United Airlines Holdings Inc (NASDAQ:UAL) is projecting a gloomy future for the airline industry due to the coronavirus pandemic’s effects. The pandemic caused a sharp drop in demand for travel as countries imposed lockdowns and restrictive health protocols to curb its spread. United reported loss of $1.6 billion, although this is better than what analysts had projected. The airline reported an adjusted net loss of $2.6 billion, with revenue dropping by 87.8% or $10 billion.
Drop in revenue due to the pandemic
The airline reported a whopping 90% drop in revenue compared to the same period a year ago. This is one of the latest indications of the turbulent financial times that the airline industry is going through. This situation is likely to continue, with a spike in coronavirus cases and no vaccine in the foreseeable future.
According to United, traffic is expected to regain 50% of the pre-pandemic levels when the virus is discovered. “I’m not an expert on when a vaccine is going to be available and widely distributed,” said CEO Scott Kirby. “We’re planning on a scenario that it takes until late next year before that really happens. We hope it’s sooner than that.”
As opposed to typical earning report where companies try to give a positive forecast of the future, United went open with investors telling them it had completed the “the most difficult financial quarter in its 94-year-history.”
With boarders still shut around the world, the airline industry is counting on domestic travel to rebound
The U.S airline industry has been counting on domestic travel to bounce back with many Americans cancel travel to Asia, South America, and Europe and instead opting to national parks or to see relatives. The Q2, United’s domestic revenue was lower than international revenue. The airline reported a 92% drop in domestic passenger revenue throughout the entire quarter. On the other hand, international passenger revenue slumped by 96.4%.
The announcement did not get United’s investors by surprise. The company’s shares sunk 3% following the admission that the future is gloomy for the airline industry. Many airlines have been putting measures to instill travelers’ confidence to travel in the wake of the pandemic.