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United Airlines (UAL) Posts Q2 Loss, Sees a Dip in Load Factor

Zacks Equity Research

With coronavirus continuing to wreak havoc on the airline space, United Airlines UAL became the second carrier after Delta Air Lines DAL to report a loss for the second quarter of 2020.

United Airlines incurred a loss (excluding $3.52 from non-recurring items) of $9.31 per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of $9.13. Results were hurt by the coronavirus-induced weakness in air-travel demand.

Even though operating revenues of $1,475 million slumped 87.1% year over year, the same beat the Zacks Consensus Estimate of $1,217 million. This year-over-year plunge was due to the 93.5% drop in passenger revenues. However, the carrier’s move to operate cargo-only flights in the face of declining passenger revenues paid off as revenues from the same surged 36.3% year over year. Meanwhile revenues from other sources declined 36.9% in the June quarter.

United Airlines Holdings Inc Price, Consensus and EPS Surprise
United Airlines Holdings Inc Price, Consensus and EPS Surprise

Operating Results

Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 46.9% year over year to 7.6 cents. Total revenue per available seat mile, however, increased 5.7%. On a consolidated basis, average yield per revenue passenger mile jumped 37.8% from the year-ago quarter.

During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 95.3% year over year. Capacity (or available seat miles) contracted 87.8%. Consolidated load factor (percentage of seat occupancy) deteriorated 5290 percentage points to 33.1% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon fell 45.4% year over year to $1.18. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 81.5% to 204 million.

Total adjusted operating expenses declined 41.4% year over year to $4,263 million in the reported quarter. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit sharing and special charges escalated in excess of 100%.

United Airlines exited the second quarter with cash and cash equivalents of $6,505 million compared with $2,762 million at 2019 end. Long-term debt at the end of the reported quarter was $14,318 million compared with $13,145 million at 2019 end.

Other Details

During the June quarter, cash burn averaged $40 million a day including $3 million of principal payments and severance expenses. This presently Zacks Rank #3 (Hold) carrier expects average daily cash burn to be approximately $25 million for the September quarter (including $6 million of principal payments and severance expenses). Liquidity at the end of the third quarter is forecast to be more than $18 billion. Consolidated system capacity is expected to tank 65% year over year during the period. Adjusted capital expenditures for the current year are anticipated to be approximately $3.7 billion.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Airline Releases

Investors interested in the Zacks Airline industry are keenly awaiting second-quarter earnings reports of American Airlines AAL and Southwest Airlines LUV on Jul 23. Both stocks carry the same Zacks Rank as United Airlines at present.

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Click to get this free report Southwest Airlines Co. (LUV) : Free Stock Analysis Report Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report United Airlines Holdings Inc (UAL) : Free Stock Analysis Report American Airlines Group Inc. (AAL) : Free Stock Analysis Report To read this article on Zacks.com click here.