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United Airlines Returns To Profitability

In an SEC filing, United Airlines has today revealed that it expects July to be the first month since January 2020 where the carrier has positive adjusted pre-tax income. As it’s described:

United Airlines, Inc. (“United”), a wholly-owned subsidiary of United Airlines Holdings, Inc. (“UAL” and, together with United, the “Company”), expects to generate positive adjusted pre-tax income in the month of July 2021, which would be the first month with positive adjusted pre-tax income since January 2020, before the start of the crisis. The COVID-19 pandemic caused the most severe drop in demand for travel in the history of aviation and this expected performance would mark an important financial milestone as the Company is turning its focus to the future of United Airlines.

As you can see, United’s 18 month streak of losing money appears to be coming to an end. While the pandemic only really shut down the United States in March 2020, international travel was already heavily impacted starting earlier than that, which is why United didn’t make money in February 2020.

It’s not entirely clear to me whether the math on “pre-tax income” accounts for the $2.8 billion in payroll support that United has received with the third round of the CARES Act. With this, United can’t furlough any employees through at least September 30, 2021, and it also means that much of United’s payroll expenses are covered by taxpayers.

The filing simply states the following:

Excludes special charges (credits) and the unrealized gains and losses on investments, the nature of which are not determinable at this time

Separate from this regulatory filing, United Airlines CEO Scott Kirby announced that today (Monday, June 28, 2021), will be United’s first single day of profitability since the start of the pandemic.

It seems to me like the timing of this filing isn’t a coincidence. United Airlines is expected to announce a huge aircraft order tomorrow, so from an optics perspective I can see the logic in United talking about how it’s once again profitable, before committing to spending tens of billions of dollars on new planes.

This is an impressive accomplishment

It’s fantastic to see that the worst is finally behind us, and that hopefully airlines across the board will return to profitability soon. Overall airlines have done a good job adapting to the situation, and I’m sure it hasn’t been easy.

As it stands, airlines in the United States are currently much better positioned than airlines in Europe, Asia, etc., given that domestic travel demand here is almost back to pre-coronavirus levels. We keep seeing new pandemic records set, and we’re now consistently seeing over two million air travelers per day.

As the financial situation for airlines in the United States changes, I can’t help but wonder if airlines will return to consistent profitability, or if we could see United (and other airlines) go back to losing money this fall and winter:

  • Currently travel demand is overwhelmingly leisure-oriented, and on top of that people are more excited than ever before to go on vacation

  • Summer (and in particular July) is a time when leisure travel is typically at its peak

  • No one knows how coronavirus will evolve in the fall and winter, given that there’s some seasonality to the spread of it, and we don’t know variants will evolve, and how well vaccines will work against them

  • Historically airlines have relied on business travel in the late fall and winter, yet as of now business travel isn’t anywhere close to having recovered

  • On top of that, international travel isn’t anywhere close to pre-coronavirus levels, so we’ll have to see how that plays out in fall and winter

  • Then payroll support runs out at the end of September, and unless it’s extended, the airlines will be on the hook for paying employees in full

So I hope that as airlines return to profitability they stay that way, but I don’t think that’s a sure bet.

Bottom line

Today is United Airlines’ first “profitable” day since the start of the pandemic, and July is expected to be the company’s first month of positive adjusted pre-tax income. It’s not entirely clear to me if this math factors in the third round of payroll support, as United got $2.8 billion through that. This announcement comes one day ahead of an anticipated huge aircraft order from the Chicago-based airline.

It’s fantastic to see United return to profitability, and I hope it stays that way. While domestic leisure travel is more or less recovered, international and business travel are a different story. This could get tricky in the fall and winter.

This article originally appeared on One Mile At A Time

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