United’s revenue outlook is dismal for the foreseeable
future, and the airline doesn’t think it can turn an operating profit without a
vaccine for Covid-19.
During United’s Q2 earnings call, CFO Gerry Laderman said when
demand reaches 50% of pre-pandemic levels, the airline can break even on daily
cash burn. He wouldn’t predict when demand would reach the 50% threshold.
United CEO Scott Kirby described why demand won’t reach the
breakeven benchmark. Large conferences, he said, won’t return ahead of a widely
available vaccine, even if small-group events return. Companies won’t be flying
employees around for discretionary events, such as end-of-year parties.
Leisure travel will also remain depressed, with even big reopenings
like Disney World coming at reduced capacity.
Kirby shied away from predicting exactly when there would be
widespread vaccine availability.
“At United, we’re at least planning as a scenario that it
takes until late next year before that really happens, and we hope it’s better
than that,” he said.
For the week that ended July 19, TSA checkpoints saw 26% of
the traffic from a year earlier. For those same seven days, ARC
processed 88% less in ticket sales.
United predicts that cash burn for the third quarter will
average $25 million per day on an 83% decline in passenger revenue. During Q2,
the carrier averaged $40 million per day of cash burn.
United reported a net loss of $1.63 billion for the second
quarter. Revenue was down 87.1%, to $681 million, on an 87.8% cut in capacity.
As of July 22, United had $15.2 billion in liquidity. The
company projects that figure to increase to $18 billion by Sept. 30 as it
completes additional cash raises. That amount will be sufficient to manage the
airline until at least late into 2021, even if demand remains depressed,
United has raised $16.1 billion since the start of the
Covid-19 crisis, mostly through debt offerings, stock issuances and Cares Act funding.
Executives touted United’s relative success in stemming
losses during the Covid-19 crisis compared with network competitors. Delta last
week reported a net Q2 loss of $5.72 billion.
United said two weeks ago that up to 36,000 employees could
be furloughed by Oct. 1, when federal payroll grants expire. Thus far, 6,000
employees have agreed to participate in a buyout program.