United Airlines: Shifting from surviving COVID-19 crisis to leading the rebound

United Airlines today announced third-quarter 2020 financial results. Since the beginning of the crisis, the company has been at the forefront of the industry in delivering on its three-pillar strategy of building and maintaining liquidity, minimizing cash burn and variabilizing its cost structure. Achieving these objectives has supported the airline’s ability to manage the crisis as well as or better than its competitors and positions United to lead the industry when demand for air travel returns.

In addition, United expects
that third-quarter revenue performance will be the best, even in a historically
difficult environment, among our large network competitors – once they have all
reported their quarterly results. By almost any revenue measure, the company
expects on a year-over-year basis, with our total unit revenue of down 26
percent, passenger unit revenue of down 47 percent, cargo revenue of up 50
percent and loyalty revenue of down 45 percent to be stronger results than
those that will be achieved by each of our legacy competitors.

“Having successfully
executed our initial crisis strategy, we’re ready to turn the page on seven
months that have been dedicated to developing and implementing extraordinary
and often painful measures, like furloughing 13,000 team members, to survive
the worst financial crisis in aviation history,” said United CEO Scott
Kirby. “Even though the negative impact of COVID-19 will persist in the
near term, we are now focused on positioning the airline for a strong recovery
that will allow United to bring our furloughed employees back to work and
emerge as the global leader in aviation.”

United
CleanPlus: Keeping Our Customers and Employees Safe

  • Partnered
    with the Defense Advanced Research Projects Agency (DARPA) to study how
    effectively the unique airflow configuration on board an aircraft can
    prevent the spread of aerosolized particles among passengers and crew.
  • Only airline
    maximizing ventilation systems by running the auxiliary power on mainline
    aircraft during the entire boarding and deplaning process, so our
    customers and crew get the important safety benefits provided by
    high-efficiency particulate air (HEPA) filtration systems.
  • First U.S.
    airline to announce the launch of a COVID-19 pilot testing program for
    customers traveling on United from San Francisco International Airport
    (SFO) to Hawaii.
  • Added Zoono
    Microbe Shield, an EPA-registered antimicrobial coating that forms a
    long-lasting bond with surfaces and inhibits the growth of microbes, to
    the airline’s already rigorous safety and cleaning procedures and expects
    to add the coating to the entire mainline and express fleet before the end
    of the year.
  • Since
    COVID-19 began, first major U.S. airline to require flight attendants to
    wear masks onboard, and among first to require all customers to wear masks
    onboard. In the third quarter, extended mask requirements to require
    customers to wear a face covering in the more than 360 airports where
    United operates around the world, including United customer service counters
    and kiosks, United Club locations, United’s gates, and baggage claim
    areas.
  • Launched the
    United Automated Assistant, a new chat function that gives customers a
    contactless option to receive immediate access to information about
    cleaning and safety procedures put in place due to COVID-19.
  • Began
    cleaning pilot flight decks with Ultraviolet C (UVC) lighting technology
    on most aircraft at hub airports to disinfect the flight deck interior and
    continue providing pilots with a sanitary work environment.

Pillar
1 Raising and Maintaining Liquidity

  • Since March,
    the company has raised over $22 billion through commercial debt offerings,
    stock issuances and the Coronavirus Aid, Relief, and Economic Security Act
    (“CARES Act”) Payroll Support Program grant and loan, among
    other items.
  • The
    company’s total available liquidity1 at the end of the third
    quarter 2020 was approximately $19.4 billion.
  • Entered into
    the first-of-its-kind loyalty backed transaction, borrowing $6.8 billion
    secured against MileagePlus Holdings in the form of a $3.8 billion bond
    and a $3.0 billion term loan.
  • Secured the
    ability to borrow $5.2 billion with the U.S. Treasury under the CARES Act
    loan program between now and March 2021 and expects to have the ability to
    increase the borrowing capacity up to $7.5 billion, subject to government
    approval.
  • Entered into
    an agreement with CDB Aviation to finance, via a sale leaseback transaction,
    two Boeing 787-9 and ten Boeing 737 MAX aircraft that are currently
    subject to purchase agreements between United and The Boeing Company.

Pillar
2 Minimizing Cash Burn

  • Reduced
    total operating costs by 59 percent versus the third quarter of 2019.
    Excluding special charges2, reduced operating costs by 48
    percent versus the third quarter of 2019.
  • Achieved
    target average daily cash burn3 during the third quarter of $21
    million plus $4 million of average debt principal payments and severance
    payments per day, compared to second-quarter average daily cash burn of
    $37 million plus $3 million of debt principal payments and
    severance payments per day.

