Skip to Content
Stock Analyst Update

United Airlines Raises Equity, We Reduce Our Fair Value

It's difficult to say with any certainty when air traffic will return, but we are confident that demand will eventually bounce back.


We’re lowering our fair value estimate for United Airlines (UAL) by about 9.5% to $38 per share as we account for the equity issuance announced on April 22, 2020, and the firm’s acceptance of government support. United has received $6 billion government loans and has issued the government $0.65 billion in warrants that dilute the firm’s share count by about 7%. Separately, United has raised equity on the open market worth about $1 billion, which diluted previous equity holders by about 15%. We think airlines face a dismal outlook for near-term air traffic and substantial fixed costs, so we are expecting stiff operating losses in 2020. Therefore, we respect that firms may need to employ shareholder-unfriendly tools to maintain solvency while demand is in the doldrums.

Longer-term, while it's difficult to say with any certainty when air traffic will return, we are confident that demand will eventually bounce back. We're modeling demand to begin to normalize in 2021. We think the primary risk to airline investors are increased leverage and equity dilution as airlines look to bolster solvency during this difficult operating environment for the airlines.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Brian Bernard does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.