United Air Sees Lower Cash Burn With 6,000 Workers to Exit
(Bloomberg) -- United Airlines Holdings Inc. will cut its average daily cash burn to $25 million in the third quarter from $40 million in the previous three-month period, as the company braces for a choppy recovery from the coronavirus pandemic.
More than 6,000 employees have accepted an offer to leave as part of an effort to cut costs, United said in an earnings statement Tuesday. Earlier this month, the company warned 36,000 workers that their jobs will be at risk when federal payroll aid expires at the end of September.
Underscoring the depth of the crisis, United recorded an adjusted loss of $2.6 billion for the three months ending June 30, which the carrier described as “the most difficult financial quarter in its 94-year history.” Travel demand collapsed in March and April because of Covid-19, and the U.S. government stepped in with $25 billion in assistance for the nation’s airlines.
United is bolstering its cash position and said it would have more than $18 billion of liquidity by the end of the third quarter. The Chicago-based company has raised $16.1 billion since the start of the pandemic, and could borrow another $4.5 billion from the federal government later this year if it requires additional funds.
“The liquidity commentary is generally positive and speaks to management’s success in navigating the current environment,” Helane Becker, an analyst at Cowen & Co., said in a note to clients. “We believe the stock action tomorrow hinges on overall commentary for demand and the underlying competitive landscape.”
United Chief Executive Officer Scott Kirby and his colleagues will hold a conference call with investors and analysts Wednesday at 10:30 a.m. Eastern time.
The shares were little changed at $33.15 after the close of regular trading in New York. United has tumbled 62% this year, the biggest drop on a Standard & Poor’s index of major U.S. airlines.
Delta Air Lines Inc. last week reported a record loss in the second quarter. American Airlines Group Inc. and Southwest Airlines Co. report earnings Thursday.
United remains cautious about adding additional flights, with overall third-quarter seating capacity to be only about 35% of what the airline flew in the same period last year. The figure also reflects deep declines for international travel, where United has historically done more flying than its U.S. rivals.
The company said it would continue to review and cancel flights on a rolling 60-day basis “until it sees signs of a recovery in demand.”
United swung to an adjusted loss of $9.31 a share, worse than the shortfall of $9.18 expected by Wall Street, according to the average of analyst estimates compiled by Bloomberg. Total operating revenue fell 87% to $1.48 billion. Analysts had predicted $1.27 billion.
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