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United Airlines withdrew its 2020 profit forecast, citing the financial impact of the coronavirus outbreak in China. The uncertainty surrounding the virus means United can't guarantee its earlier goal of earning $11-$13 a share this year, according to a regulatory filing Monday.
The earnings target is still within reach if the outbreak runs its course by mid-May and travel patterns return to normal in the five months after that, United said.
The airline’s caution underscores the worsening financial drag as the spread of Covid-19 stymies global travel.
China flights
Airlines around the world have halted flights to China, while in other industries companies from Apple to Puma have warned that the virus threatens their results. Mastercard is the latest to join the chorus, lowering its forecast for revenue growth.
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United rose less than 1 per cent to $75.70 before the start of regular trading on Tuesday in New York. The stock had dropped 3.3 per cent on Monday amid a global rout on coronavirus fears.
The Chicago-based airline said it still expects to meet its first-quarter guidance of 75 cents to $1.25 a share, aided by a decline in fuel prices, cost savings and a revised co-branded credit card agreement with JP Morgan Chase and Co.
United had the most service to China among US airlines, with 12 daily flights. It has removed that flying from its schedule until April 24th. Flights to destinations in all of Asia were expected to account for 15 per cent of United’s capacity this year.
Despite the virus’s financial impact, United said it’s on track to earn $15-$18 a share in 2022, with free cash flow of $2 billion that year and $3 billion in 2023.
The company also plans to cap its debt level at no more than 3.5 times adjusted debt to adjusted earnings. United had net debt of $17.7 billion at the end of 2019. – Bloomberg