Wall Street was eagerly looking toward today's results from commercial airline giant United Airlines to get a real-time sense whether the covid pandemic is starting to thaw when it comes to one of the worst-hit sectors from the economic shutdowns.
Alas, the answer appears to be no, because moments ago UAL reported a worse than expected Q2 loss per share of $9.31, more than the $9.18 loss expected, and down from a profit of $4.21 a year ago. This translated to a record quarterly loss of $2.6 billion, as the collapse of passenger demand in the "Covid quarter" played out for a full three months.
Revenue was even uglier, plunging by a record 87% to just $1.48 BN from $11.4BN a year ago, if fractionally better than the $1.27BN expected.
Some more details from the report, courtesy of Bloomberg:
- Available seat miles 8.96 billion, estimate 9.14 billion
- Rev. passenger miles $2.97 billion, estimate $3.12 billion
- Passenger revenue $681 million, estimate $530.1 million
- Cargo revenue $402 million, estimate $188.2 million
- Other revenue $392 million, estimate $450.2 million
- Expects July Load Factor of 45%
Reflecting the dismal conditions, the company said that more than 6,000 employees had agreed to leave voluntarily, and many more will likely leave involuntarily as with mass layoffs are a rising risk after federal payroll aid expires at the end of September.
With costs still far above revenue, United Q2 cash burn averaged a whopping $40 million a day, although it said that it expects that to fall to $25 million a day in the third quarter. The good news is that total liquidity was $15.2 billion at the end of Q2 and is expected to increase to more than $18 billion by the end of the third quarter, so a default is not immediately in the cards.
As Bloomberg notes, United stood out in March and April for its dire outlook on the coronavirus crisis. CEO Scott Kirby says that served the company well by enabling it to take speedy action such as cutting costs and raising capital. He says in the release:
“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.”
He is right... assuming a vaccine is not only discovered by implemented by early 2021. Otherwise, burning even a reduced $25MM per day for a full year will have dire consequences on the company.