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United Airlines loss bigger than feared on higher fuel costs, capacity slide

MONEY & CAREERS
By Reuters | April 20th 2021

United Airlines on Monday reported a bigger-than-expected loss for the first quarter, as fuel costs rose and seat capacity slumped as carriers remained under stress from weak demand due to the COVID-19 pandemic.

Average fuel cost climbed nearly 30 per cent to $1.74 per gallon in the quarter from the previous three months, while seat capacity fell 54 per cent compared to the same period in 2019. United said it expects fuel costs to rise by another 5 per cent in the second quarter.

The company, however, forecast a return to profitability later this year and said it expects the slide in capacity to slow to 45 per cent in the second quarter, from 2019.

Rival Delta Air too had attributed higher fuel cost in part for its quarterly loss and pinned its hope on profitability later in 2021 as rapid COVID-19 vaccinations are expected to boost air travel.

United said earlier on Monday that it was adding three flights to Croatia, Greece and Iceland, which are among countries reopening for vaccinated travelers.

The Chicago-based carrier said it expects its adjusted earnings before interest, taxes, depreciation, and amortization to turn positive later this year even with business and long-haul international demand remaining 70 per cent below 2019 levels.

The company said it was aiming to be profitable on a net basis as soon as business and long-haul international demand start trending at a level that is 35 per cent below 2019.

United forecast its second-quarter total unit revenue, which compares sales to flight capacity, to fall 20 per cent compared with the same period in 2019. That would be lesser than the 27 per cent drop in the first quarter.

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The company said it expects core cash flow to remain positive for the rest of 2021 after it turned positive in March.

United’s adjusted net loss was about $2.40 billion for the first quarter, compared with analysts’ average estimate for a loss of about $2.23 billion, according to IBES data from Refinitiv.

Total revenue fell 66 per cent to $3.2 billion in the reported quarter, compared with the same period in 2019.

United Airlines passenger jet (PHOTO: Reuters)

 

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