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United Still Working to Slow Cash Burn, Announces $1.6 Billion Loss

By Howard Smith – Jul 22, 2020 at 1:06PM

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The airline announced second-quarter results with operating revenue down 87.1% versus the year-ago period.

United Airlines (UAL -1.16%) reported a $1.6 billion loss in its second quarter, with operating revenue down 87.1% due to operating capacity having decreased 87.8% compared with 2019. It expects flight schedule capacity in the third quarter to be about 35% of what it was in the third quarter of 2019. That's in line with a previous announcement that it would be at 30% capacity in July and would be adding flights for August to get to 40% of August 2019 levels. 

The airline continues to burn through cash at a rate of $40 million per day; but with reduced operating costs, it expects to average about $25 million in daily cash burn for the third quarter. Rival Delta Air Lines recently said in its quarterly earnings report that it had reduced its daily cash burn rate to $27 million in June 2020.  

An airplane flying over clouds

Image source: Getty Images.

United said it had total liquidity of $15.2 billion as of July 20, 2020, and that it expects to end the third quarter at over $18 billion in liquidity. The company has already raised $16.1 billion in financing since the start of the COVID-19 crisis through debt offerings, issuing stock, receiving aid through the CARES Act, and other items. 

Cash preservation actions have included entering into a sale-leaseback program for new aircraft scheduled for delivery in 2020, in addition to cutting capital spending. It now says it plans on capital expenditures for the year to be about $3.7 billion. In May 2020, it had expected to spend under $4.5 billion.

United also announced an expansion of its mask-wearing policy, saying it will require face coverings in all the airports it serves, including service counters, United Clubs, gates, and baggage claim areas. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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