United Airlines lists traffic needed for profit as losses pile up

NEW YORK • United Airlines has listed the travel milestones needed for a return to profitability after posting a bigger-than-expected loss in the first quarter and offering limited insight into its expectations for the summer flying season.

It sees an end to net losses when business and international traffic recover to 65 per cent of 2019 levels, but it has not predicted when that would happen or quantify the current decline. Generating adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) is on the table when demand in those segments gets back to 30 per cent of pre-pandemic levels, United said on Monday.

"We've shifted our focus to the next milestone on the horizon and now see a clear path to profitability," United chief executive officer Scott Kirby said in a statement. He said he was "encouraged by the strong evidence of pent-up demand for air travel".

The carrier's guarded optimism echoes a similar tone from Delta Air Lines, which last week posted a worse-than-anticipated quarterly loss but predicted summer gains in passenger loads. Expanding US vaccination rates are bolstering airline ticket sales after more than a year in which most Americans stayed close to home.

United fell 2.1 per cent to US$53.84 after the close of regular trading in New York. The shares had advanced 27 per cent this year through Monday, in line with the gains of Standard & Poor's index of big US airlines. But rising doubts about the travel outlook have spurred nine straight days of declines on the stock gauge, the longest streak since 2009.

American Airlines, Southwest Airlines and Alaska Air all report earnings tomorrow.

"While the comments were likely made to show where break-even can occur during the recovery, investors may be interpreting them as an expectation that it will take longer than anticipated for business and international travel to recover fully," Cowen & Co analyst Helane Becker said in a note.

Adding to the uncertain outlook for airlines, the US State Department said it was changing the way it issues travel advisories to reflect the global prevalence of the virus - a move it said will result in about 80 per cent of the world's nations being considered no-go zones.

United's adjusted loss - its fifth in a row - worsened to US$7.50 a share in the first quarter. Sales tumbled 60 per cent to US$3.22 billion (S$4.3 billion), slightly less than the US$3.25 billion expected by Wall Street. The revenue drop since the same period of 2019 was 66 per cent. United said it ended the first quarter with US$21 billion in liquidity, including US$7 billion it has not tapped from a US government loan programme.

For the second quarter, it plans to operate more than half of its pre-pandemic capacity, or 45 per cent lower than the same period in 2019. First-quarter capacity was 54 per cent below 2019 levels.

BLOOMBERG