United improves quarterly cash burn but employee demand for early exits weak

CHICAGO (Reuters) – United Airlines Holdings Inc (UAL.O) said on Tuesday it burned through about $40 million per day in the second quarter but sees that amount slowing to roughly $25 million in the third quarter as it matches its flight schedule to coronavirus-hit demand.

U.S. airlines are scrambling to adjust operations to hard-to-predict travel demand as COVID-19 infections surge, forcing some U.S. states to scale back reopening plans and reinstate quarantines.

To avoid furloughs when government bailout funds run out in October, U.S. airlines have rolled out a number of packages to encourage employees to leave voluntarily.

Chicago-based United said more than 6,000 employees had opted for such packages. But after sending 36,000 notices of potential furloughs earlier this month, that relatively low take-up suggests United might have to furlough a significant number of workers.

Delta Air Lines (DAL.N) and Southwest Airlines (LUV.N), which offered cash buyouts, have reported strong employee take-up for departures, meaning they could have a less costly workforce on the other side of the crisis given that union contracts force airlines to lay off junior workers first.

United reported an adjusted net loss of $2.6 billion for the June quarter, or a $9.31 per-share loss, versus a $4.21 per-share profit a year ago, as revenue dropped 87% to $1.475 billion.

Analysts on average expected a loss of $9.02 per share and revenue of $1.321 billion, according to data from Refinitiv.

With the timing of a recovery uncertain, investor focus has turned to airlines’ cash on hand and their ability to pick up demand once it returns.

United said it had $15.2 billion in liquidity as of July 20 and reiterated its forecast for liquidity to reach $18 billion at the end of September.

In the third quarter, United expects to operate about 35% of the schedule it flew in 2019. It is forecasting a load factor of about 45% in July after its planes flew about one-third full in the second quarter.

United is more exposed than other U.S. carriers to international travel, which is expected to be slower to recover.

On Tuesday, major U.S. and European Union airlines including United asked the EU and White House to consider a joint program to test passengers for COVID-19 as a way to allow people to travel once again between the United States and Europe.

Last week, Delta said it expects third-quarter revenue and flight capacity to be around 20% to 25% of last summer, with a sustainable industry recovery more than two years away. American Airlines (AAL.O) and Southwest report on Thursday.

United is holding a conference call at 10:30 a.m. EDT on Wednesday.

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