United Is Planning For Zero Net Passenger Revenue Into 2021

During this morning’s earnings call, United Airlines President Scott Kirby told investors and journalists that the carrier is “planning for zero net passenger revenue for rest of year and into 2021.”

They’re not forecasting this, as they cannot predict “the course of the crisis” or recovery, and they are “hoping it’s better.” However this is the scenario they’re planning to ensure the airline’s survival.

  • Available cash. United opens May with $9.6 billion in liquidity. They expect to take in $2.5 billion from the CARES Act during the coming quarter and exit June with the same liquidity. Assuming no additional financing and cash burn below $40 million per day they will end September with $6 billion in liquidity. They still have $4.5 billion available from CARES Act loans, taking United over $10 billion cash in the fall.

  • Reducing cash burn. Cash burn is currently $50 million per day but they expect to get this down to $40 to $45 million per day during the second quarter. This comes from huge reductions in all categories except wages.

    • They’ve stopped 200 real estate projects, and have fewer than 5 remaining.
    • Stopped United Club investment at Chicago O’Hare, Washington Dulles, and Newark.
    • Stopped 300 technology initiatives.
    • Simplified their onboard product (food and beverage) saving $30 million.
    • Saved $45 million on airport vendors by reducing hours and having United employees take on the work.
    • Reduced promotional spending by $60 million.

    Without a demand increase they say they will have to go to involuntary furloughs and reduced hours as soon as they are permitted starting October 1. By that point employees are the only place left to cut. If demand doesn’t recover they’ll get cash burn down to $20 million per day – a 50% reduction, all coming from shedding payroll.

  • Opportunities for more cash. United reports “at least” $10 billion in unencumbered collateral available excluding MileagePlus. $8 billion of their collateral is in aircraft, engines, parts, simulators, and equipment. $2 billion is in routes to slot-constrained airports.

    Unlike American they didn’t give any hints about how they’re valuing the loyalty program, but they did describe is as their “largest unencumbered asset.” They noted different ways to draw liquidity from the program, “loans against the business, prepaid miles..there’s probably an aggregate cap for that.” And they argue that a 1-3 year reduction in the size of the airline won’t reduce the value of the co-brand.

    $4.5 billion from a CARES Act loan is expected to come at LIBOR plus 300 basis points and require offering the government warrants to purchase 14.2 million shares.

United expects to take delivery of 16 Boeing 737 MAX aircraft this year and 24 next year. Less than ½ originally planned by end 2021. Expect 8 787-9 this year, 8 787-10 in 2021. High cost to reschedule. Won’t take delivery funless fully financed so not cash drain. They won’t increase capital spend next year otherwise.

The future looks very different for United. They don’t know how yet but Scott Kirby says “everything is on the table, while we do not have plans to close hubs when we say “everything is on the table [and] we mean everything, there are no sacred cows.”

Analyst Jamie Baker specifically asked about hubs, which he said American disappointingly said they weren’t considering drawing down. Kirby said “when we emerge from this United Airlines and the airline industry will look different.” He said United is going to “engineer costs permanently out of the system.”

There are, however, some green shoots. I’ve written about an increase in searches for future travel. Kirby reports that searches for spring break 2021 travel is up year-over-year on the airline’s website.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »



  1. People think Kirby is smart. Kirby is an idiot. An absolute Moron. Eliminate 50 seat flying ? How ? What an idiot. Look at UA’s load factors now. AA and DL have Ben trashing them. Doubling them in some cases. Kirby’s negative outlook will throw United into the ground. He should just restart America West where he belongs. All he’s done is merge carriers to offset his poor leadership, planning and “saving a penny to lose a dollar” approach to everything he does.

  2. Anyone want to start taking bets on which hubs will get axed? My money is on LAX or IAD…or both?

  3. I wish United luck. Atleast this 1K loyalist and apologist will be a loyalist no more come 2021. I will be switching my allegiance to another carrier and will become a free agent if they all cut their loyalty programs (that would be even better).

  4. @ Bobby J — I’ll go with LAX. They’ve already got SFO (but fog) and perhaps IAD brings strong government revenues??

  5. United has shown little love for IAD since the merger with Continental. It would not surprise me to see them give it the axe as a hub. Similarly, they’ve shown little love for Houston since the merger, so that could go, too. They seem to love SFO, DEN, ORD, and EWR. LAX may also bite the dust.

  6. My money is on IAD and LAX. Both of those airports should have been flattened decades ago, and whatever 6-decade construction project they’re working on now at LAX is probably going to just people-move passengers without a thought whether public transit is a good idea in this city.

    Trust me, I love good public transit. But as an Angelino, I don’t take any rail line here. I literally was mugged in Santa Monica and the sheriff just stood on the Expo line platform and later asked me why I didn’t punch him more. Passengers are gonna love that treatment!

  7. I’m a million miler so I have no worries about keeping at least Gold Status, but I’m wondering about customer service. I have a Polaris Flight in August to Greece, IF we are able to fly that early. My last Polaris Flight had no Polaris Club, the seats weren’t installed yet, no teddy bear or pajamas. This time I’d hoped to do it right. But I hear things about cutting back on the clubs and food. 3 months from now if allowed, I’ll take that trip. I just hope SOME things are worth the price.

    I’ll switch easily to Delta as I fly from DTW. I’ve always hated Delta from Detroit because they got the old NW planes. But it doesn’t hurt to give it a try after all these years. I’ve been loyal to UA even though Delta’s hub is here. I could skip the layovers and fly direct. I guess we just see what happens.

  8. United has been on the rebound on IAD for the last two years. During the so-called “Continental Philosophy” engineered by Jeff Smisek, they came close to shutdown IAD. His only goal was to reduce expenses, make a short term profit and don’t think about long term (just like a hedge fund merger man)! Once Smisek was out, UA realized that it was a poor decision, with lack of vision! UA realized that IAD could be an asset in many ways: a very good reliever airport to congested EWR; move many North-South connections from EWR to IAD; add more international flying. United has been steadily growing in IAD in the last three years, came close to finishing the Polaris lounge! IAD also tried to get its act together by reducing CPE (with the help of state of Virginia, which chipped in $50 mill).
    So, if UA has any long term vision, I think, it wouldn’t ditch IAD. The Washington DC plus Baltimore Combined Area is as big as Chicago and may overtake Chicago in population in a year or two. With good high tech jobs, Amazon HQ2 in the area, it would be prudent for UA to make a pause in new investments, but continue to maintain IAD at a decent level. Also, IAD has a very good STAR footprint. Maintaining a decent level of services at IAD would give UA an opportunity to bounce back and ramp up services and reap benefits when the market rebounds.

Comments are closed.