Shares of United Airlines Holdings (UAL - Free Report) declined 3.4% at the close of business on Sep 9, following its reduced guidance for third-quarter 2020 capacity and passenger revenues. With coronavirus concerns continuing unabated, the company is seeing significantly suppressed air-travel demand.
According to a SEC filing, the Chicago, IL-based airline anticipates capacity to decrease approximately 70% year over year in the third quarter. Previously, the carrier estimated capacity to decline approximately 65%. Additionally, passenger revenues are predicted to fall approximately 85% year over year in the current quarter, compared with the previous expectation of a decline of approximately 83%.
This guidance cut comes despite the company seeing “moderate improvement in bookings for leisure travel in the domestic United States and certain short-haul destinations in Latin America and the Caribbean” in the last two weeks, ending Sep 7, 2020.
United Airlines, carrying a Zacks Rank #4 (Sell), will continue to “evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand.” It expects “demand to remain suppressed and plateau at levels of around 50%, relative to 2019 levels, until a widely accepted treatment and/or vaccine for COVID-19 is widely available.”
The company maintains its projection for average daily cash burn at approximately $25 million per day for the third quarter. Additionally, total liquidity is still anticipated to be more than $18 billion at the end of the third quarter.
Deal to Avert Pilot Furloughs
As United Airlines grapples with the coronavirus-induced reduced demand for air travel, it warned of furloughing roughly 16,370 employees post Sep 30, i.e, when the federal aid expires. This implies that 2,850 pilots, 2,010 mechanics and 6,920 flight attendants alongside multiple management and support staff might lose their jobs between Oct 1 and Nov 30.
However, the company has been evaluating possibilities to reduce the extent of job cuts. In this regard, it has reached an agreement in principle with the pilots’ union to avoid furloughs. Details of the agreement, which needs to be approved by the union members, were not available.
Other U.S. carriers such as Southwest Airlines (LUV - Free Report) , Spirit Airlines (SAVE - Free Report) and JetBlue Airways (JBLU - Free Report) have also reached deals with their pilots’ unions to avoid furloughs.
Each of the stocks mentioned above carries a Zacks Rank #4.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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