Scott Kirby just announced to Wall Street and to employees that United would reach EBITDA break-even by the end of June.
Now before people take this statement and start going crazy Scott Kirby did make it 100% clear United still has a long way to go before we reach the real break even point.
He stated United has around $350 million dollars per month in expenses that we are paying, so at the end of the day we are still loosing money every month. However, United will reach EBITDA break-even months ahead of schedule thanks in no small part to robust demand for domestic leisure travel. Demand in the leisure market has lead to higher ticket prices especially compared to last year in fact leisure demand is so great ticket prices this summer could hit 2019 prices.
Thanks for this post. I'm surprised it didn't get more discussion.
For those who aren't familiar with the acronym, EBITDA is
Earnings Before Interest Taxes Depreciation and Amortization
It's a long way from GAAP Net Income.
U.S. airlines have a lot of expensive assets. Depreciation is not trivial. UA's depreciation and amortization last quarter was $623 million.
U.S. airlines now have a ton of debt. (AA, UA, WN and others issued new equity, but most of the financing of op losses over the last 15 months has come from added debt.) Even at fairly low interest rates by historical standards, interest expense is significant. UA's net interest expense last quarter was $353 million (DL, $361 million; AA, $371 million).
UA can break even on EBITDA and still show a loss of $1 Billion a quarter in pre-tax income.