United Airlines loses 'just' $1.6B thanks to steep second-quarter cost cuts
United Airlines was among the first to slash flights and warn of a deep downturn for airlines when the coronavirus pandemic took hold in the U.S. in March.
Those early moves, which were matched within weeks by other carriers, appear to have paid off in cutting the Chicago-based carrier's losses during the three months ending in June. United lost $1.6 billion in the second quarter before special items. That's not an insignificant amount, but it's $4 billion better than competitor Delta Air Lines — the only other U.S. airline to report earnings so far.
The notable difference was United's ability to reduce costs as travelers stayed home en masse to avoid COVID-19. United slashed operating expenses by 69% year-over-year to $3.1 billion. That compares to Delta, which only cut them by 40% to $6.3 billion. Even after taking out Delta's $2.5 billion in one-time expenses related to the retirement of four aircraft types from its fleet, United still slashed $700 million more from its business.
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"We expect United produced fewer losses and lower cash burn in the second quarter than any of our large network competitors," United CEO Scott Kirby said in a statement. "We believe [our] quick and aggressive action has positioned United to both survive the COVID crisis and capitalize on consumer demand when it sustainably returns."
Still, as a whole, the U.S. airlines are expected to wrack up billions of dollars of losses in the second quarter, which many hope will prove to be the worst of the pandemic for travel. The industry flew only about a third of what it flew in the U.S. during the same three-month period in 2019, according to Cirium schedules. Many of those flights were less than half full.
Reducing expenses — or shrinking the business — to fit travelers' current willingness to buy tickets and fly is the name of the game. United lost an average of $40 million a day in the second quarter and aims to reduce that to $25 million a day in the third quarter.
Related: Delta retires more jets amid shaky outlook, nearly $6B quarterly loss
One bright spot was cargo. United saw cargo revenues jump 36% year-over-year to $402 million during the three months ending in June. Cargo amounted for more than a quarter of the airline's revenue compared to just 2% a year ago.
While United appears to have lost less than its peers, more cuts are coming. The airline has advised investors that it plans to stop adding back flights in August and hold schedules roughly level through the end of the year. In addition, it has notified some 36,000 staff members — nearly half of its U.S. workforce — of possible furloughs beginning in October.
And despite the conservative forecast, United has not unveiled plans for permanent changes to its fleet. The airline has only confirmed plans to put its premium Boeing 757-200s — those with 28 business-class seats — and its Boeing 767-400ERs in long-term storage.
Related: United scales back August schedule on resurgent coronavirus, travel restrictions
In a report Tuesday, Cowen analyst Helane Becker said United's results were better than consensus, but added that the airline must address its "bloated fleet, where aircraft retirements are a necessity."
Any aircraft retirements will come with added one-time expenses for United, or the same as Delta recorded in the second quarter.
United will present additional details on its second quarter performance and forecast for the rest of the year on July 22.
Related: United Airlines may furlough up to 36,000 staff as coronavirus forces drastic cuts
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- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
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| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
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Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.