United Airlines has today posted a preliminary $2.1 billion loss for the first quarter of this year. The Chicago-based carrier has shared that the coronavirus pandemic is mostly to blame for the dire results.
According to an official report, United’s adjusted pretax loss was over $1 billion. It additionally reports a revenue of $8 billion during the period, which is down 17 percent from this time last year.
These numbers will be hard reading for United, especially since it doubled its profits in Q1 2019 to $292 million. Now, is has faced its most significant loss since the global recession of 2008.
United’s initial 2020 concerns came with the impact that the virus had on its China operations. Passenger demand was low, and several airlines eventually suspended services to the country. The value of its China routes had been impaired. However, the situation soon created a ripple within the aviation industry and the problems became global.
“During the three months ended March 31, 2020, the Company recorded $63 million of special charges, primarily associated with a $50 million impairment for its China routes,” United said, according to the report.
“The Company conducted impairment reviews of certain intangible assets in the first quarter of 2020, which consisted of a comparison of the book value of those assets to their fair value calculated using the discounted cash flow method.”
The suspensions continue
United went on to state that it is experiencing a material decline in demand for both international and domestic travel resulting from the spread of the virus. The firm has cut approximately 80% of its capacity for April and currently expects to cut 90% of its capacity for May, with similar reductions expected for June 2020. Because of these actions, it is experiencing losses of around $100 million each day.
As the low demand and global travel restrictions continue, the operator has turned to the United States government for financial support. It has shared its gratitude for receiving approximately $5.0 billion under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
However, the firm feels that this won’t be enough to cover costs amid the downturn. Therefore, it is applying to borrow a further $4.5 billion from the Treasury Department.
These sorts of numbers won’t be exclusive to United. With the pandemic affecting the industry across the board, most airlines are expecting to report losses for the first quarter of this year. Nonetheless, while the outbreak continues, United is still doing its best to fight the virus.
Simple Flying reached out to United Airlines for comment on the first-quarter losses. We will update the article with any further announcements.
What are your thoughts on United’s financials during Q1? Do you see this situation continuing into the next quarter? Let us know what you think in the comment section.