United sees revenue stalling at 50% without a virus vaccine

Finance and Business

FILE – In this June 16, 2020 file photo, a traveler wears a mask and protective goggles as he walks through Terminal 3 at O’Hare International Airport in Chicago. United Airlines says its face mask requirement now extends to ticket counters and airport lounges. United said Wednesday, July 22 that it might ban violators from flying on its planes. United and all other major U.S. airlines already require passengers to wear masks during flights. (AP Photo/Nam Y. Huh, File)

United Airlines executives said Wednesday that travel will rise when the number of new coronavirus cases drops but the airline’s revenue will stall around 50% of pre-pandemic levels until there is a vaccine.

No doubt United would settle for half of normal sales right now. Its revenue plunged 89% in the second quarter, pushing the Chicago company to a $1.6 billion loss.

Air travel was slowly recovering until the number of confirmed coronavirus cases in the U.S. surged, especially in the Sun Belt, starting around late June. New York, New Jersey and Connecticut now require visitors from 31 states to quarantine themselves for 14 days upon arrival, and other states have similar edicts.

About 530,000 people went through U.S. airport security checkpoints on Tuesday, the lowest number in July other than the Independence Day holiday, and down 78% from a year ago.

United executives said the setback will be only temporary.

“We do expect that demand recovery, which stalled in recent weeks, will begin to recover again when new cases start to fall, quarantines are lifted, and borders are reopened,” Andrew Nocella, the airline’s chief commercial officer, said Wednesday on a call with analysts and reporters.

Nocella said United’s revenue will rise to 50% of normal “over time” and stay there until there is a vaccine for COVID-19, the disease produced by the coronavirus.

United and other airlines are trying to persuade consumers that air travel is safe. CEO Scott Kirby said that filtration systems and air-flow patterns inside planes make them safer than restaurants, office buildings, “or even a hospital.”

“It really is one of the safest places you can be if you are going to leave your house,” Kirby said.

Passengers have criticized United for booking planes full when it can. American does the same, while Delta, Southwest and JetBlue block some seats to create more space between passengers. United said it limits full flights by substituting larger planes — 4,000 times in May and June, it said.

United said its average flight from April through June was 35% full and it estimates the July average will be 45%.

United is focused on reducing costs to survive the downturn in travel. The airline estimates it will lose $25 million a day during the third quarter, down from $40 million a day in the second quarter.

Labor is the biggest single expense for most airlines, and United last week warned 36,000 employees that they could be furloughed in October. The company said 6,000 have taken severance packages to leave and will be paid through November.

United shares fell more than 4% Wednesday while shares of other largest U.S. airlines fell by less than 1%.

United also announced Wednesday that it is expanding its rule on face coverings. Passengers will have to wear face masks at ticket counters, baggage-claim areas and in its airport lounges or risk being banned from flights. Delta, JetBlue and Southwest already have similar requirements. All the familiar U.S. airlines require passengers other than small children and those with certain health problems to wear a mask during flights except while eating or drinking.

Kirby said United has seen “very high compliance” with the rule.

“We have had fewer than 30 that we have had to actually take action against,” he said. “We will welcome them back when this is all over and masks aren’t required.”

Delta Air Lines CEO Ed Bastian told NBC that his airline has banned more than 100 people for not wearing face masks. This week, Delta began additional screening of passengers who claim that a health issue prevents them from wearing one.

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David Koenig can be reached at www.twitter.com/airlinewriter

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