Airline industry earnings season hits its stride this week, with a number of the nation's largest carriers reporting first-quarter results.

The actual numbers are anticlimactic, as investors know the COVID-19 pandemic began to sap travel demand late in the first quarter and the falloff accelerated in April. Airlines are going to post first-quarter losses, and the losses will be far worse when second quarter numbers come out in July.

United Airlines Holdings (NASDAQ:UAL) came into 2020 flying high, with shares up more than 580% in the previous decade thanks to an impressive turnaround that has allowed it to streamline costs, improve its ticket pricing, and increase margins.

All that work is now at risk of unraveling due to the pandemic. United expects to fly fewer people during the entire month of May 2020 than it did on a single day in May 2019, and its shares are down more than 65% year to date.

Expect an ugly quarter, and uglier guidance

United is scheduled to release earnings Thursday evening, April 30, and discuss them with investors on Friday morning. Analysts expect the airline to lose $2.68 per share in the quarter on revenue of $8.23 billion. By comparison, in the first quarter of 2019, United earned $1.15 per share on $9.59 billion in sales.

Initial indications suggest those estimates might be pessimistic. So far two major airlines, Delta Air Lines and Southwest Airlines, have reported first quarter results, and both airlines recorded losses significantly less than what was anticipated.

In mid-April, United pre-announced a preliminary quarterly loss of about $2 billion, but that included non-cash charges relating to a decline in the value of the airline's investment in Colombia's Avianca Holdings.

A United Airlines jet taxis towards the runway.

Image source: United Airlines.

Regardless, expect United to focus on how the second quarter is going. The airline is likely to see revenue fall by 90% or more compared to the $11.4 billion in total operating revenue it reported in the same three months of 2019.

The pandemic is responsible for a lot of that fall off, but United is also heavily exposed to the tech and energy sectors through its large hub operations in San Francisco and Houston, and among U.S. airlines is one of the most exposed to Asia. With oil prices hitting record lows and major tech companies cutting conferences through the remainder of the year and tightening their belts ahead of a potential economic downturn, United is unlikely to see a quick bounce back even if the virus is soon contained.

United's total capacity for the quarter is expected to be down 80% to 90% year over year, and revenue is sure to follow.

What to listen for during the conference call

Given the current state of the travel industry, investors should be less concerned about when United will again make money and more concerned with whether the airline has enough cash to ride out the storm. The airline is getting about $5 billion in payroll support funding from the U.S. government, including $1.5 billion in loans, and is expected to apply for another $4.5 billion from the U.S. Treasury.

United has also successfully tapped equity markets, raising $1 billion earlier this month by selling 39.25 million shares. That offering diluted existing shareholders by nearly 15% and was done near multi-year lows, but for investors it is preferable to getting zeroed out in a bankruptcy filing. United still likely has billions in unencumbered assets it could use as collateral for additional loans and could discuss other options for raising additional cash.

United has billions in cash at its disposal and is likely burning through $25 million to $50 million daily. Investors are going to be eager to hear exact figures for each of those numbers to get a feel for how long the airline can go before it runs out of cash.

A groundworker directs an airplane to the terminal.

Image source: Getty Images.

Expect management to also update their outlook for the quarters to come. Capacity, and with it revenue, will hopefully rebound off of second-quarter lows in the second half of 2020, but with a recession looming there will likely be a slow recovery.

United management has been more blunt than most in warning that absent a recovery in the months to come, significant layoffs will be needed in the fall. It will be interesting to see if management is seeing any signs of a recovery, including an uptick in bookings 90 days out.

Is it time to buy United stock?

I'm optimistic traffic will return in time to allow the airlines to avoid bankruptcies, but the traffic is likely to only return to more typical recessionary levels, in which large, complex carriers like United can struggle to make money. A full recovery to pre-pandemic traffic levels is likely years away, and a lot of other sectors are likely to rebound off their lows before the airlines do.

For those willing to wait out the recession, it is safe to invest in airline shares. But given the challenges the industry faces, I'd prefer to stick to top operators including Southwest and Delta instead of taking my chances on United. Delta in particular has fallen almost as much as United year to date, and trades at similar depressed multiples to sales and earnings, despite being much further along in its transformation and boasting a better track record in recent years.

It's too late to bail on the airlines, given how far the shares have fallen already. But it is still way too early to be buying into speculative recovery stories like United.