United Air posts bigger-than-feared US$2.4b net loss for Q1

Chicago

UNITED Airlines on Monday reported a bigger-than-expected US$2.4 billion adjusted net loss for the first quarter, as fuel costs rose and the airline operated fewer flights amid continued weak demand due to the Covid-19 pandemic.

Average fuel cost climbed nearly 30 per cent to US$1.74 per gallon in the quarter from the previous three months, while passenger traffic fell 52 per cent compared to the same period in 2020.

The World Health Organization did not declare Covid-19 a pandemic until near the end of Q1 in 2020.

United Airlines said it expects fuel costs to rise by another 5 per cent in the second quarter. The airline, however, forecast a return to profitability later this year and said it expects to restore some capacity cuts as more people are willing to travel. Capacity should reach 45 per cent of 2019's level in Q2 from 2019, United said.

United's adjusted net loss was about US$2.40 billion for Q1, compared with analysts' average estimate for a loss of about US$2.23 billion, according to IBES data from Refinitiv.

United Airlines CEO Scott Kirby said the airline now sees "a clear path to profitability". United shares fell 1.8 per cent in aftermarket trading.

Rival Delta Air too had pointed to higher fuel costs in part for its quarterly loss and pinned its hope on profitability later in 2021 as rapid Covid-19 vaccinations are expected to boost air travel.

United said earlier on Monday that it was adding three flights to Croatia, Greece and Iceland, which are among countries reopening for vaccinated travellers. The carrier expects its adjusted earnings before interest, taxes, depreciation and amortisation to turn positive later this year even if business and long-haul international demand remains 70 per cent below 2019 levels.

United forecast its second-quarter total unit revenue, which compares sales to flight capacity, to fall 20 per cent compared with the same period in 2019. That would be less than the 27 per cent drop in Q1.

The company expects core cash flow to remain positive for the rest of 2021 after it turned positive in March. Total revenue fell 66 per cent to $3.2 billion in the quarter, compared with the same period in 2019. REUTERS