Key Takeaways from United's Q3 Earnings Report

United Airlines Holdings Inc UAL missed earnings expectations for its third quarter on Wednesday. Throughout Q3, the company's primary focus was on controlling cash burn, ensuring liquidity, and amending its cost structures.

Of its total operating revenue, turnover from the Cargo segment increased to $422 million, a 50% rise compared to the same period one year ago. Revenues from the passenger segment dropped 47% and loyalty revenues fell by 45% year-over-year.

Liquidity And Financing Position: United reported a $19.4 billion liquidity position, comprising of cash and cash equivalents, short-term investments, an undrawn revolving credit of $1 billion, and $4.7 billion loan funds under the CARES (Coronavirus Aid, Relief, and Economic Security) Act.

United was able to successfully increase its borrowing capacity to $5.2 billion till March 2021, under the CARES Act. The company expects the threshold to increase up to $7.5 billion, subject to federal approval.

The airline raised $6.8 billion secured loans against its MileagePlus Holdings, under a loyalty backed transaction. The $6.8 billion proceeds include $3 billion from term loans and the balance of $3.8 billion by way of bonds.

It also entered into a sale-leaseback financing agreement with CDB Aviation for two Boeing 787-9 and around 10 Boeing 737 Max.

United controlled cash burns by reducing it to $21 million in Q3, against $37 million in the earlier quarter. The company reported a 59% year over year drop in total operating costs.

Safety Measures: In July, United collaborated with the Defense Advanced Research Projects Agency, as a part of its CleanPlus safety campaign. It deployed high-efficiency particulate air (HEPA) filtration systems to maximize ventilation and reduce health risks to passengers and crew.

The company also included EPA-registered antimicrobial coating for cleaning its aircraft, Ultraviolet C lighting technology to disinfect the pilot’s flight desks, and introduced a program to test passengers from San Francisco to Hawaii.

What's Next: United plans to cut headcount by 22,000 with an estimated $1.1 billion payout. Of the total reduction in workforce, 13,000 employees will be furloughed and the balance 9,000 consists of voluntary departures, according to the Financial Times.

Price Action: United shares traded 1.29% lower in the pre-market session Thursday at $35.15.

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