United Counts on $19 Billion Cushion as New Loss Disappoints

(Bloomberg) -- United Airlines Holdings Inc. says it’s ready to pounce on any travel rebound while riding out an unprecedented industry slump that is hurting the company’s results even more than expected.

The carrier posted a third-quarter adjusted loss of $8.16 a share, worse than the $7.47 shortfall that was the average of analyst estimates. But United lowered daily cash burn to $25 million from $40 million in the previous three-month period, and had $19.4 billion in liquidity at the end of September, according to a statement Wednesday.

”Having successfully executed our initial crisis strategy, we’re ready to turn the page,” United Chief Executive Officer Scott Kirby said in the statement. “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.”

Airlines still face a long, slow rebound as the coronavirus pandemic continues to hold domestic passenger numbers at about a third of last year’s levels -- with even deeper declines for international traffic. Since travel collapsed in March and April, U.S. carriers have slashed payrolls, parked jets, raised billions of dollars through debt deals and received $25 billion in federal payroll support. Negotiations for additional government aid have stalled in Washington.

United fell less than 1% to $35.45 after the close of regular trading in New York. The shares have tumbled 60% this year, the biggest drop on a Standard & Poor’s index of major U.S. airlines.

The Chicago-based airline has bolstered its cash stockpile by raising more than $22 billion with debt offerings, stock sales and federal aid since March. Its liquidity of more than $19 billion trailed Delta Air Lines Inc.’s $21.6 billion. American Airlines Group Inc., which reports third-quarter results Oct. 22, has raised around $13 billion.

Change of Tone

Despite the deep industry slump, United touted its revenue performance relative to rivals and said its results would prove to be better “by almost any revenue measure.”

That’s a departure from the pessimistic tone United used earlier in the crisis, given its larger exposure to international flights. The company responded with deeper capacity cuts than American, Delta and Southwest Airlines Co., and has warned that sales would remain at only about half of pre-pandemic levels until a vaccine is available and widely distributed.

“United believes their plan positions them to win the recovery,” Helane Becker, an analyst at Cowen & Co., said in a note to clients. “Given current demand and booking trends, we can’t poke holes in that thesis or strategy, but we note their hub structure appears to put them at a disadvantage without a rebound in international travel.”

The company’s third-quarter sales dropped 78% to $2.49 billion, in line with analyst estimates and comparable to Delta’s decline. United’s cargo revenue jumped 50%, while passenger sales tumbled 84%. The airline will hold a conference call for analysts and investors on Thursday at 10:30 a.m. Eastern time.

In a separate filing, United said it would incur $1.1 billion in pretax costs related to the departure of 22,000 employees, including those who have left the company voluntarily.

©2020 Bloomberg L.P.