United projects 1Q loss of $2.1B

Pandemic dims travel demands

United Airlines Holdings Inc. tumbled after the company said it expected to record a $2.1 billion loss in the first quarter as the coronavirus outbreak all but erased airtravel demand in March.

The pretax loss, which will be about $1 billion on an adjusted basis, came as revenue dropped 17% from a year earlier to $8 billion, the carrier said Monday in a regulatory filing. The results are preliminary and subject to change.

The airline’s early look at first-quarter results is the first for big U.S. carriers and presages a gruesome set of earnings reports after flights were curtailed worldwide. Travel at U.S. airports is about 5% of what it was a year earlier. Delta Air Lines Inc. is scheduled to release its earnings on Wednesday, with Southwest Airlines Co. and American Airlines Group Inc. following next week.

United fell 4.44% to $27.79 in New York on Monday. The shares had tumbled 67% this year through Friday, also the worst on the industry stock gauge.

The carrier filed the basic results, without balance sheet details, in an effort to be transparent, executives said on a call with reporters. A more detailed release is ex

pected in coming weeks.

“The company plans to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand,” United said in the filing.

In the filing, United said it had applied for a loan from the U.S. Treasury Department under a rescue program for airlines, and expected to be able to borrow as much as $4.5 billion from the government through Sept. 30 for a term of as long as five years. That would complement $5 billion in payroll assistance the company disclosed last week.

SALE-LEASEBACK DEAL

To raise additional cash, the Chicago-based carrier agreed to sell almost two dozen jetliners to a unit of BOC Aviation Ltd. and lease them back.

The agreement, reached Friday, involves six Boeing Co. 7879 Dreamliner wide-body planes and 16 narrow-body 737-9 Max jets that are scheduled for delivery this year. The Max has been out of service for more than a year following two fatal crashes, and Boeing has said it hopes to resume shipments sometime this summer following regulatory approvals.

The leaseback deal follows a similar arrangement by Delta that Bloomberg News reported last week.

United reiterated its expectation for 90% drop in capacity next month, underscoring the likelihood of even deeper damage for major airlines as passengers continue to stay home because of the pandemic. The company said last week that travel demand had fallen to “essentially zero.”

Several carriers have begun openly contemplating how they will shrink operations, while American Airlines Group Inc. is moving to shed more of its older planes.

By one analyst’s count, as many as 105,000 jobs could be lost industrywide.

NO JOB CUTS, FOR NOW

Airlines are barred from slashing jobs through Sept. 30 under the terms of the $50 billion government bailout, but they’re already warning employees that cuts are almost inevitable. The planned conAustralia’s traction reflects a widespread belief that 2020 revenues could shrink to levels not seen in years. Recovery will probably be a long-term affair, said Cowen & Co., which predicted that ticket sales may not rebound to pre-pandemic levels until 2025.

“The challenging economic outlook means we have some tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today,” Chief Executive Officer Oscar Munoz and President Scott Kirby wrote in an April 15 employee memo.

Unable to cut jobs or salaries while receiving grants to cover payroll, airlines will staff their typical summer peak flights largely as usual, even with millions of fewer travelers. But come fall, it could get ugly for employees. “We’re going to be smaller coming out of this,” Delta Chief Financial Officer Paul Jacobson told employees last month. “Certainly quite a bit smaller than when we went into it.”

STUNNING REVERSAL

The reversal of fortune comes as a shock for an industry that just last year was breaking passenger traffic records. Last week, the average number of U.S. daily passengers declined 96%, to 95,531, compared with 2.39 million last year, according to Transportation Security Administration data compiled by Bloomberg.

Such anemic demand means that anything less than a robust rebound over the coming months will prompt airlines to cut more employees, jettison older aircraft and cut more salaries, which in turn could persuade more workers to depart. During the past two months, at least 87,000 employees — more than one quarter of the combined workforce of Delta, American and Southwest — have taken voluntary leaves, early retirement or reduced work hours.