United Airlines (NASDAQ: UAL) achieved 36.3% growth in cargo revenue in the second quarter after transitioning idle aircraft to cargo-only flights, but the glimmer of good news was overshadowed by a $1.6 billion net loss.
It was the worst quarter in United’s 94-year history. Revenues fell 87% year-over-year as travel demand evaporated because of travel restrictions and fears of infection from the coronavirus, United said. The earnings report, released after the market closed Tuesday, showed the Chicago-based carrier with $15.2 billion in liquid assets and expectations for cash-equivalent assets to be more than $18 million by the end of the third quarter.
United was able to drop its cash burn to $40 million per day from $50 million per day in March, and said it was on track for daily cash spending to be about $25 million during the current quarter, including $6 million of principal repayments and severance expenses.
“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,” said CEO Scott Kirby. “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. We believe this quick and aggressive action has positioned United to both survive the COVID crisis and capitalize on consumer demand when it sustainably returns.”
Second quarter cargo revenue was $402 million. For the first half of the year, cargo revenue grew 14.6% to $666 million.
The positive cargo trend could continue in the third quarter. United Cargo President Jan Krems said in a recent customer bulletin the airline will continue to fly the so-called “mini-freighters” for the near term because passenger networks will still be a stunted and unable to offer airlift. United is operating 270 cargo-only flights per week to more than 20 airports worldwide. United has operated more than 3,800 cargo-only flights hauling 204 million pounds of cargo since the crisis began.
Since the start of the crisis the company has raised a total of $16.1 billion through debt offerings, loans, stock issuances and the federal payroll assistance grants and loans.
United has also reduced total operating costs by 69% versus the second quarter of 2019.
United said it expects consolidated system capacity to be down 65% versus third quarter 2019. The company will continue to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand, and expects demand to remain suppressed until the availability of a widely accepted treatment and/or vaccine for COVID-19.
Early industry optimism that air travel was picking up has lost steam as the pandemic accelerates across the U.S.
Earlier this month, United informed 36,000 workers about plans to reduce its workforce as part of a strategic realignment to reduce redundancies for the next several years. In a Securities and Exchange Commission filing it said it will book $300 million in charges for voluntary employee separation, $50 million of it in cash.
In a further attempt to build confidence with the traveling public, United on Monday said it will maximize airflow volume during the entire boarding and deplaning process to help reduce the spread of the coronavirus. Air will be recirculated, as during flight, through HEPA filters every two to three minutes, something doctor say can significantly increase safety.