United Airlines drops FY2020 guidance amidst coronavirus outbreak

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Arina P Habich

United has dropped its previous FY2020 profit guidance due to the coronavirus outbreak, a filing submitted to the United States Securities and Exchange Commission (SEC) indicates. The airline, which reached a net income of $3.0 billion in 2019, stated that it expected to report an Adjusted Diluted Earnings Per Share (EPS) between $11 and $13 at the end of 2020.

In 2019, the Adjusted Diluted Earnings Per Share were $11.58, the company’s financial report states.

However, the coronavirus has brought significant challenges to the airline. The SEC filing indicates that United Airlines’ flights operated between the United States and Beijing, Chengdu, Shanghai, China and Hong Kong represented 5% of the total capacity planned for 2020.

“As a result of COVID-19, we are currently seeing an approximately 100% decline in near-term demand to China and an approximately 75% decline in near-term demand on the rest of our trans-Pacific routes.”

The trans-Pacific routes represented 10% of the total capacity for the year, meaning that in total, 15% of United Airlines’ total capacity is lost due to the virus outbreak. As a result, the company withdrew its 2020 full-year guidance, as the “range of possible scenarios is too wide” to provide an outlook. If the virus “were to run its course by mid-May,” and the demand on trans-Pacific routes gradually returns to normal within the next five months, the company still assumes an EPS between $11 and $13.

Q1 2020 earnings are expected to stay the same, as the lost revenue would be offset by lower fuel prices, cost savings and an extended co-brand partnership in the United MileagePlus credit card program.