Today, United Airlines announced its financial results for the first quarter of this year. As expected, the coronavirus outbreak has caused massive losses for the Chicago-based carrier. Altogether, the airline reports a net loss of $1.7 billion and an adjusted net loss of $639 million.
According to a press release, United’s total liquidity as of last night was approximately $9.6 billion. This figure includes $2 billion under its undrawn revolving credit facility. To highlight the monetary damage, the firm expects to burn through $40 million and $45 million a day for the second quarter of this year. That’s up to just under $1.9 million every hour.
United CEO Oscar Munoz spoke about how his firm has responded to the challenges that the pandemic had brought. Ever since the outbreak started to heavily impact US airline schedules, United hasn’t downplayed the effect of the groundings.
“Throughout the COVID-19 crisis we have maintained our focus – first on the safety of our customers and our people and second on swiftly taking action to keep United operating. We have been at the forefront of warning how deep of an impact we expect this crisis could have and how long we expect it could last,” Munoz said, as per the press release.
“We’ve also led the industry in taking decisive steps to mitigate the operational and financial impacts of COVID-19 — making deep schedule reductions, drastically reducing spending and aggressively raising liquidity.”
The executive added that while his carrier is in the middle of the crisis, it will not hesitate to make difficult decisions. These choices will ensure the long-term success of the company. Ultimately, when demand returns, he believes that the company will bounce back strongly. He states that a quick return will be because of early and aggressive efforts to fight the worst financial crisis in aviation history.
To help deal with the blow, United will receive approximately $5.0 billion from the US Treasury Department. This funding will be paid through the Payroll Support Program under the CARES Act.
The funding will be split between a $3.5 billion grant and a $1.5 billion 10-year loan and will help cover employee salaries through September 30th. Furthermore, the airline will issue warrants to purchase approximately 4.6 million shares of common stock to the federal government.
The fight continues
Meanwhile, United is doing its best to handle the outbreak of the virus. This month, it announced the production of hand sanitizer at its San Francisco facility and has made it compulsory for flight attendants to wear face masks. These masks will also be offered to customers free from next month.
To help minimize the economic damage, both Munoz and airline president Scott Kirby are currently not taking a salary. Other officers of the company are making 50 percent salary reductions. The airline has also reduced planned full-year adjusted capital expenditures by approximately $2.5 billion and will only take delivery of planes that have financing in place.
Ultimately, these results will be hard reading for investors as the airline doubled its profits in Q1 2019 to $292 million. Now, it has faced its most significant loss since the 2008 global financial crisis. However, with United preparing for the worst, it will be in a decent position to bounce back swiftly once business picks up again.
What are your thoughts on United’s Q1 results? Are the numbers what you expected given the global climate? Let us know what you think of the situation in the comment section.