United Airlines (UAL) today announced third-quarter 2020 financial results. Since the beginning of the crisis, the company has been at the forefront of the industry in delivering on its three-pillar strategy of building and maintaining liquidity, minimizing cash burn and variabilizing its cost structure. Achieving these objectives has supported the airline’s ability to manage the crisis as well as or better than its competitors and positions United to lead the industry when demand for air travel returns.
In addition, United expects that third-quarter revenue performance will be the best, even in a historically difficult environment, among our large network competitors – once they have all reported their quarterly results. By almost any revenue measure, the company expects on a year-over-year basis, with our total unit revenue of down 26 percent, passenger unit revenue of down 47 percent, cargo revenue of up 50 percent and loyalty revenue of down 45 percent to be stronger results than those that will be achieved by each of our legacy competitors.
“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,” said United CEO Scott Kirby. “Even though the negative impact of COVID-19 will persist in the near term, we are now focused on positioning the airline for a strong recovery that will allow United to bring our furloughed employees back to work and emerge as the global leader in aviation.”
Pillar 1 – Raising and Maintaining Liquidity
- Since March, the company has raised over $22 billion through commercial debt offerings, stock issuances and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) Payroll Support Program grant and loan, among other items.
- The company’s total available liquidity1 at the end of the third quarter 2020 was approximately $19.4 billion.
- Entered into the first-of-its-kind loyalty backed transaction, borrowing $6.8 billion secured against MileagePlus Holdings in the form of a $3.8 billion bond and a $3.0 billion term loan.
- Secured the ability to borrow $5.2 billion with the U.S. Treasury under the CARES Act loan program between now and March 2021 and expects to have the ability to increase the borrowing capacity up to $7.5 billion, subject to government approval.
- Entered into an agreement with CDB Aviation to finance, via a sale leaseback transaction, two Boeing 787-9 and ten Boeing 737 MAX aircraft that are currently subject to purchase agreements between United and The Boeing Company.
Pillar 2 – Minimizing Cash Burn
- Reduced total operating costs by 59 percent versus the third quarter of 2019. Excluding special charges2, reduced operating costs by 48 percent versus the third quarter of 2019.
- Achieved target average daily cash burn3 during the third quarter of $21 million plus $4 million of average debt principal payments and severance payments per day, compared to second-quarter average daily cash burn of $37 million plus $3 million of debt principal payments and severance payments per day.
Pillar 3 – Variabilizing Cost Structure
- Reduced non-labor operating expenses, excluding special charges and depreciation, by 63 percent in the third quarter, against a capacity reduction of 70 percent.
- Restructured and significantly reduced our management and administrative functions. These reductions are expected to be largely permanent, even as demand recovers.
- Reached a landmark agreement with its pilot group that avoids furloughs by securing flexibility in work hours, while also reaching agreements to provide a path to early retirement and reduce expense through voluntary leave of absence programs. These agreements position the company to rebound quickly when demand returns.
- Created a program with the Association of Flight Attendants (AFA) that reduced 3,300 flight attendant furloughs while allowing the company to react more quickly to network changes.
- Reduced furloughs of International Association of Machinists and Aerospace Workers (IAM) represented employees through an agreement that incentivizes employees to take a leave of absence.
- Worked with the union representing dispatchers to reduce furloughs and create staffing flexibility as demand returns through an agreement that allows dispatchers to voluntarily reduce their work schedules.
- Offered employees comprehensive voluntary separation packages, retirement packages and/or extended leaves of absence with approximately 9,000 employees opting to participate.
Third-Quarter Financial Results
- The company had a net loss of $1.8 billion, and an adjusted net loss4 of $2.4 billion.
- Total operating revenues were down 78 percent year-over-year, on a 70 percent decrease in capacity year-over-year.
- Passenger revenue was down 84 percent year-over-year.
Expanding Customer Benefits
- First among U.S. global airlines to permanently eliminate change fees on all standard economy and premium cabin tickets for travel within the U.S., and starting January 1, 2021, any United customer can fly standby for free on a flight departing the day of their travel regardless of the type of ticket or class of service.
- First U.S. airline to introduce the Destination Travel Guide, a new interactive map tool on united.com and the United mobile app that allows customers to filter and view destinations’ COVID-19 related travel restrictions.
- First U.S. airline to introduce an interactive map feature for customers on united.com, powered by Google Flight Search Enterprise Technology, to easily compare and shop for flights based on departure city, budget and location type. Customers can simultaneously compare travel to various destinations in a single search.
- Announced plan to continue installing Polaris Business Class on Boeing 787 fleet.