United Airlines Holdings (NASDAQ:UAL) said Monday it has filed to sell up to 28 million shares of stock and is taking other steps to raise additional capital. The move, while dilutive to current shareholders, should give the airline about $17 billion in total liquidity by the end of the third quarter.
In a securities filing, United said that the share sale represents up to 9.6% of its total shares outstanding. The airline is also raising an additional $5 billion backed by its loyalty program and said it is expected to receive about $4.5 billion from the CARES Act loan program backed by available slots, gates, and routes collateral.
This is United's second share sale since the COVID-19 crisis began, following the airline's April sale of about 39 million shares. Secondary offerings tend to lower the value of individual shares because they mean that each share represents a smaller piece of the overall pie, but with airline revenue down upwards of 90% year over year due to the pandemic, companies have had to do what they can to raise cash.
In May, United pulled a planned $2.25 billion note offering amid rumors the airline was having a hard time attracting interest in the debt.
In the filing Monday, United painted a mixed picture concerning demand. The airline said it "continues to see a steady improvement" for domestic and certain international travel, adding that customer cancellation rates are down 70% from April and ticketed passenger revenue expected to jump 400% in June from April lows.
Nevertheless, the company still expects July domestic capacity to be down 75% year over year and ticketed passenger revenue to be down more than 80%. United expects its daily cash burn for the second quarter to be about $40 million, falling to $30 million per day in the third quarter. United also said that it is in negotiations with its unions concerning future staffing levels.
Investors can read the update as glass half full or half empty. The good news is United is demonstrating it still has levers to pull to raise more cash and should have a substantial cash balance by the fall to use to weather an extended downturn. The bad news is United seems to expect it will need it.