United Airlines has released its third-quarter financial results for 2020. The Chicago-based airline recorded a net loss of $1.8 billion, with passenger revenues down over 80 per cent year-over-year.
United’s third-quarter results
United Airlines recorded a net loss of $1.8 billion. This compares to a $1.6 billion net loss from the second quarter of 2020. The airline was helped by the fact that it lowered its average daily cash burn and decreased non-labor operating expenses by 63 per cent in the quarter.
Nevertheless, the airline could not overcome the precipitous drop in demand and the slow recovery.
In the third quarter of 2020, United’s operating revenues were down 78 per cent, compared to an 87 per cent drop in operating revenues for the second quarter.
The airline pulled in over $1.6 billion in passenger revenues, with another $422 million coming from cargo and $418 million from other sources for a total of nearly $2.5 billion in operating revenue.
With over $4.1 billion in operating expenses, however, United churned out a $1.841 billion net loss for the quarter or a loss of $6.33 per share.
Pre-tax, United lost $2.3 billion, which was much less than Delta’s nearly $7 billion pre-tax loss for the quarter.
CEO Scott Kirby stated the following in a release viewed by Simple Flying:
Having successfully executed our initial crisis strategy, we’re ready to turn the page on seven months that have been dedicated to developing and implementing extraordinary and often painful measures, like furloughing 13,000 team members, to survive the worst financial crisis in aviation history. Even though the negative impact of COVID-19 will persist in the near term, we are now focused on positioning the airline for a strong recovery that will allow United to bring our furloughed employees back to work and emerge as the global leader in aviation.
Bolstering its cash position
Since March, United Airlines has raised over $22 billion in commercial debt offerings, stock issuances, support from the government, and other items. The airline’s total available liquidity stood at $19.4 billion at the end of the quarter.
Liquidity-wise, United is in a good position to make it out of the crisis over the next few years, assuming that demand continues to recover.
Part of the cash raised came from securing its MileagePlus loyalty program to raise $6.8 billion. This was quickly followed by other airlines who used their loyalty programs to either get a loan with the US government or else go to the private market for funding.
United also closed on a loan with the government for $5.2 billion between now and March 2021. As of now, the airline expects to have the option to borrow up to $7.5 billion, though it has not stated whether it will do so.
Lastly, United also entered into an agreement with CDB Aviation to sell and leaseback two Boeing 787-9s and 10 Boeing 737 MAX jets.
Cash burn
United achieved its target average daily cash burn during the third quarter of $21 million, plus $4 million of average debt principal and severance payments per day.
This was lower than the airline’s second-quarter average daily cash burn of $37 million with $3 million of debt principal payments and severance payments per day.
For United to truly save on cash, the airline had to right-size itself, which led to involuntary furloughs. In management and administrative positions, United made mostly permanent reductions in those departments.
The airline reached an agreement with its pilots to avoid furloughs while getting flexibility in work hours and offering early retirement and voluntarily leave of absence policies.
For flight attendants, United worked with the Association of Flight Attendants (AFA) to reduce 3,300 furloughs. And the airline also reduced furloughs for International Association of Machinists and Aerospace Workers (IAM)-represented employees. Nevertheless, the carrier did have to furlough thousands of employees.
