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United Airlines Sees Improving Revenues & Cash Burn Rate

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United Airlines Holdings Inc. (UAL - Free Report) is witnessing steady improvement in demand in its domestic markets as well as in some international destinations. There has been more than 70% reduction in customer-cancellation rates from the highs in April. Consequently, ticketed passenger revenues (a component of passenger revenues, excluding ancillary fees and frequent flyer revenue among other things) are expected to rise nearly 400% in June from that in April.

Since the end of May, net bookings have remained positive for the remainder of the second and third quarters. For July, consolidated capacity is anticipated to be down approximately 75% year over year (better than 85% reduction in June capacity). With this, passenger revenues are predicted to increase between 50% and 100% in July from the June figure.

However, since demand is way below the year-ago levels, United Airlines, carrying a Zacks Rank #3 (Hold), anticipates second-quarter total revenues to decline 88% year over year. Backed by international cargo-only flying, cargo revenues, expected to surge more than 30% year over year in the second quarter, have been a key revenue generator. Both American Airlines (AAL - Free Report) and Delta Air Lines (DAL - Free Report) expect a 90% year over year decline in their second-quarter revenues. While American Airlines carries a Zacks Rank #3, Delta Air Lines carries a Zacks Rank #4 (Sell).

Thanks to aggressive cost-cutting measures, United Airlines’ operating expenses are predicted to plunge 53% year over year in the second quarter. With this, second-quarter average daily cash burn is expected to be at the low end of the guidance of $40-$45 million. In the third quarter, the same is forecast at approximately $30 million per day.
The company is focused on achieving capital expenditure savings of more than $2.5 billion for the full year, which would lower its capital expenses to below $4.5 billion.

United Airlines expects to end the third quarter of 2020 with total liquidity of $17 billion, which includes $5 billion of financing to be secured by its MileagePlus loyalty program and $4.5 billion of loan under the CARES Act.

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