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“Demand to Remain Suppressed” till Vaccine/Treatment Widely Available: United Airlines. May Not Happen till Late 2021 “or Even Later”: Health Care Leaders

“Demand to Remain Suppressed” till Vaccine/Treatment Widely Available: United Airlines. May Not Happen till Late 2021 “or Even Later”: Health Care Leaders

Flattened-out fish-hook-shaped recovery of demand?

Passenger revenues collapsed by 94% to just $681 million, United Airlines disclosed in its Q2 earnings report today. Other operating revenues plunged by 37% to $392 million, but cargo was hot, rising 36% to $402 million “by serving strategic international cargo-only missions and optimizing aircraft capacity with low passenger demand.” All combined, revenues collapsed by 87%.

This has now become the serenade by airlines to investors. United follows Delta in it: Revenues have totally collapsed, and we’re in an existential crisis, and we’re cutting costs and capacity like maniacs, and we need to shed tens of thousands of employees, to reduce our cash burn, but we’ve raised many billions of dollars from you all (thank you) and from taxpayers, and we will duly burn this cash during this crisis.

United burned $40 million a day in Q2. It expects to reduce this cash burn to $25 million a day in Q3 – about $2.3 billion in the quarter – and reduce it further in Q4.

United said today it has slashed operating costs by 54%” compared to Q2 last year; this includes expenses for fuel, which were down 90%, aircraft maintenance down 74%, landing fees down 35%, and its largest line item, salaries down 29%.

Those are huge cuts. Earlier in July, in a dreary assessment of the airline industry and traffic, including a renewed decline in ticket sales starting in late June, United announced 36,000 “involuntary furloughs” on or after October 1 if it can’t entice those employees to leave voluntarily beforehand.

Despite the cost cuts, United lost $2 billion in the quarter.

And it said that it expects its system capacity in Q3 to still be down by 65% compared to Q3 last year. And it will cancel flights and adjust capacity “until it sees signs of a recovery in demand.”

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