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United Airlines on Monday reported a $2.1 billion pre-tax loss between January and March, the first U.S. carrier to place a dollar amount on first quarter carnage, a period in which demand went from strong to nearly non-existent within weeks because of a once-in-a-century global pandemic.

First quarter generally is weakest for U.S airlines, but United has in recent years been making money, reporting $367 million in profit in the first three months of last year. As recently as January, executives expected another strong quarter, reporting reasonable demand in most markets, including China.

Then it all came crashing down. First the Chinese market cratered, then Asia more broadly. Next, European demand fell, led by Italy, and then by mid-March, Americans essentially stopped traveling, even domestically.

This month, United executives have said demand has fallen to nearly zero, with the airline racing to cut flights while still satisfying U.S. government demands that it pull out of as few cities as possible. No one knows when conditions will improve.

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In its filing Monday with the U.S. Securities and Exchange Commission, the airline said revenue had decreased $100 million, each day, during the last two weeks of March, measured on a year-over-year basis.

Despite United’s big loss and late quarter revenue drop, indications suggest the worst is still to come.

From January through March, United announced total revenue of $8 billion, a 17 percent drop, year-over-year. That’s a significant but not massive revenue decrease drop, and was likely so modest because the Covid-19 pandemic did not seriously hit the United States until March.

United’s second quarter revenue is likely to drop much more substantially.

Preparing for the Worst

The airline is preparing for what could be the worst quarter in aviation history, it said in its filing.

United has cut 80 percent of capacity this month, and will slash 90 percent in May. Schedules for later this year have seen fewer changes, but in its filing, United said those will be evaluated soon. “The Company plans to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand,” it said.

United has been looking to increase cash, with the airline reporting Monday that it had $6.3 billion in cash and cash equivalents on April 16.

It said it is taking about $5 billion from the U.S. government to help cover payroll expenses through Sept. 30, with $3.5 billion as a grant and the remainder a low-interest loan. United said it expects to issue warrants to the U.S. Treasury Department allowing it to buy up to 4.6 million shares of United stock at $31.50, its April 9 closing price.

United also said Monday it is applying for a $4.5 billion loan from the Treasury Department for up to five years. Terms would be similar to the paycheck protection arrangement, the airline said. Collateral has not been determined, United said.

Losses Abroad

Not all of United’s big losses come directly from its operation. Some are tied to investments or business deals abroad.

On Monday, United said it took a $293 million loss connected tie to a decrease in value of its investment in Azul, a Brazilian airline controlled by David Neeleman, the JetBlue Airways founder. In 2018, United said it had increased its stake to 8 percent. 

United also said it was taking a $697 million non-operating credit loss from a loan to BRW Aviation Holding LLC and BRW Aviation LLC, Avianca’s majority owner.

“United recorded the allowance based on United’s assessment of Avianca Holdings S.A.’s financial uncertainty due to its high level of leverage and the fact that the airline has currently ceased operations due to the COVID-19 pandemic,” it said in the filing.

Meanwhile, in Asia, United took a $50 million impairment charge on the value of its routes to China.

“Due to the COVID-19 pandemic and the subsequent suspension of flights to China, the Company determined that the value of its China routes had been impaired,” it said.

In 1985, United announced it would pay $750 million for Pan Am’s Pacific division, giving it landing rights in China and other Asian cities, making it the first of the three surviving U.S. legacy airlines (American and Delta are the others) to fly to China.

What United Wants Investors to Focus On

Adjusting for all special charges, investments and non-operating losses, United said its first quarter loss was about $1 billion.

“United believes that adjusting for special charges and for non-operating credit losses is useful to investors because these items are not indicative of United’s ongoing performance,” it said.

Photo Credit: A United Airlines Boeing 767-300 on the ground at London Heathrow Anna Zvereva / Flickr