United targets pre-virus margins in 2023 after record loss

United Airlines Holdings Inc. is mapping a recovery from last year’s record loss with a plan that calls for topping pre-pandemic profit margins in 2023.

This year will serve as a “transition” after the collapse in travel demand because of Covid-19, United said in an earnings statement Wednesday. The company expressed “high confidence” that its 2023 profit margin as measured by adjusted earnings before interest, taxes, depreciation and amortization would exceed that of 2019. Its Ebitda margin that year was almost 16%.

United’s focus on the long term underscored the bleak outlook for the coming months as the coronavirus pandemic continues to gut travel demand. First-quarter operating revenue will fall as much as 70%, the company said, slightly worse than the drop of up to 65% that Delta Air Lines Inc. projected last week. Looking ahead, however, United said it has identified $1.4 billion in permanent cost cuts, getting it more than halfway to its goal of $2 billion.

“The truth is that Covid-19 has changed United Airlines forever,” Chief Executive Officer Scott Kirby said in the statement.

The shares fell 2.3% to $44.14 after the close of regular trading in New York. United tumbled 50% in the 12 months through Wednesday, the worst among major U.S. carriers.

Record Loss

United swung to an adjusted fourth-quarter loss of $7 a share, 35 cents worse than the average of analyst estimates compiled by Bloomberg. For all of 2020, United lost $27.57 a share, the largest shortfall in its 94-year history.

The Chicago-based company will discuss its results and outlook on a conference call Thursday at 10:30 a.m. Eastern time. Investors will be listening for any sign of a “snapback” in demand, said Helane Becker, an analyst at Cowen & Co.

“Trading activity tomorrow will likely hinge on management comments about summer bookings and if they’ve seen any increased activity to support the idea of pent-up demand,” Becker said in a note to clients.

In a separate filing, United said it had accepted $2.6 billion in U.S. funds on Jan. 15 as part of a federal package supporting airline employees’ wages through March 31. As part of that agreement, United issued warrants for the Treasury to buy 1.7 million company shares.

Cash Burn

United said it burned through $33 million a day in cash during the fourth quarter, up from $25 million during the previous three-month period.

The airline also introduced a new cash-burn metric, which excludes debt payments, severance and certain capital spending projects. By that measure, United went through $19 million a day in the fourth quarter, a $5 million improvement compared with the third quarter.

While the company didn’t project its cash burn in the first quarter, it said available liquidity as of March 31 would be similar to its $19.7 billion level at the end of last year.