What happened

Shares of United Airlines Holdings (UAL -2.88%) traded down more than 5% on Monday after the airline announced plans to raise $9 billion in fresh debt. The company also previewed its first quarter, suggesting results might come in slightly below expectations.

So what

Capital markets have rolled out the welcome mats for the airlines, and carriers are taking advantage of the opportunity. United in a regulatory filing said it would raise $9 billion in loans and bonds, with the proceeds going in part to pay off $520 million borrowed from the government last year.

In borrowing to pay off the government loan, United is following a course charted by American Airlines Group last month. The airlines prefer private funding to the government program because the Treasury support came with restrictions on dividends, buybacks, and executive compensation.

A United Airlines plane awaits takeoff.

Image source: United Airlines.

In the filing, United said it expects to report revenue of about $3.2 billion in the first quarter, slightly off the $3.29 billion consensus. It also said it had $21 billion in total liquidity, including available borrowings, as of March 31.

Business is improving after a miserable 2020, but United still struggled through much of the first quarter. The airline said its average daily core cash burn in the first quarter is expected to come in at $9 million, only slightly better than the $10 million cash burn in the fourth quarter of last year.

Now what

Investors are likely reacting to the cash burn and revenue numbers, but United clearly is seeing conditions improve. The company said that in March it observed "a forward acceleration in customer demand for travel and new bookings," and that for the month cash flow was positive. As importantly, United said it expects to post "positive average daily core cash flow moving forward."

The question for investors is whether those improvements are already priced into the stocks. Even with the decline Monday, United shares are still up almost 30% year to date, and up 50% in the last six months. Conditions are clearly improving for United, but it seems likely the recovery will not move as quickly as the stock has.