MIAMI- United Airlines (UA) loses US$2.1bn during the first quarter of 2020 as a consequence of the pandemic impact, being the first US carrier to report such numbers.
The loss is just one of the indicators of the current overview of the US commercial aviation market, along with staff layoff as UA, American Airlines (AA) and Delta Air Lines (DL) could lose about 105,000 jobs in the next months, according to Bloomberg.
United’s financial state
Due to the cut in travel operations, UA will see more than half of its US$3.9bn pre-tax 2019 profit reduced per its US$2bn losses, as reported by The Points Guy. The amount follows a domestic and international capacity reduction announced in March and April.
As UA expects further cancelations throughout May by 90%, which could be also extended to June, the beginning of the summer schedule and several job cuts could increase the negative numbers if low travel demand remains.
During April, the airline accepted a US$5bn government bailout for payroll assistance as part of the Treasury Department’s aviation aid package. In addition, it has intentions to apply for a further US$4.5bn loan from the CARES Act for other airline’s fixed expenses.
To improve liquidity, UA sold 22 BOC Aviation aircraft in a sale-and-leaseback deal on the weekend while it also arranged a US$2bn one-year credit through private equity firm Apollo Global Management at the end of March.
United CEO and President, Oscar Munoz, and Scott Kirby said in an April employee memo that due to the challenging economic outlook, the overall workforce of the carrier would be smaller, as reported by Bloomberg. This position was also communicated to DL employees by its CFO Paul Jacobson.
During March and April, over one quarter of the total UA, DL and AA workforce, which represents 87,000 employees, already have taken voluntary leaves or early retirement while partial workers had reduced hours.
However, the bailout package comes with certain conditions of no staff reductions throughout September, so carriers are restricted to cut jobs or salaries while receiving grants to cover payroll once they come to an agreement with the Treasury Department.
This scenario means that airlines will carry less operations and their staff will not normally resume to work at long term unless the company’s numbers improve.
According to The Points Guys, Wall Street analysts are forecasting that U.S. airlines will be 25% to 30% smaller by year-end that in the same period last year. The numbers for Delta and Southwest Airlines will give us a better picture, as the carries release their Q1 earnings on the 4th week of April.