United Airlines Lost $1.6 Billion due to the Pandemic

Air travel

United Airlines announced that it has lost $1.6 billion in the second quarter as air travel was down because of the pandemic.

However, the airline’s net collection was just $1.4 billion in revenue. This is an 87.1 percent drop as compared to the same quarter last year, with capacity falling 87.8 percent.

But there was a somewhat positivity in the airline’s announcement, things were not nearly as bad as they could have been.

Delta Air Lines also announced its second-quarter performance which is worse than United. However, the airline reported that its net loss for the quarter is $5.7 billion.

The reason why united has less loss than Delta is that United reduced its operating expenses more than Delta. United cut its expenses by nearly 69 percent as compared to 2019. Whereas Delta made reductions in its expenses by just 40 percent.

United’s capacity, on the other hand, was just 15% lower than Delta’s for the quarter. Suggesting that the cost savings came from more than just grounding flights.

However, in the second quarter, United was consuming an average of $40 million in cash every day. Whereas, in a press release the airline says that it expects cash burn to fall to $25 million per day in the third quarter.

“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,” United CEO Scott Kirby said in a press release.

“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.”

United and Delta both said that travel demand was low by about 93 percent as compared to the same quarter last year. And passenger revenues fell by 93.5 percent. However, revenues from operating cargo flights were up about 36.3 percent. While other operating revenue declined 36.9%, from $621 million to $392 million.

Cost Cutting Plans

United Airlines announces that it will be sending layoff notices to about 36,000 of its US employees. This will be nearly half of the airline’s US staff.

However, other than the staff cuts, United Airlines also plans to reduce its management and support staff by 1,300 starting from 1 October. Moreover, the airline will be reducing its international staff as well. United employs 95,000 people.

The layoffs at United are the latest in a long line of hits the industry has taken since the arrival of the coronavirus. There has been a decline in air travel by 95 percent since the beginning of March until the middle of April due to the pandemic.

But as the government was lifting travel restrictions air travel was recovering slowly. But the number of US air travelers is still low as compared to the same time last year. It is down by 70 percent.

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