01—Abstract
Summary
Summary of the 10-K filed March 1, 2021. Cited figures are marked; the original filing is the authoritative source.
United Airlines Holdings, Inc. (UAL) reported a severe deterioration in 2020 driven by COVID-19.
Operating revenue fell to $15.36 billiona from $43.26 billion in 2019, and the company posted an operating loss of $6.36 billion and a net loss of $7.07 billion, or $(25.30) per diluted share, compared with net income of $3.01 billion in 2019. Passenger revenue dropped $27.8 billion, or 70.2%, and the company cut approximately 57% of its 2020 scheduled capacity. Results were supported by a $3.5 billion CARES Act grant recorded as a special credit, which partly offset operating expenses.
Fuel expense fell to $3.15 billionb from $8.95 billion, and salaries and related costs declined to $9.52 billion. Liquidity was strengthened substantially through financing. Unrestricted cash, cash equivalents and short-term investments rose to $11.7 billion at year-end from $4.9 billion in 2019.
The company issued or entered into approximately $13.4 billionc of secured notes, term loans and aircraft financings, borrowed $1.0 billion under its revolver, and raised about $2.1 billion from common stock sales. Total debt and finance lease obligations increased to $27.2 billion from $14.8 billion. Operating cash flow was negative $4.1 billion.
In January 2021 the company received a further PSP2 agreement with Treasury for approximately $2.6 billiond. Management states that 2021 liquidity needs will be met through existing liquidity plus additional debt or equity issuances, and that the company must return to profitability and/or access capital markets to meet long-term obligations.
The filing highlights continuing risks, including the pace of demand recovery, the ongoing Avianca/AVH Chapter 11 proceedings and a $697 million expected credit loss on the BRW Term Loan, restrictions on the Boeing 737 MAX, covenant and liquidity constraints under MileagePlus and other secured financings, and credit ratings below investment grade (UAL rated B+ by S&P, Ba2 by Moody's and BB- by Fitch). Management also expects a non-linear recovery in demand, with first-quarter 2021 scheduled capacity down at least 51% versus the first quarter of 2019.
02—Key points
Key Highlights
- Revenue and profitability: Operating revenue was $15.36 billion in 2020 versus $43.26 billion in 2019, and the net loss was $7.07 billion, or $(25.30) per diluted share, compared with net income of $3.01 billion in 2019.
- Capacity: The company cut approximately 57% of its 2020 scheduled capacity relative to 2019 and expects first-quarter 2021 scheduled capacity to be down at least 51% versus first-quarter 2019.
- Government support: The company received $5.1 billion under the PSP Agreement (including a $3.6 billion grant), a $520 million CARES Act Term Loan draw, and approximately $2.6 billion under the January 2021 PSP2 Agreement.
- Liquidity: Unrestricted cash, cash equivalents and short-term investments were $11.7 billion at December 31, 2020, up from $4.9 billion in 2019, supported by approximately $13.4 billion of new secured and aircraft financings and about $2.1 billion of equity raised.
- Leverage: Debt and finance lease obligations rose to $27.2 billion from $14.8 billion, and the company had $9.5 billion of variable rate indebtedness exposed to LIBOR.
- Avianca exposure: A $697 million expected credit loss allowance was recorded on the BRW Term Loan and related guarantee, and AVH remains in Chapter 11 proceedings.
- Credit ratings: UAL's corporate credit ratings are below investment grade (B+ S&P, Ba2 Moody's, BB- Fitch).
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 1, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $15.36B$43.26B | −64.5% |
| Operating Expenses | $21.71B$38.96B | −44.3% |
| Operating Income | -$6.36B$4.30B | −247.8% |
| Net Income | -$7.07B$3.01B | −334.9% |
| EPS (Basic) | $-25.30$11.63 | −317.5% |
| EPS (Diluted) | $-25.30$11.58 | −318.5% |
| Shares Outstanding (Basic) | 279.40M258.80M | +8.0% |
| Shares Outstanding (Diluted) | 279.40M259.90M | +7.5% |
05—Questions
Frequently Asked Questions
How much did United Airlines Holdings lose in 2020, and how did it compare with 2019?
The company reported a net loss of $7.07 billion, or $(25.30) per diluted share, in 2020, compared with net income of $3.01 billion, or $11.58 per diluted share, in 2019. The operating loss was $6.36 billion, versus operating income of $4.30 billion in 2019. The filing attributes the decline to the COVID-19 pandemic, which caused passenger revenue to fall $27.8 billion, or 70.2%.
How is the company funding itself through the pandemic?
The company used several sources: approximately $5.1 billion under the PSP Agreement, a $520 million draw under the CARES Act Term Loan Facility, about $13.4 billion of new secured notes, term loans and aircraft financings, a $1.0 billion revolver borrowing, and about $2.1 billion of common stock sales. It also deferred $199 million in payroll taxes and entered into sale-leaseback agreements for certain aircraft.
What are the main risks to the company's recovery?
The filing cites the uncertain pace of demand recovery, which management says will not follow a linear path and is expected to stay suppressed until COVID-19 vaccines are widely distributed and effective. Other risks include restrictions on government funding, covenant compliance under the MileagePlus Financing and other debt, the Avianca/AVH Chapter 11 proceedings affecting the $697 million credit loss, the continued restrictions on the Boeing 737 MAX, and variable-rate debt tied to LIBOR.
What does the company say about its liquidity needs for 2021?
Management states that 2021 liquidity needs will be met by existing liquidity plus additional debt or equity issuances. It also says the company must return to profitability and/or access capital markets to meet significant long-term debt and finance lease obligations and future aircraft capital commitments. The company expects approximately $4.4 billion of gross capital expenditures in 2021.
What is the company's exposure to Avianca and AVH?
United recorded a $697 million expected credit loss allowance in 2020 for the BRW Term Loan and related guarantee. AVH and affiliates filed Chapter 11 reorganization proceedings in May 2020. United also holds a $150 million AVH Convertible Loan, which was converted into a DIP loan with a balance of $159 million at year-end 2020, and it is a Tranche B DIP lender in the AVH DIP Financing.
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