United Airlines reported deepening losses in the third quarter and a $1.1bn charge to cover 22,000 job cuts during the coronavirus pandemic.
The Chicago-based company said it suffered a net loss in the third quarter of $1.8bn, about $200m more than in the second quarter and a reversal from the $1bn it earned in the same period of last year. Operating revenues plunged 78 per cent to $2.5bn as it reduced flights from last year’s levels.
Cash burn averaged $25m a day for the period — compared with $40m a day in the second quarter — of which $4m was dedicated to servicing debt and paying severance to employees. United had $19.4bn in liquidity at the end of the third quarter.
The company also said on Wednesday that it expected to pay $1.1bn to reduce its workforce by 22,000 employees — 13,000 through furloughs, and 9,000 through voluntary departures. The costs comprise a mix of severance and settlement losses from the employees’ pension plan.
United began furloughing 13,000 employees two weeks ago, as restrictions on US government aid meant to preserve jobs expired. The company recorded $294m of the workforce reduction charge in the second quarter, and $765m in the third quarter. It has also paid $14m in severance for managers this year.
“We’re ready to turn the page on seven months that have been dedicated to developing and implementing extraordinary and often painful measures,” Scott Kirby, United’s chief executive, said in a statement.
“Even though the negative impact of Covid-19 will persist in the near term, we are now focused on positioning the airline for a strong recovery that will allow United to bring our furloughed employees back to work and emerge as the global leader in aviation.”
The pandemic has devastated the airline industry since the spring, when fears of the virus and governmental travel restrictions choked air traffic to a trickle. While US passenger numbers have recovered to approximately 30 per cent of their level a year ago, airlines continue to burn tens of millions in cash each day.
The US Congress began underwriting the bulk of the industry’s labour costs in March when it passed a $50bn bailout package that required airlines to maintain their payrolls through to October 1. Originally, industry executives and lawmakers thought the aid would act as a bridge until passenger numbers rebounded. Since then, lawmakers have refused to extend additional funds to airlines, despite lobbying from executives and aviation unions.
American Airlines joined United with furloughs when the deadline passed, furloughing 19,000. The announced job losses have been smaller than the 56,000 cuts the companies warned of during the summer. So far, Delta and Southwest Airlines have avoided furloughs, although 1,700 Delta pilots could lose their jobs on November 1.
Airlines are hunting for revenue wherever they can. United is trying to lure passengers back to the skies by dropping change fees and offering more flights to holiday destinations to court leisure travellers. The company’s cargo revenue climbed 50 per cent in the third quarter to $422m.
The airline’s loss of $8.16 per share compared with a $7.53 loss anticipated by analysts polled by FactSet.
United shares were 0.4 per cent lower in after-hours trading.