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United Announces $2.1 Billion Loss in Q1 2020 Due to COVID-19

Date: April 22, 2020

As Oscar and Scott told us in their recent address to employees, “The challenge that lies ahead for United is bigger than any we have faced in our proud 94-year history.”   This morning, reinforcing this message in numbers, United furnished a Form 8-K to the Securities and Exchange Commission disclosing that United expects to post a $2.1 billion pre-tax loss for the first quarter of 2020.

As a company, we continue to experience a material decline in demand for travel, both domestic and international resulting from the effects of the COVID-19 pandemic on our business.  Management reported a loss of revenue of approximately $100 million per day, on average, in the last two weeks of March 2020 compared to the prior period. In an ongoing effort to address reduced demand, United has cut 80% of its capacity for April and expects to cut 90% of our capacity for May with similar cuts expected to continue into June.  The business plan calls for a proactive evaluation and cancellation of flights on a rolling 60-day basis until there is some form of recovery in demand for travel.

United’s 8-K filing outlined specifics of the approximately $5 billion in grant aid and loans that are expected under the CARES Act.  Approximately $3.5 billion of the proceeds will be a direct grant to pay salaries and benefits to tens of thousands of United employees while the remaining approximately $1.5 billion will be in the form of a low-interest 10-year loan, which is expected to be pre-payable at par at any time.        

In addition, today’s 8-K filing refers to an application United submitted on Friday under the Loan Program of the CARES Act that United expects will give the corporation the ability, through Sept. 30, 2020, to borrow up to $4.5 billion from the U.S. Treasury Department for a term of up to 5 years in the form of a senior secured obligation of the Company.

In connection with any borrowings under the Loan Program and with the receipt of any funds under the Payroll Support Program, the Company and its business will be subject to certain restrictions and also expects to issue to the U.S. Treasury Department warrants to purchase shares of United Airlines Holdings, Inc. common stock.

Also noted in today’s 8-K filing, United entered into an agreement with Chinese lessor BOC (Bank of China) Aviation to finance in a sale and lease transaction six Boeing 787-9 aircraft and 16 Boeing 737 MAX 9 aircraft scheduled to be delivered in 2020.

This is truly an extraordinary situation that has and will continue to have an unprecedented impact on our families and our company. Our path forward, while uncertain, is best navigated together.

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