Expecting $2 Billion Loss in First Quarter, United Airlines to Seek Another $4.5 Billion in Federal Coronavirus Aid
United Airlines applied to borrow up to $4.5 billion from the federal government as the COVID-19 pandemic brings passenger travel to a near standstill, on top of the roughly $5 billion aid package it announced last week.
United, the first U.S. airline to give preliminary details of its financial results for the first quarter, reported a $2.1 billion loss, or $1 billion on an adjusted basis, according to a regulatory filing Monday. Shortly after 9 a.m., shares in the airline were $28.09, down 3.4% from the prior day’s close.
The Chicago-based airline said revenue fell 17% during the first quarter of 2020, mostly in March, as the pandemic and efforts to stop it, including stay-at-home orders, drastically reduced demand for flights. United said it carried fewer than 200,000 people during the first two weeks of April, down about 97% from the same period last year, and the airline slashed about 90% of its flying capacity in May.
The loans are part of the $2.2 trillion federal coronavirus relief package. If United borrows all or a portion of that amount between now and September, it would give the federal government warrants granting them the option to purchase shares in the company — up to 14.2 million, if United borrows the full amount.
United is already expecting to receive roughly $5 billion in financial assistance from the federal government. Those funds are meant to help the airline keep paying employees and require United to forestall involuntary layoffs and pay rate cuts through Sept. 30. Several major airlines announced similar agreements last week.
United executives have already warned layoffs could follow, but said the funding let United avoid immediate furloughs and provides time to see whether demand for flying will start to recover by fall. In the meantime, the company has asked employees to volunteer for unpaid leave and plans to offer more voluntary leave and separation programs over the next few weeks.
The $5 billion aid package already comes with a requirement to give the U.S. Treasury Department the warrants to purchase 4.6 million shares of United stock.
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