As Q3 Ends, United Airlines Shifts from Surviving the COVID-19 Crisis to Positioning to Lead the Rebound

CHICAGO, Oct. 14, 2020 /PRNewswire/ -- United Airlines (UAL) 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.

Additional Noteworthy Accomplishments

• Recognized for the fifth consecutive year as a top-scoring company and best place to work for disability inclusion with a perfect score of 100 on the 2020 Disability Equality Index (DEI).
• Selected by the Commission on Presidential Debates as the official airline for the 2020 Presidential and Vice Presidential Debates.
• Announced signing of The Board Challenge and committed to adding a second Black board member to the Board of Directors.

Earnings Call

UAL will hold a conference call to discuss third quarter 2020 financial results as well as its financial and operational outlook for the fourth quarter and full year 2020, on Thursday, October 15, at 9:30 a.m. CT/10:30 a.m. ET. A live, listen-only webcast of the conference call will be available at ir.united.com.

The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.

About United

United's shared purpose is "Connecting People. Uniting the World." For more information, visit united.com, follow @United on Twitter and Instagram or connect on Facebook. The common stock of United's parent, United Airlines Holdings, Inc., is traded on the Nasdaq under the symbol "UAL".

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this release are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as "expects," "will," "plans," "anticipates," "indicates," "remains," "believes," "estimates," "forecast," "guidance," "outlook," "goals," "targets" and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: the duration and spread of the ongoing global COVID-19 pandemic and the outbreak of any other disease or similar public health threat and the impact on our business, results of operations and financial condition; the lenders' ability to accelerate the MileagePlus indebtedness, foreclose upon the collateral securing the MileagePlus indebtedness or exercise other remedies if we are not able to comply with the covenants in the MileagePlus financing agreements; the final terms of borrowing pursuant to the Loan Program under the CARES Act and the effects of the grant and promissory note through the Payroll Support Program under the CARES Act; the costs and availability of financing; our significant amount of financial leverage from fixed obligations and ability to seek additional liquidity and maintain adequate liquidity; our ability to comply with the terms of our various financing arrangements; our ability to utilize our net operating losses to offset future taxable income; the material disruption of our strategic operating plan as a result of the COVID-19 pandemic and our ability to execute our strategic operating plans in the long term; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); risks of doing business globally, including instability and political developments that may impact our operations in certain countries; demand for travel and the impact that global economic and political conditions have on customer travel patterns; our capacity decisions and the capacity decisions of our competitors; competitive pressures on pricing and on demand; changes in aircraft fuel prices; disruptions in our supply of aircraft fuel; our ability to cost-effectively hedge against increases in the price of aircraft fuel, if we decide to do so; the effects of any technology failures or cybersecurity or significant data breaches; disruptions to services provided by third-party service providers; potential reputational or other impact from adverse events involving our aircraft or operations, the aircraft or operations of our regional carriers or our code share partners or the aircraft or operations of another airline; our ability to attract and retain customers; the effects of any terrorist attacks, international hostilities or other security events, or the fear of such events; the mandatory grounding of aircraft in our fleet; disruptions to our regional network, as a result of the COVID-19 pandemic or otherwise; the impact of regulatory, investigative and legal proceedings and legal compliance risks; the success of our investments in other airlines, including in other parts of the world, which involve significant challenges and risks, particularly given the impact of the COVID-19 pandemic; industry consolidation or changes in airline alliances; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; costs associated with any modification or termination of our aircraft orders; disruptions in the availability of aircraft, parts or support from our suppliers; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; labor costs; the impact of any management changes; extended interruptions or disruptions in service at major airports where we operate; U.S. or foreign governmental legislation, regulation and other actions (including Open Skies agreements, environmental regulations and the United Kingdom's withdrawal from the European Union); the seasonality of the airline industry; weather conditions; the costs and availability of aviation and other insurance; our ability to realize the full value of our intangible assets and long-lived assets; any impact to our reputation or brand image; and other risks and uncertainties set forth under Part I, Item 1A., "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as updated by our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.

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