United's losses are rising, however the airline expects it to beat 2019 margins in 2023
A United Airlines-operated Boeing 787 Dreamliner takes off from Los Angeles International Airport.
United Airlines announced on Wednesday that it would beat pre-pandemic margins by 2023, but warned that sales would suffer earlier this year if the Covid health crisis continues.
United posted a net loss of $ 1.9 billion in the fourth quarter after a profit of $ 641 million a year earlier. Revenue in the fourth quarter was down 69% to $ 3.41 billion, below analysts' estimates of $ 3.44 billion.
The airline's full-year net loss of $ 7.07 billion was the largest since 2005, according to FactSet.
"Aggressively addressing the challenges of 2020 depended on our innovation and quick decision-making. The truth, however, is that COVID-19 changed United Airlines forever," said Scott Kirby, the airline's CEO, in an earnings release.
Airline executives said the widespread availability of coronavirus vaccines will lead to a recovery in air travel. However, the introduction of the vaccine was slow and chaotic, characterized by a lack of doses.
While United was optimistic about its 2023 goal, the airline doesn't expect a quick turnaround earlier this year. Revenue in the first quarter is expected to be 65% to 70% below 2019 levels, the airline said. Estimated capacity in the first three months of 2021 will be at least 51% below the same period in 2019, which is a similar outlook from American Airlines.
United burned an average of $ 33 million a day for the quarter, including debt and severance payments. Core daily cash burn that removes these items averaged $ 19 million in the fourth quarter, down $ 5 million from the third quarter. The Chicago-based airline reported an adjusted loss of $ 7 per share, compared to estimates of a loss of $ 6.60 per share.
Here's how United performed in the quarter compared to Wall Street's expectations based on Refinitiv's average estimates:
- Adjusted earnings per share: a loss of $ 7 versus an expected loss of $ 6.60 per share.
- Revenue: $ 3.41 billion versus expected $ 3.44 billion in revenue.
United's cargo business once again proved to be a bright spot in the pandemic. Revenue for the quarter increased 77% to $ 560 million. This unit contributed 16% to fourth quarter revenue, up from just 3% last year. Passenger airlines have tried to bolster this business over the past year as customers around the world faced a crisis in air cargo capacity.
United shares fell 2.3% in after-hours trading after the report.
United executives will be holding a call Thursday at 10:30 a.m. ET to discuss their earnings and prospects. American Airlines and Southwest Airlines are expected to release results next week.