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United Airlines (UAL) Incurs Wider-Than-Expected Loss in Q1

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United Airlines UAL incurred a loss (excluding $3.21 from non-recurring items) of $7.5 per share in the first quarter of 2021, wider than the Zacks Consensus Estimate of a loss of $6.97. This is the fifth consecutive quarterly loss incurred by the company as coronavirus continues to weigh on air-travel demand. Shares of the company dipped 1.9% in after-market trading on Apr 19.

Operating revenues of $3,221 million also fell short of the Zacks Consensus Estimate of $3,253.1 million. The top line plunged 59.6% year over year due to passenger revenues (which totaled $2,316 million in the reported quarter) seeing a 67.2% drop. However, cargo revenues surged 88.3% year over year to $497 million. Meanwhile revenues from other sources declined 37.2% to $408 million.

Operating Results

Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 34.2% year over year to 7.63 cents. Total revenue per available seat mile (TRASM) fell 18.9% to 10.61 cents. On a consolidated basis, average yield per revenue passenger mile declined 17.8% from the year-ago quarter.


During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 60.1% year over year. Capacity (measured in available seat miles) contracted 50.2%. Consolidated load factor (percentage of seat occupancy) deteriorated 14.1 percentage points year over year to 56.8% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon decreased 8.4% year over year to $1.74. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 46.2% to 490 million.

Owing to its cost-reduction initiatives, the Chicago-based carrier was able to bring down adjusted operating costs by 28.3% year over year. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit-sharing and special charges, escalated by 43.8% mainly due to capacity cuts.

United Airlines exited the first quarter of 2021 with cash and cash equivalents of $12.67 billion compared with $11.27 billion at the end of 2020. Long-term debt at the end of the reported quarter was $25.85 billion compared with $24.84 billion at the end of December 2020.

Other Details

During first-quarter 2021, core cash burn averaged $9 million per day, indicating an improvement of about $10 million per day in the fourth quarter of 2020. This Zacks Rank #3 (Hold) company exited the quarter with total available liquidity of $21 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

United Airlines anticipates second-quarter 2021 TRASM to decline approximately 20% compared with the second quarter of 2019. Additionally, capacity is expected to decrease around 45% from the second-quarter 2019 levels. Further, the company estimates operating expenses, excluding special charges, to drop approximately 32% from the 2019 levels. Fuel price per gallon is estimated to be approximately $1.83. Adjusted EBITDA margin is predicted to be approximately (20%) in the second quarter.

Having already generated positive core cash flow on an adjusted basis in March, the company aims to return positive adjusted EBITDA margins “even if business and long-haul international demand remain as much as 70% below 2019 levels”.

The company, which is witnessing evidences of pent-up demand for air travel, now sees “a clear path to profitability”. It is confident of being able to achieve its goal of exceeding 2019 adjusted EBITDA margins in 2023 or sooner, the airline’s CEO Scott Kirby stated.

Sectorial Snapshot

Within the broader Transportation sector, Delta Air Lines (DAL - Free Report) , J.B. Hunt Transport Services (JBHT - Free Report) and Kansas City Southern KSU recently reported first-quarter 2021 results.

Delta, carrying a Zacks Rank #3, incurred a loss (excluding $1.70 from non-recurring items) of $3.55 per share, wider than the Zacks Consensus Estimate of a loss of $3.08. Meanwhile, total revenues of $4,150 million topped the Zacks Consensus Estimate of $3,821.3 million.

J.B. Hunt, a Zacks #3-Ranked player, reported earnings of $1.37 per share, beating the Zacks Consensus Estimate of $1.18. Total operating revenues of $2,618.1 million also surpassed the Zacks Consensus Estimate of $2,486.9 million.

Kansas City Southern, carrying a Zacks Rank of 3, reported earnings (excluding 23 cents from non-recurring items) of $1.91 per share, missing the Zacks Consensus Estimate of $2. Moreover, quarterly revenues of $706 million lagged the Zacks Consensus Estimate of $714.3 million.

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