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Tuesday, January 26, 2021

United Airlines Stock: No Hope For Dividends Till 2026

A huge debt of $30 billion looms over the head of United Airlines even though it barely saved itself from the liquidity crisis. It is going to take a while for the United Airline stocks to return to profitability. The shares are getting too high, and they are unable to issue the dividends until 2026. The industry of air travel has faced a lot of changes in 2019, and the recovery of the situation might not happen till 2024. The instability of the company is keeping investors away from the United Airlines stock.

Investors choose to avoid United Airlines Stock

Before the pandemic, United Airlines did not have much liquidity, because of which, they had to arrange a lot of money through stock offerings and debt to keep their head above the water. Even though the company managed to sustain itself somehow, by avoiding insolvency, it is highly doubtful if it can perform well in the coming years. 

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Normalcy in the company will still take quite some time for the United Airlines stock. The company has taken up some measures to promote travel fluidity. The fees for date changing are not being charged for a while and passengers are also being given free travel standby for departures on the same day. Despite all these efforts, full recovery still seems like a faraway dream for the company.

The reports of the Q3 showed that the revenues of United Airlines have receded by 78% every year to $2.49 billion. Though the decline is lower compared to the Q2, in which the reduction was 87% per year, the recovery still seems a pretty far fetched idea. The main problem of the company lies elsewhere. The company had to raise more than $20 through stock offerings and debt billion to stay away from getting bankrupt. There have been several methods by which the company has tried to control its expenses, like a 63% cut on their non-labor operating expenses. The daily severance payment of the company was at around $4 million, whereas, the daily cash burn average from July to September was $21 million. 

In September United Airlines settled a deal with the Treasury for a $5.2 billion loan. This can raise it to $7.5 billion with the approval of the Treasury. The deal still has certain problems, like, the Treasury has received warrants, which will allow the Departments to buy the shares of the company with a $31.5 strike price for each share.

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Alongside a decline in the company in the international market, United Airlines stock is bearing the blues of the COVID-19 pandemic. With limited traveling taking place all over the world, and many borders are still sealed, it’s a tough journey that United Airlines stock has to take to survive. Therefore, it can be said that investors are advised to stay away from the United Airline stock given the situation.

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