United Airlines has shifted its focus from survival to recovery, though executives still expect any significant pickup in demand will not happen until well into next year, with business travel demand not reaching pre-pandemic levels until 2024.
The carrier ended the third quarter with US$19.4 billion in total liquidity, having raised US$22 billion since March through federal aid as well as commercial debt offerings, stock issuances and other methods. Daily cash burn during the third quarter averaged US$25 million, which includes US$4 million in daily debt principal and severance payments, compared with US$40 million in the second quarter.
In an earnings call, CEO Scott Kirby said he expects to be the first network carrier to reach positive cash flow and that cash burn was "not the issue anymore," as United has enough liquidity to endure the pandemic.
"The light at the end of the tunnel is now visible," Kirby said. "It's a long tunnel that will have twists and turns, but we'll begin to move back towards normal with what health experts are telling us is a widely available vaccine around the end of next year."
Still, Kirby acknowledged that the next 12 to 15 months would be "difficult." United's passenger revenue in the third quarter was US$1.6 billion, down 84.3 per cent year over year, and total operating revenue was down 78.1 per cent year over year. Revenue in the fourth quarter is forecast to be down 67 per cent year over year, including a 72 per cent decline in passenger revenue, chief commercial officer Andrew Nocella said.
Business travel demand remains slight, down between 85 per cent and 90 per cent, EVP and CFO Gerry Laderman said. It has shown slight improvement, "more with smaller corporations than larger corporations at this point," he said.
Kirby said he expected that as general demand begins a true recovery around the beginning of 2022, it would likely take until 2024 for business travel demand to get "back to normal." However, he said he was confident in its eventual return.
"I've been fond of saying that the first time someone loses a sale to a competitor who showed up in person is the last time they tried to make a sales call on Zoom," Kirby said. "Business travel is incredibly important to United. It was our bread and butter before, and I think it will be our bread and butter in the future."
In the meantime, United is turning from cost savings to investment, including in projects that will help United get through the pandemic—such as Covid-19 testing programs—and commercial investments, such as work on Polaris and Premium Plus cabins on United's Boeing 787 fleet, which restarted in August, Kirby said.
Capacity in the third quarter was down 70 per cent year over year, and United plans to be "conservative" with future capacity, according to Nocella. The carrier expects consolidated capacity will be down 55 per cent year over year in the quarter, and capacity in early 2021 will be consistent with those levels, he said.
United reported a US$1.8 billion loss for the third quarter, compared with net income of US$1 billion in the third quarter of 2019.