United Airlines recorded a $-1.627 billion net loss in Q2 2020 or $-2.613 billion adjusted in what has been the most difficult quarter in its 94-year history, it announced on July 21.

United lost 93.5 percent in passenger revenues compared to last year, earning just $681 million. Cargo revenues were 36.3 percent up to $402 million. Combined with other revenues, the quarter ended at $1.475 billion compared to $11.4 billion in 2019.
Operating expenses were 68.7 percent lower to $3.113 billion, for one thanks to a much lower (-89.9 percent) fuel bill at $240 million, 73 percent lower aircraft maintenance costs, 93 percent lower distribution costs, and 29 percent lower staff costs. The operating income was $-1.637 billion compared to $1.472 billion last year.
United burnt $40 million in cash per day but expects to reduce this to $25 million in Q3. Total operating costs have been reduced by 69 percent. “What is left is what is absolutely necessary to run the airline.”
Capex for this year has been reduced to $3.7 billion down from $7.0 billion planned pre-crisis.

Passenger numbers were down -93.4 percent to 2.813 million, Revenues Passenger Miles -95.3 percent to 2.970 million and capacity/Available Seat Miles by 87.8 percent to 8.963 million.
Domestic revenues were down 91.8 percent to $542 million and International by 96.4 percent to $139 million. Refunds for the quarter stood just shy of $ 5 billion.

Liquidity up to 15.2 billion
United bolstered its liquidity position to $15.2 billion on July 20 and expects to grow this to $18 billion by the end of Q3. Since the start of the Covid-crisis, the airline has raised $16.1 billion in debt offerings, stock issuances, and proceeds from the payroll support program under the CARES act, including grants and loans. On July 2, United raised $6.8 billion in secured financings against MileagePlus Holdings and raised $250 million in a secured term loan facility.

It also agreed with BOC Aviation Limited on the sale and leaseback of six Boeing 787-9s and 16 MAX 9s still scheduled for delivery later this year and 2021 but only if financing is complete. However, United has agreed with Boeing not to take any deliveries in 2022, when a fair number of MAX were set to join. This will reduce pre-delivery deposits.
No specific plans were announced on fleet reductions except that United will remain ‘agile’ on this. Despite the slump in long-haul traffic, widebodies will be needed for cargo services, so over 100 will remain active by the end of the year compared to 196 at the beginning of 2020.

The airline has another $9 billion in collaterals that are available if it wishes to further raise its liquidity position, potentially by borrowing under the CARES program. Liquidity is expected to be adequate to weather the crisis even if it takes until 2022. A review of its cost structure is underway to check how and where improvements can be found.

United expects to operate at -65 percent lower capacity in Q3. It expects a July load factor of 45 percent, down from June’s 57.8 percent as new cases of Covid “spiked in the sunbelt” this month.
The airline has placed 6.000 employees on voluntary separation packages through November 30, with another 26.000 having taken voluntary leave. Recently, the airline notified 36.000 staff about potential furloughs or involuntary leave from October 1, when restrictions from the CARES program will end. The number of potential redundancies is conditional on how market demand recovers. Discussions with unions are ongoing.
A slimmed-down United could be cash burn-neutral even at only 50-percent demand, but a more realistic level for Q4 will be around $15-20 million.

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