United Airlines vowed to step up its cost-cutting efforts after its cash burn rose in the fourth quarter because of interest payments on its mounting debt and the costs of reducing staff.
Scott Kirby, chief executive at the US carrier, said the Covid-19 pandemic “has changed United Airlines forever” and that the company planned to make “structural reductions” that would make it “more profitable than ever”.
The company said that in two years it will beat the 15.8 per cent margin on earnings before interest, taxes, depreciation and amortisation that it posted in 2019, before the pandemic crushed demand for air travel.
But in the fourth quarter of 2020, the airline’s cash burn rose to $33m a day from $25m a day in the third quarter. The amount devoted to servicing debt and paying severance to employees rose from $4m to $10m a day.
United cut 22,000 jobs because of the crisis, although it temporarily recalled some of those workers after US lawmakers in December approved a further $15bn in aid to the battered industry. The aid extends a programme to support payrolls until March 31.
The carrier was the second US carrier after Delta Air Lines to release results for 2020, a year that punished airlines worldwide as governments imposed restrictions on travel. United posted a net loss of $1.9bn for the fourth quarter and $7.1bn for the whole of 2020.
Operating revenue for the fourth quarter increased to $3.4bn from $2.5bn in the previous quarter, as Americans chose to travel for the Thanksgiving and Christmas holidays despite government warnings. Revenue was still down 69 per cent from the fourth quarter of 2019.
The Chicago company’s adjusted loss per share of $6.39 slightly beat expectations of the 23 analysts polled by FactSet, who forecasted a $6.62 adjusted loss per share on $3.4bn in revenue.
United forecasted that its capacity would be down 51 per cent in the first quarter of 2021 compared to the same period in 2019, and its revenue would be down 65-70 per cent.
“Airlines are doing their best to control costs, but there is a limit,” Cowen analyst Helane Becker said in a note. “The industry needs a revenue recovery.”