July 22, 2020 / 4:01 PM / 21 days ago

United sees around $15-20 million daily cash burn in fourth-quarter if demand bounces

CHICAGO (Reuters) - United Airlines (UAL.O) expects its daily cash burn rate to slow to between $15 million and $20 million in the fourth quarter, depending on the pace of a recovery in demand, executives said on a conference call on Wednesday.

Halting the cash burn, which averaged $40 million in the second quarter, will happen once United reaches a point in which sharp falls in demand and flight capacity have slowed to a roughly 50% decline.

“The second quarter of 2020 was historic for the airline industry for all the wrong reasons. At the beginning of April, we saw the sharpest, deepest drop in demand in history, far worse than 9/11 or the Great Recession,” Chief Executive Scott Kirby told investors.

Chicago-based United flew only a fraction of its normal capacity in the second quarter and expects to fly about 35% of its normal summer schedule in the third quarter as the coronavirus pandemic continues to thrash travel demand.

Near the end of the second quarter, Kirby said that “just as optimism about a recovery was beginning to build, we watched demand fade once again as COVID-19 spiked.”

Cases have surged in many parts of the country, prompting fresh quarantine orders in some states and forcing some states to scale back reopening plans.

In its earnings report on Tuesday, United warned that travel demand will remain suppressed until there is a widely accepted treatment or vaccine for COVID-19, which plunged the carrier to a deep quarterly loss.

United Chief Commercial Officer Andrew Nocella said on Wednesday he does expect demand to recover slightly when new cases start to fall, quarantines are lifted and borders are reopened, but airline executives do not expect a return to pre-pandemic levels for some years.

Reporting by Tracy Rucinski and Sanjana Shivdas; Editing by Chizu Nomiyama and Jonathan Oatis

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