United Airlines is preparing for a return to profitability this year with or without a significant return of business travel, though executives for now are betting on the former.
The carrier’s passenger revenue in the first quarter declined 67.2% year over year, to $2.3 billion, with both business travel demand and long-haul international travel demand — which together represent about two-thirds of United’s total business — down more than 80%, United CEO Scott Kirby said during the company’s earnings call this week. United’s core cash flow, however, turned positive in the month of March, which Kirby said should continue. The carrier now is focused on turning earnings before interest, taxes, depreciation and amortization (EBITDA) positive, which Kirby said is possible even if long-haul international and business travel remain down as much as 70%.
Leisure demand trends, however, are giving United executives hope that corporate demand recovery is not that far off.
The carrier had reduced capacity and braced for a slowdown in demand to Mexico’s beach destinations, for example, when testing requirements upon return to the United States started earlier this year, United executive vice president and chief commercial officer Andrew Nocella said.
“We were wrong, and capacity was quickly reinstated,” Nocella said. “Wherever we look, where access is permitted, we see leisure demand at 2019 levels or greater.”
With that in mind, United is “cautiously optimistic that we’ll see a lot more demand for business travel later this summer,” with the strongest return likely coinciding with full re-openings of schools and employees returning to offices to work, he said. Along with recent capacity adjustments to European leisure destinations where quarantine-free travel is being permitted for vaccinated visitors, United also stands ready to start eight to 10 daily flights to London should a U.S.-U.K. travel corridor open, Nocella said.
Kirby also stood by earlier statements that business travel would return to a level comparable to prepandemic levels. In the call, he said the CEO of one of United’s biggest corporate customers had told him last summer to prepare for a permanent reduction of 50% of business demand, a number that the CEO had adjusted to 20% to 30% by the fall. More recently, that CEO indicated the company’s travel levels could be up 20% to 30% compared with 2019 levels when travel initially returns, he said.
“They’ve lost their cultural connection, and they’ve had new hires coming in, and there’s no way they can become a part of the company culture working at home,” Kirby said.
Even with positive EBITDA, United will need to see business and long-haul travel to recover to about 65% of pre-pandemic levels in order for the carrier to see positive net income, according to Kirby.
This report was initially published in Business Travel News, a sister publication to Travel Weekly.
The Texas unemployment rate remained unchanged in March, but employers added 99,000 jobs, according to data released Friday by the Texas Workforce Commission.
The state’s seasonally adjusted unemployment rate held steady at 6.9% as the number of Texans in the labor force grew. In Dallas-Fort Worth, the unemployment rate fell from 6.8% in February to 6.5% last month. North Texas employers added 19,500 jobs in March.
“Jobs rebounded strongly in March as COVID-19 cases and hospitalizations fell sharply and mobility increased,” said Keith R. Phillips, Federal Reserve Bank of Dallas assistant vice president and senior economist. “Job gains were broad-based across industries, with particular strength in construction, leisure and hospitality, and oil and gas jobs.”
The construction industry added 19,100 jobs last month. The hard-hit leisure and hospitality sector, which includes hotels and entertainment businesses, posted a gain of 23,100 compared with the preceding month.
Growth in the construction sector was driven by continuing strong demand for single-family homes and repairs associated with February’s epic freeze, Phillips said. He said gains in the number of people vaccinated against the virus probably led to a rise in leisure and hospitality employment.
Despite the gains, the jobless rates in D-FW and Texas remained above the nation’s 6.2% rate in March.
Compared with a year earlier, when the pre-pandemic unemployment rate was less than 5%, the region is continuing to recover from one of the worst job loss cycles in the state’s history. Closures of businesses deemed nonessential caused mass layoffs and led to a loss of more than a quarter of a million jobs in D-FW in April 2020 and more in subsequent months.
The economic forecasting firm Beacon Economics described Texas’ job gain in March as the “strongest labor market jump in months.”
“February was a tough month for the state on a number of fronts, so it was good to see the labor market bounce back in such a strong way in March,” Taner Osman, research manager at Beacon Economics, said in a statement. “And with the vaccine rollout continuing at a strong pace, there should be no stopping the state’s labor market recovery in the coming months.”
North Texas’ employment increase is a reversal from job losses in February, which economists attributed to the disastrous winter storm and widespread power outages that gripped the entire state. With February’s job losses an outlier, Texas has added jobs in 10 of the last 11 months.
Phillips said that the state has added 142,200 jobs year-to-date and that high-frequency data tracking by the Dallas Fed suggests that growth is continuing this month.
“As long as COVID-19 cases and hospitalizations continue to decline, we should see further strengthening of job growth going forward,” he said.
The Dallas Fed now projects 816,400 new jobs in Texas by year’s end.
Fewer workers filed unemployment insurance claims in Texas in the first week of April than in previous weeks, according to the U.S. Department of Labor. Texas saw one of the nation’s biggest drops in unemployment