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United Airlines Reports Second Quarter Net Loss of $1.6 Billion on Revenue Decline of 87.1 Percent

United Airlines reported Tuesday a second quarter net loss of $1.6 billion or $(5.79) per diluted share and an adjusted net loss of $2.6 billion, on a revenue decline of 87.1 percent to $1.48 billion. The carrier’s second quarter capacity decreased 87.8 percent year-over-year.

United Airlines Boeing 737-900ER - Courtesy United Airlines

Yesterday (July 21, 2020) United Airlines reported their most difficult quarter in the company’s 94-year history with a second quarter net loss of $1.6 billion or $(5.79) per diluted share and an adjusted net loss of $2.6 billion. During the quarter, the carrier’s revenue declined 87.1 percent to $1.48 billion on a year-over-year capacity decrease of 87.8 percent. As of the close of business on Monday (July 20, 2020), United Airlines had approximately $15.2 billion in liquidity, which the company expected to bolster to over $18 billion by the end of the third quarter. United’s second quarter daily cash burn averaged $40 million, including $3 million in daily principal payments and severance payments. During the third quarter, the carrier expects to reduce their daily cash burn to approximately 25 million, which includes principal payments of $6 million and severance payments. In Tuesday’s announcement, United Airlines’ CEO, Scott Kirby said,

“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 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 Airlines has raised a total of $16.1 billion since the beginning of the crisis through debt offerings, the issuance of stock and the Payroll Support Program (PSP) of the U.S. Cares Act. The carrier was able to raise $6.2 billion by collateralizing their MileagePlus loyalty program. The borrowings against MileagePlus Holdings include a $3.8 billion bond (6.5% interest) and a term loan of $3.0 billion (LIBOR plus 5.25%). The company also entered an equity distribution agreement to issue and sell up to 28 million UAL Common shares in “at-the-market” offerings. During the second quarter the company raised approximately $22 million through the sale of around 532,000 shares. Additionally, United entered a sale-leaseback agreement with BOC Aviation Limited for six Boeing 787-9 and 16 Boeing 737 MAX 9 aircraft which are scheduled for delivery in 2020.

During the third quarter, the carrier expects system capacity to be down 65 percent versus the third quarter of 2019. United will proactively evaluate and cancel flights as needed on a 60-day rolling basis, relative to the existing demand environment. The company expects demand to remain suppressed until a widely accepted vaccine and/or treatment for COVID-19 is available. In after-hours trading Tuesday evening (July 21, 2020), shares in United Airlines Holdings, Inc. (NASDAQ: UAL) were trading 2.29 percent higher at $33.07/share (7:59 PM EDT).

Source: United Airlines

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