Pillar
3
  Variabilizing Cost Structure

  • Reduced
    non-labor operating expenses, excluding special charges and depreciation,
    by 63 percent in the third quarter, against a capacity reduction of 70
    percent.
  • Restructured
    and significantly reduced our management and administrative functions.
    These reductions are expected to be largely permanent, even as demand
    recovers.
  • Reached a
    landmark agreement with its pilot group that avoids furloughs by securing
    flexibility in work hours, while also reaching agreements to provide a
    path to early retirement and reduce expense through voluntary leave of
    absence programs. These agreements position the company to rebound quickly
    when demand returns.
  • Created a
    program with the Association of Flight Attendants (AFA) that reduced 3,300
    flight attendant furloughs while allowing the company to react more
    quickly to network changes.
  • Reduced
    furloughs of International Association of Machinists and Aerospace Workers
    (IAM) represented employees through an agreement that incentivizes
    employees to take a leave of absence.
  • Worked with
    the union representing dispatchers to reduce furloughs and create staffing
    flexibility as demand returns through an agreement that allows dispatchers
    to voluntarily reduce their work schedules.
  • Offered
    employees comprehensive voluntary separation packages, retirement packages
    and/or extended leaves of absence with approximately 9,000 employees
    opting to participate.

Third-Quarter
Financial Results

  • The company
    had a net loss of $1.8 billion, and an adjusted net loss4 of
    $2.4 billion.
  • Total
    operating revenues were down 78 percent year-over-year, on a 70 percent
    decrease in capacity year-over-year.
  • Passenger
    revenue was down 84 percent year-over-year.

Expanding
Customer Benefits

  • First among
    U.S. global airlines to permanently eliminate change fees on all standard
    economy and premium cabin tickets for travel within the U.S., and starting
    January 1, 2021, any United customer can fly standby for free on a flight
    departing the day of their travel regardless of the type of ticket or
    class of service.
  • First U.S.
    airline to introduce the Destination Travel Guide, a new interactive map
    tool on united.com and the United mobile app that allows customers to
    filter and view destinations’ COVID-19 related travel restrictions.
  • First U.S.
    airline to introduce an interactive map feature for customers on
    united.com, powered by Google Flight Search Enterprise Technology, to
    easily compare and shop for flights based on departure city, budget and
    location type. Customers can simultaneously compare travel to various
    destinations in a single search.
  • Announced
    plan to continue installing Polaris Business Class on Boeing 787 fleet.

Reimagining
Our Route Network

  • Announced 28
    new domestic routes and 9 new international routes.
  • Resumed nonstop
    service on 146 domestic routes.
  • Resumed
    and/or launched service on 78 international routes to 33 destinations in
    18 countries around the world, including: Aruba, Belgium, Brazil, Canada,
    China, Costa Rica, Dominican Republic, El Salvador, French Polynesia
    (Tahiti), Guatemala, Honduras, India, Ireland, Jamaica, Philippines,
    Singapore, South Korea and Switzerland.
  • Compared to
    June, United had nonstop service in 127 more domestic and 29 more
    international markets in July, 157 more domestic and 57 more international
    markets in August, and 151 more domestic and 80 more international markets
    in September.
  • Announced
    increased service to China from two to four weekly flights between San
    Francisco and Shanghai’s Pudong International Airport. Once service resumes,
    United will be the only U.S. airline flying to mainland China directly.
  • Announced
    plans to expand global route network with new nonstop service to Ghana,
    Hawaii, India, Nigeria, and South Africa. With these new routes, United
    will offer more nonstop service to India and South Africa than any other
    U.S. carrier and remain the largest carrier between the U.S. mainland and
    Hawaii.
  • Announced
    plans to add up to 28 daily nonstop flights this winter connecting
    customers in Boston, Cleveland, Indianapolis, Milwaukee, New
    York/LaGuardia, Pittsburgh, and Columbus, Ohio to four popular Florida
    destinations.
  • Announced
    plans to fly roughly 40 percent of its full schedule in October 2020
    compared to October of last year.
  • Increased
    cargo revenue by 50 percent by leveraging international flying and
    deploying strategic international cargo-only missions.

Doing
Our Part to Help Fight COVID-19 Since Crisis Began

  • Booked over
    2,900 free flights for medical professionals to support COVID-19 response
    in New Jersey/New York and California.
  • More than
    19.2 million miles donated by MileagePlus members and 7.6 million miles
    matched by United to help organizations providing relief during COVID-19.
  • Donated
    nearly 1.2 million pounds of food from United Polaris lounges, United Club
    locations, and catering kitchens to local food banks and charities.
  • Over 7,500
    face masks were made from upcycled unused employee uniforms.
  • More than
    800 gallons of hand sanitizer produced by United employees in San
    Francisco for use by United employees.
  • Donated
    15,000 pillows, 2,800 amenity kits, and 5,000 self-care products to
    charities and homeless shelters.
  • More than
    2.2 million pounds of food and household goods were processed by United
    employees at the Houston Food Bank.
  • Flew more
    than 146.8 million pounds of medical equipment and personal protective
    equipment (PPE) and 3.1 million pounds of supplies to support military
    troops.
  • More than
    2,400 United employees worldwide have volunteered, with over 33,400 hours
    served.
  • United began
    flying a portion of its Boeing 777 and 787 fleet as dedicated cargo
    charter aircraft, as of March 19, to transfer freight to and from U.S.
    hubs and key international business locations. Since then, we have
    operated over 6,500 cargo-only flights and moved over 223 million pounds
    of a variety of goods.
  • Through a
    combination of cargo-only flights and passenger flights, United has
    transported more than 401 million pounds of freight, which includes 154
    million pounds of vital shipments, such as medical kits, PPE, pharmaceuticals
    and medical equipment, and more than 3 million pounds of military mail and
    packages.

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