United warns travel demand will languish until COVID-19 vaccine

By Tracy Rucinski

CHICAGO (Reuters) - United Airlines Holdings Inc <UAL.O> warned on Tuesday that travel demand will remain suppressed until there is a widely accepted treatment or vaccine for COVID-19, which plunged the carrier to a deep quarterly loss on Tuesday.

Coronavirus infections are surging in the United States, causing some states to scale back reopening plans and reinstate quarantines in a fresh blow to airlines.

United, which is not blocking middle seats, plans to fly about 35% of its 2019 summer schedule in the third quarter and is forecasting a load factor of about 45% in July. Its planes flew about one-third full in the second quarter.

The setback does not bode well for airline jobs in the fall, when a U.S. government stimulus package expires. To avoid furloughs, 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.

Airline unions have urged lawmakers to pass another round of aid through March, but airlines say they are not counting on fresh funds.

Delta Air Lines <DAL.N> and Southwest Airlines <LUV.N>, which offered cash buyouts, have reported strong employee response for voluntary departures, meaning they could have a less costly workforce on the other side of the crisis since union contracts force airlines to furlough junior workers first.

While early data from trials of three potential COVID-19 vaccines released on Monday was encouraging, it is still far from clear whether the efforts will result in a vaccine capable of ending the global pandemic that has claimed more than 600,000 lives.

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 had $15.2 billion in liquidity as of July 20 and reiterated its forecast for liquidity to top $18 billion at the end of September as it taps additional capital.

The airline 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 demand.

The airline, which is more exposed than peers to harder-hit international travel, 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.

Still, United Chief Executive Scott Kirby said in a statement he believed the quarterly losses and cash burn were lower than large network competitors.

Delta said last week it was burning about $27 million a day in June and July. American Airlines <AAL.O> and Southwest report on Thursday.

Shares of United, which will hold a conference call at 10:30 a.m. EDT on Wednesday, were flat after the bell.

(Reporting by Tracy Rucinski in Chicago; Editing by Matthew Lewis)