United Airlines pledges more cost cuts

United Airlines said on Wednesday it aims to cut about $2 billion of annual costs through 2023 as it charts a recovery from the coronavirus pandemic that drove its fourth straight quarterly loss.

Airlines are counting on COVID-19 vaccines to boost travel demand later this year but warn that the strength of a rebound will largely depend on the pace of vaccine rollouts, particularly as coronavirus cases keep rising.

Chicago-based United said 2021 would be a “transition year that’s focused on preparing for a recovery.” Its shares fell 2% in after-hours trading.

The company burned an average of $33 million per day in the fourth quarter, including about $10 million of severance and debt payments, even as it continued to slash costs.

United furloughed thousands of employees last October when an initial round of payroll aid for airlines expired. It brought back those workers following a fresh $15 billion in payroll aid for the sector but warned the recall could be “temporary” as travel demand remains depressed.

United is set to receive about $2.6 billion in payroll support through March and said it expects to offer employees options like voluntary leaves to reduce furloughs after that time.

Rival Delta Air Lines, which last week labeled 2021 a year of recovery, expects to halt its daily cash burn rate of about $12 million in the spring and does not expect any furloughs.

United has the greatest exposure of major U.S. airlines to international travel, the sector hardest hit by the pandemic and the one likely to be the slowest to recover.

U.S. President Joe Biden, who was inaugurated on Wednesday, plans to maintain a ban on travelers from Europe and Brazil that his predecessor, Donald Trump, had signed an order to lift beginning on Jan. 26.

United’s adjusted net loss was $2.1 billion, or a loss of $7 per share, in the fourth quarter ended Dec. 31, compared with a profit of $676 million a year earlier. That missed analysts’ estimates for a loss of $6.60 per share, according to IBES data from Refinitiv.

Total operating revenue fell 69% to $3.4 billion, in line with forecasts. In the current quarter, United said it expects revenue to fall by 65% to 70% from a year ago and its flight capacity to shrink by at least 51%.

The airline had $19.7 billion of liquidity as of Dec. 31 and expects to have a similar amount at the end of March, it said.

However, its cost reduction plan positions it to exceed its 2019 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin – a key metric of profitability -in 2023, or sooner if demand returns more quickly, it said.

United will hold an investor call on Thursday, with focus on summer booking trends. But since U.S. airlines have dropped fees for changing or cancelling flights, it has become more difficult to predict revenue based on bookings.

American Airlines and Southwest Airlines are due to report quarterly results on Jan. 28.