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Saturday, January 23, 2021

The United Airlines Stock is Going To Suspend All Dividends Until 2026

Although the United Airlines stock has managed to avoid a crisis in its liquidity, it will take the company quite a long period of time before it returns to any iota of profitability. Currently, the debt has risen to around $30 billion- with a massive inability in issuing dividends until 2026- and this has led to an increase in the opportunity cost of the shares of this airline. It comes as no surprise that the United Airlines stock is currently uninvestable- since the air travel industry won’t be able to recover from this economic recession until 2024. Therefore, it would be better not to invest in their stocks.  

Investors Need to Stay Away from United Airlines Stock

Before the pandemic took place, the United Airlines stock didn’t have considerable liquidity- something that has led to them being forced to accrue massive funds through stock offerings and debts- so that they can survive. While it was fortunate that the airline managed to remain solvent in the first couple of months during the pandemic- there is no way that this company is going to show any remarkable performance in the coming years. Despite them recovering, the recovery is going to be immensely slow- meaning the United Airlines stock and the rest of the competitors will take several years before they come back to being normal. 

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In one of the many efforts taken up by the airline company in trying to boost air travel, the company decided to forego fees for changing the flight dates of the passengers- along with giving them a plan that would allow them to be free for standby flights on same day departures. It is ascertained that such measures would definitely help the United Airlines stock improve- but the recovery is going to take quite a lot of time. 

United Airline stock
United Airline stock

The Quarterly Earnings of United Airlines Stock

The last couple of earnings for Q3 highlighted the revenue of United Airlines, as it declined to about $2.49 billion. Although this decline wasn’t as much as compared to Q2, the comparatively weak performance that has been displayed over the entire period only strengthens the point that this company is far from recovering. In this quarter, the capacity of the United Airline stock was down by 70%, where the load factor was just 47.8%- below the consensus estimate of 48.7%. 

The main problem that United Airlines stock faced was that they were forced to gather around $20 billion through stock offerings and debt so that they could avoid bankruptcy. But since there were a high cash burn and a demand already weakened, the total liquidity of the company at the end of Q3 was almost $19.4 billion In the coming months, the company will keep on bleeding money, as the cash burn would be around $15 to $20 million in Q4. 

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