United Airlines faces problems that will consolidate the sector.
United Airlines reported a $1.8 billion loss for the third quarter as it restructured its operations to reflect lower demand following the near-collapse of the passenger aviation industry earlier this year.
The Chicago-based carrier says on 14 October that it had reduced its capacity by 70% during the recently completed quarter, resulting in a 78% decline in revenue. United’s third-quarter revenue came in at $2.5 billion, compared to $11.3 billion in the same period in 2019.
Passenger revenue fell 84% during the period, as lockdowns and strict quarantine requirements in some geographies made travelling almost impossible.
“Having successfully executed our initial crisis strategy, we’re ready to turn the page on seven months that have been dedicated to developing and implementing extraordinary and often painful measures, like furloughing 13,000 team members, to survive the worst financial crisis in aviation history,” says chief executive Scott Kirby.
On 13 October, competitor Delta Air Lines initiated the third quarter earnings reporting season by posting a $5.4 billion loss for the same quarter. The third major US carrier, American Airlines, publishes its earnings next week.
United ended September with $19.4 billion in liquidity, and was able to reduce its cash burn to $21 million plus $4 million of debt principal payments and severance payments per day. At the end of the second quarter that number still stood at $37 million plus $3 million of debt principal payments and severance payments.
The carrier furloughed 13,000 employees at the beginning of this month, the day after federal government aid for the airlines expired. That number includes almost 7,000 flight attendants but no pilots. The airline and its pilots union reached a last-minute deal in late September to avoid furloughs for that work group until at least June 2021.
In reducing its workforce, the carrier was able to cut its total operating costs by 59% compared to the same quarter a year ago, United says.
During the quarter it reinstated 146 domestic flights, and resumed 78 international routes. Also during the period, the carrier launched 28 new domestic and nine new international routes. In October, the airline is planning to fly about 40% of its regular schedule.
In an attempt to capture more of the leisure travel market United announced it would offer numerous point-to-point connections between cities in the Northeast and Midwest USA to warm-weather destinations in Florida as the climate turns cold in the northern part of the United States. These routes do not go through one of the airline’s major hubs, a notable departure from previous schedule expansions.
In this way the mainline carrier is trying to remain competitive and flexible to attract a larger leisure travel base, as the all-important corporate travel sector remains depressed while the coronavirus crisis moves into its eighth month.
The carrier received $5 billion in sector-specific federal payroll support assistance in March in order help it manage through the pandemic. In return for the aid, major airlines promised no involuntary furloughs until the end of the third quarter. That financial assitance programme expired on 1 October, and even though airlines, unions trade organisations and others lobbied hard for an extension, none have come so far.
Lawmakers in Washington, DC continue to squabble over the terms of an extension, but a timely agreement does not seem likely.
The airline will present more details about its third quarter results during a conference call on 15 October.