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| DATE | 2021-01-20 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [Hangout - NYLXS] airline business is essential to the US economy
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wsj.com
United Airlines Offers Grim Outlook but Seeks to Rebuild
Alison Sider
6-8 minutes
Travelers checking in at San Francisco International Airport last month.
Photo: David Paul Morris/Bloomberg News
Updated Jan. 20, 2021 5:47 pm ET
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United Airlines Holdings Inc. UAL 0.96% on Wednesday said it expects the
coronavirus pandemic will continue to weigh on travel demand this year
as the airline turns its focus to rebuilding itself.
United reported a net loss of $1.9 billion for the fourth quarter,
compared with a profit of $641 million in the same period a year
earlier. Altogether, United lost $7.1 billion in 2020.
While the outlook for the next few months remains dim for airlines,
United said it has gotten a handle on how to survive its immediate
challenges and outlined the broad strokes of its plan to exceed its 2019
profit margins by 2023, through a combination of returning travel
revenue and cost-cutting.
“Aggressively managing the challenges of 2020 depended on our innovation
and fast-paced decision making. But the truth is that Covid-19 has
changed United Airlines forever,” said United Airlines Chief Executive
Scott Kirby.
United’s losses come nearly a week after Delta Air Lines Inc. DAL 3.25%
said it lost $12 billion in last year, also its worst-ever annual
performance. The two airlines’ dismal results reflect the damage the
pandemic has inflicted on airlines. Carriers including Southwest
Airlines Co. LUV 2.77% and American Airlines Group Inc. AAL 1.25% are
set to report fourth-quarter results next week.
The industry’s trajectory this year will depend on how quickly vaccines
can be disseminated to a point that appetite for travel is ignited
again. Airline executives have taken different views on how quickly
pent-up demand for travel could be unleashed, and United’s Mr. Kirby has
said substantial recovery likely won’t get under way until late in the year.
Air Travel During the Pandemic
A brief surge in travel during the December holidays helped cushion the
blow to airlines in the final months of last year, but the uptick in
demand was short-lived and not as strong as airlines had initially
hoped. Carriers including United said bookings slowed amid the increase
in Covid-19 cases and in the wake of new guidance from the Centers for
Disease Control and Prevention to avoid unnecessary travel.
Now airlines are entering what could be an even darker period, as
Covid-19 cases and fatalities surge in the U.S. and around the world.
January is typically a lackluster month for air travel, and U.S.
passenger volumes have stalled at about 40% of pre-pandemic levels.
United, which has operated a leaner schedule than some rivals to match
depressed demand, said Wednesday that its first-quarter revenue would
likely be 65% to 70% lower than the same period in 2019, before the
pandemic, unless Covid-19 vaccines are distributed more quickly.
After raising billions of dollars from investors and borrowing from the
government, United said it ended the year with $19.7 billion in
liquidity—enough to survive the slow, choppy recovery it is
anticipating. The airline said it ended the quarter burning through $33
million in cash a day including debt and severance payments. But the
company said its “core cash burn,” adjusted for things like investments
that the airline says will make it more efficient as it ramps up, was
$19 million a day, down from $24 million a day in the third quarter.
Airline executives and analysts expect international and business
travel, which United and other major carriers rely on for much of their
revenue, to recover more slowly than leisure trips. Several countries
have imposed new restrictions on arrivals from abroad in an effort to
keep out new strains that have emerged in parts of the world and have
already spread widely.
The U.S. last week said it would require all passengers arriving on
international flights to test negative for Covid-19 no more than three
days before flying. Airlines had hoped the new testing requirements
would be accompanied by a loosening of restrictions on travel from the
U.K. and Europe, but a spokeswoman for President Biden said earlier this
week that the new administration doesn’t plan to allow most travel from
those countries to resume on Jan. 26 as former President Donald Trump
had announced.
Accounting for one-time adjustments United incurred a $2.1 billion loss
in its latest quarter. The loss of $7 a share compared with the loss of
$6.62 a share that analysts expected.
Write to Alison Sider at alison.sider-at-wsj.com
Corrections & Amplifications
United ended the quarter burning through $33 million in cash a day
including debt and severance payments, and its core cash burn was $19
million a day, down from $24 million a day in the third quarter. An
earlier version of this article incorrectly reported these figures in
billions. (Corrected on Jan. 20)
Appeared in the January 21, 2021, print edition as 'United Posts Loss,
Focuses on Rebuild.'
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