typically do?


    Wow, only 6,000? That’s such a bad figure compared to DL’s 17,000 estimate and Southwest of course.

  8. With nearly 3 million miles I have obviously given United a lot of business. However, their pandemic response has been pathetic. We need more than wings and engines to keep us safe now. It is not acceptable to pack planes as in the past. United can denigrate these concerns but, yes, I want them to do EVERYTHING they can to protect me. Until they show that they are dedicated to safety, don’t fly United.

    By comparison, some airlines show that they understand and are working to protect us and reassure us that they care about the health of their customers. With all the other disruptions we now endure to protect our health, why would I risk packing onto a plane full of people who obviously don’t care, much less in fully packed seats.

    On Zoom calls with colleagues across the country, I hear horror stories of packed flights and loose enforcement. Those friends have now reached the same conclusion. Some people may not want to “believe” in COVID, but I don’t want to fly with them.

    Also, don’t tell me “at least United is better than American.” It is not good enough to be better than the very worst.

  9. UA is in surprisingly good condition considering the wallop they industry took on the chin. Projected18B in liquidity? Impressive.

    The A/F number is not surprising. I actually thought it would be more as spot air rates soared if you could only get the space. Everything froze in China for the first quarter so many shipments destined from China to anywhere by ocean/rail went by air to make up the time.

  10. Business travel is 60-70% of United airlines revenue. By 2022, Business travel is forecast to recover 50% of what it was in 2019. If my math is correct, that is about a 35% less total revenue for the airlines compared to 2019 and that recovery level isn’t expected until at least 2022. Assuming no PPP, that will be a disaster for airline jobs.

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