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A United 777-300ER touching down at Paine Field after a test flight. (Photo: AirlineGeeks | Katie Bailey)

United Reports $1.6 Billion Second Quarter Loss

Chicago-based United Airlines released its second quarter earnings report on Tuesday afternoon, announcing a $1.6 billion net loss on approximately $1.5 billion in revenue. The revenue figure, which comes on the back of an 87.8% drop in total capacity, is 87.1% less than revenue in the second quarter of 2019.

With its announcement Tuesday, United became the second U.S. carrier to report earnings for the period spanning April-June. Delta Air Lines last week revealed it had lost an adjusted $5.7 billion in the same time frame, even as it had worked to cut costs substantially. United has undertaken many of the same measures, but the company was still burning approximately $40 million in cash daily according to the attached report. But that still represents a 69% year-over-year drop in operating costs, while Delta was only able to achieve a 53% drop — a measure that likely contributed to the stark differences in their financial performance.

The airline also made note of the $15.2 billion in liquidity it had carried into the month of July, leaving the company able to continue operating as normal with minimal cash flow issues. United Airlines CEO Scott Kirby called attention to the airline’s matching of capacity to demand, a success that can be seen in the similarity between the airline’s drop in capacity — 87.8% — and the drop in passenger traffic — 93.4%.

“While this unprecedented crisis has been difficult for our team, we expect United produced fewer losses and lower cash burn in the second quarter than any of our large network competitors,” Kirby said. “We accomplished this by quickly and accurately forecasting the impact that COVID would have on passenger and cargo demand, accurately matching our schedule to that reduced demand, completing the largest debt financing deal in aviation history, and cutting expenses across our business. We believe this quick and aggressive action has positioned United to both survive the COVID crisis and capitalize on consumer demand when it sustainably returns.”

Looking at that impact on cargo demand, United benefited greatly from the upswing in needed cargo space. Cargo revenue increased 36.3% compared to the second quarter of 2019 on the back of what the airline said were “strategic international cargo-only missions” and through “optimizing aircraft capacity with low passenger demand.”

The airline was also looking to a stronger third quarter, even as it prepared to furlough tens of thousands of employees. The airline said it was expecting a 45% load factor in July and expected to operate only around one out of every 6.7 of its flights with less than 70% of seats filled.

The Middle Seat’s Final Say

The airline’s load factor expectations give rise to another facet of United’s earnings release. While Delta continued to block off the middle seat on its flights throughout the second quarter, United progressively filled more of its aircraft to full capacity. That change could very well have been a large contributor to the airline’s noticeably smaller losses. Because while United only saw a 33.1% total load factor in the second quarter, it saw an increase in total revenue per available seat mile.

As the Dallas and Fort Worth, Texas-based duo of Southwest Airlines and American Airlines release their own earnings reports on Thursday, this will be a theme to follow. Though Southwest and Delta have recently fared better financially than American and United, the latter pair were the two airlines that have filled their aircraft to capacity in recent months, while Southwest and Delta did not.

United also announced that 6,000 employees had opted into a program to leave the company in exchange for severance pay and flight benefits through Nov. 30.

Parker Davis
Parker Davis
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