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United Airlines Aims To Cut Approximately $2bn Of Annual Costs After Fourth Consecutive Quarterly Loss

Published on Jan 24 2021 10:00 AM in General Industry tagged: Trending Posts / United airlines

United Airlines Aims To Cut Approximately $2bn Of Annual Costs After Fourth Consecutive Quarterly Loss

United Airlines Holdings Inc has said that it is aiming to cut approximately $2 billion of annual costs through 2023 as it charts a recovery from the coronavirus pandemic, which has caused the airline's fourth consecutive quarterly loss.

Airlines are counting on COVID-19 vaccines to boost travel demand later this year but warn that the strength of a rebound will largely depend on the pace of vaccine roll-outs, particularly as coronavirus cases keep rising.

Chicago-based United said that 2021 will be a "transition year that's focussed on preparing for a recovery."

The company burned an average of $33 million per day in the fourth quarter, including approximately $10 million of severance and debt payments, even as it continued to slash costs.

United furloughed thousands of employees last October when an initial round of payroll aid for airlines expired. It brought those workers back following a fresh $15 billion in payroll aid for the sector but warned that the recall could be "temporary" as travel demand remains depressed.

United is set to receive approximately $2.6 billion in payroll support through March and said that it expects to offer employees options like voluntary leaves to reduce furloughs after that time.

Rival Delta Air Lines, which labelled 2021 a year of recovery last week, expects to halt its daily cash burn rate of approximately $12 million in the spring and does not expect any furloughs.

United has the greatest exposure of major US airlines to international travel, which is the sector that has been hit the hardest by the pandemic and the one that is likely to be the slowest to recover.

US President Joe Biden, who was inaugurated on Wednesday January 20, plans to maintain a ban on travellers from Europe and Brazil that his predecessor, Donald Trump, had signed an order to lift beginning on January 26.

Q4 2020 Statistics

United's adjusted net loss was $2.1 billion, or a loss of $7 per share, in the fourth quarter that ended on December 31, compared with a profit of $676 million a year earlier. That missed analysts' estimates for a loss of $6.60 per share, according to IBES data from Refinitiv.

The airline's total operating revenue fell by 69% to $3.4 billion, in line with forecasts. In the current quarter, United said that it expects its revenue to fall by 65% to 70% from a year ago and its flight capacity to shrink by at least 51%.

Liquidity And EBITDA Expectations

The airline had $19.7 billion of liquidity as of December 31 and expects to have a similar amount at the end of March, it said.

However, its cost reduction plan positions it to exceed its 2019 adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) margin - a key metric of profitability - in 2023, or sooner if demand returns more quickly, United said.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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