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Thread: United Airlines promises more cost cuts as cash burn rises

  1. #1

    United Airlines promises more cost cuts as cash burn rises

    Source: https://www.ft.com/content/fff71ee5-...2-8a25c6e71b06


    United Airlines vowed to step up its cost-cutting efforts after its cash burn rose in the fourth quarter because of interest payments on its mounting debt and the costs of reducing staff.

    Scott Kirby, chief executive at the US carrier, said the Covid-19 pandemic “has changed United Airlines forever” and that the company planned to make “structural reductions” that would make it “more profitable than ever”.

    The company said that in two years it will beat the 15.8 per cent margin on earnings before interest, taxes, depreciation and amortisation that it posted in 2019, before the pandemic crushed demand for air travel.

    But in the fourth quarter of 2020, the airline’s cash burn rose to $33m a day from $25m a day in the third quarter. The amount devoted to servicing debt and paying severance to employees rose from $4m to $10m a day.

    United cut 22,000 jobs because of the crisis, although it temporarily recalled some of those workers after US lawmakers in December approved a further $15bn in aid to the battered industry. The aid extends a programme to support payrolls until March 31.

    The carrier was the second US carrier after Delta Air Lines to release results for 2020, a year that punished airlines worldwide as governments imposed restrictions on travel. United posted a net loss of $1.9bn for the fourth quarter and $7.1bn for the whole of 2020.

    Operating revenue for the fourth quarter increased to $3.4bn from $2.5bn in the previous quarter, as Americans chose to travel for the Thanksgiving and Christmas holidays despite government warnings. Revenue was still down 69 per cent from the fourth quarter of 2019.

    The Chicago company’s adjusted loss per share of $6.39 slightly beat expectations of the 23 analysts polled by FactSet, who forecasted a $6.62 adjusted loss per share on $3.4bn in revenue.

    United forecasted that its capacity would be down 51 per cent in the first quarter of 2021 compared to the same period in 2019, and its revenue would be down 65-70 per cent. “Airlines are doing their best to control costs, but there is a limit,” Cowen analyst Helane Becker said in a note. “The industry needs a revenue recovery.”

  2. #2
    Regular Contributor
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    The industry needs one less airline. Who will it be?

  3. #3
    Regular Contributor
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    Quote Originally Posted by Chris View Post
    The industry needs one less airline. Who will it be?
    I hate to say it because I have a lot of friends that work at American both in the sim shop at CLT and cabin crew but I think it will be them. They are saying they will have to lay off another 13,000 employees if they dont get $51 billion in relief.

  4. #4
    Regular Contributor
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    Mar 2020
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    The $1.9 trillion COVID bill currently moving through Congress has more airline money in it.
    This may just be enough to weather the storm and get everyone through to the other side.
    The problem with AA going into bankruptcy is that once they do, everyone else of similar size kind of "has to" as well.
    One reason being aircraft values plummet basically overnight and the other guys want to renegotiate their leases, etc. as well to take advantage of the market conditions.

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