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United Airlines’ ‘Dire Scenario’ for Coronavirus Includes a 70% Drop in April Revenue

https://www.barrons.com/articles/uni...ic-51583937348

In recent days, United had seen a 100% decline in net bookings—new bookings less cancellations—to Asia and Europe.

Photograph by Daniel Slim/AFP via Getty ImagesWith the drop in airline traffic in the wake of the coronavirus pandemic, many investors are wondering how bad it could get for the industry.

A lot worse, according to United Airlines Holdings President Scott Kirby.  In a presentation on Tuesday at a J.P. Morgan conference, Kirby outlined what he called a “dire scenario planning assumption,” under which the company’s revenue drops 70% in both April and May, 60% in June, 40% in July, 30% in September and October and 20% in November and December.

“I suspect that sounds shocking to some of you and for what it’s worth, we don’t think it will actually be that bad,” Kirby said. “But again, we’re biased to be too aggressive in taking action as opposed to running the risk of looking back at some point and wishing we’d been more aggressive sooner.” After 9/11, revenue was down 40% for two months and then began a gradual recovery, he added.

United shares (ticker UAL) were down $2.59, or 4.9%, to $49.97 Wednesday morning after rallying 12% on Tuesday. The Dow Jones Industrial Average was down 3.2%. The stock is down more than 40% this year in the weak airline group.

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CHICAGO, March 10 (Reuters) - United Airlines Holdings Inc said on Tuesday it has raised an extra $2 billion in financing while slashing its 2020 capital expenditures by more than a third in an effort to prepare for a prolonged slump in travel demand due to COVID-19.

The measures come on top of previous announcements from United regarding capacity cuts and suspended earnings forecasts and will bring the airline’s total liquidity to $8 billion for 2020, while adjusted capex will fall to $4.5 billion from $7 billion previously forecast for the full-year.

The airline said it is now withdrawing guidance for the first quarter and expects to record a loss for the period.