For the entirety of 2020, airline stocks have taken a pretty tough beating. Despite securing billions in federal aid in order to stay afloat, almost every major company in the aerospace sector has had to shed thousands of jobs in order to help slow down the rate of cash burn. While many were hoping that, with the approval of two new coronavirus vaccines, airfare would return to normal, top airlines and their management teams have warned that this won’t necessarily be the case. United Airlines (NASDAQ: UAL) announced on Wednesday its fourth-quarter financial results, as well as a $1.9 billion quarterly loss, amidst other potential concerns.
The $1.9 billion Q4 loss United reported is significantly worse than the $641 million in profit the airline reported back in Q4 2019. Throughout 2020, United lost approximately $7.1 billion, making it one of the more hard-hit airlines in America. Management did say that thanks to its cost-cutting measures, United could return to profitability sometime in 2023. However, that’s a pretty long time to wait for even long-term investors.
“Aggressively managing the challenges of 2020 depended on our innovation and fast-paced decision making. But the truth is that Covid-19 has changed United Airlines forever,” warned United Airlines CEO Scott Kirby. He would later pivot to say that “The passion, teamwork and perseverance that the United team showed in 2020 is exactly what will help us build a new United Airlines that’s better, stronger and more profitable than ever,” but shareholders sharing Kirby’s enthusiasm at the moment.
At the same time, other big airlines have reported staggering losses as well. Delta Air Lines (NYSE: DAL) reported last week that it lost a whopping $12 billion through 2020, the worst year in the company’s history. Going forward, most analysts and investors are bracing themselves for some difficult numbers from other airline stocks. Both Southwest Airlines, as well as American Airlines, are expected to report their fourth-quarter results next week.
Even long-time value investors like Warren Buffett have decided to give up on airline stocks. Last year, the Oracle of Omaha sold his remaining stake in United, American, Southwest, as well as Delta Airlines, accepting a pretty steep loss in the process. For many investors, if Buffett wasn’t willing to wait it out, then it didn’t make sense why regular folks should onto these stocks either.
Shares of United Airlines actually didn’t move too much in response to the news, which was somewhat surprising. The stock is down around 2.7% in after-hours trading while still trading at around half the price of where it was back in January 2020. For the most part, few are expecting any sort of major comeback from airline stocks anytime soon.
United Airlines Company Profile
United Airlines operates more than 4,500 flights a day to five continents. United’s hubs include San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. United operates more than 740 mainline aircraft. The airline is a member of the Star Alliance, which provides service to 192 countries via member airlines. In 2019, the carrier posted $43.2 billion in revenue, of which $39.6 billion was passenger revenue. – Warrior Trading News