A United Airlines plane prepares to take off at the Benito Juarez International airport in Mexico City, on March 20, 2020.
Pedro Pardo | AFP | Getty Images
The Chicago-based airline and its competitors are facing a 95% decline in U.S. air travel, just as customers are normally gearing up for summer vacation. The second and third quarters are generally the most lucrative for airlines but the virus and shelter-in-place orders are keeping would-be travelers home.
United said it swung to a $1.7 billion loss in the three months ended March 31, from a $292 million profit in the same period of 2019. Revenue dropped nearly 17% from a year earlier to $7.98 billion, slightly below analysts’ estimates.
“While we are still in the midst of this crisis, we will not hesitate to make difficult decisions we believe will ensure the long term success of our company,” CEO Oscar Munoz said in an earnings release. “When demand returns, we believe we’ll be positioned to bounce back strongly and quickly because of our early and aggressive efforts to fight the worst financial crisis in aviation history.”
The airline and its competitors have cut costs by parking planes, slashing routes and freezing hiring. It expects to burn an average of $40 million to $45 million a day in the second quarter. United has also encouraged employees to take voluntary unpaid leaves and more than 20,000 United employees took that option. The airline had about 96,000 employees at the end of last year.
U.S. airlines earlier this month reach agreements for portions of $25 billion in payroll assistance from the federal government. United said it has has secured about $5 billion in government aid — $3.5 billion in grants and $1.5 billion in a low-interest loan — that requires it to keep paying its workforce until Sept. 30. It also applied for a federal loan and it expects to borrow as much as $4.5 billion. As of Wednesday, the airline had $9.6 billion in liquidity, including $2 billion from an undrawn revolving credit facility.
The airline earlier this month disclosed a pretax loss of $2.1 billion in the quarter. The company lost $2.57 a share on an adjusted basis, less than expected. Shares of United were up just under 1% in after-hours trading.
United executives will detail the results and outlook in a 10 a.m. ET earnings call Friday.