Image: Bigstock

United Airlines (UAL - Free Report) incurred a loss (excluding 6 cents from non-recurring items) of $7 per share in the fourth quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $6.56. Results were hurt by coronavirus-induced weakness in air-travel demand.

Despite the optimism surrounding coronavirus vaccine distributions, the airline provided a bleak outlook for the first quarter of 2021. This, in turn, weighed on investor sentiments, causing shares of the company to dip 2.8% in after-market trading on Jan 20.

The carrier estimates total operating revenues to decline 65-70% year over year in the current quarter. The carrier stated that the outlook does not include the potential impact from accelerated COVID-19 vaccine distribution, which may lead to faster recovery in air-travel demand.

Coming back to the earnings performance, operating revenues of $3,412 million lagged the Zacks Consensus Estimate of $3,420.4 million. The top line plunged 68.7% year over year due to 75.7% drop in passenger revenues, which totaled $2,410 million in the reported quarter. However, cargo revenues surged 77.2% year over year to $560 million. Meanwhile, revenues from other sources declined 30.8% to $442 million.

United Airlines Holdings Inc Price, Consensus, and EPS Surprise

(Click on image to enlarge)

United Airlines Holdings Inc price-consensus-eps-surprise-chart | United Airlines Holdings Inc Quote

Operating Results

Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 43.8% year over year to 7.85 cents. Total revenue per available seat mile fell 27.5% to 11.12 cents. On a consolidated basis, average yield per revenue passenger mile dipped 16.6% from the year-ago quarter.

During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 70.9% year over year. Capacity (measured in available seat miles) contracted 56.8%. Consolidated load factor (percentage of seat occupancy) deteriorated 26.9 percentage points year over year to 55.6% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon fell 35.7% year over year to $1.35. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 53% to 503 million.

Owing to its cost-reduction initiatives, the Chicago-based carrier was able to bring down operating costs (excluding special charges) by 42.4% on a year-over-year basis. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit-sharing, and special charges, escalated by 54.6% mainly due tocapacity cuts.

United Airlines exited the fourth quarter with cash and cash equivalents of $11.27 billion compared with $2.76 billion at the 2019 end. Long-term debt at the end of the reported quarter was $24.84 billion compared with $13.14 billion at the 2019 end.

Other Details

During the December quarter, cash burn averaged $33 million a day including $10 million of average debt principal payments and severance payments per day. This compares unfavorably with the daily cash burn of $25 million, including $4 million of principal payments and severance expenses, recorded in third-quarter 2020. This Zacks Rank #3 (Hold) company exited the quarter with total available liquidity of $19.7 billion.

Q1 2021 Outlook

United Airlines anticipates capacity to fall at least 51% from the year-ago period. Available liquidity at the end of the period is expected to be similar to that at the end of 2020.