American Airlines posts US$2.2b loss during pandemic
AMERICAN AIRLINES reported a staggering loss of US$2.24 billion for the first quarter, when the coronavirus pandemic triggered a sharp drop in air travel.
The airline’s revenue fell 19 per cent while costs continued to rise, even as the virus spread.
The situation facing the airline industry has grown more dire since the first quarter ended. Air travel within the United States has plunged 95 per cent from a year ago, judging by the number of people screened at the nation’s airports.
“Never before has our airline, or our industry, faced such a significant challenge,” Chairman and CEO Doug Parker said.
American’s massive loss compared with a profit of US$185 million in the same quarter last year. It was American’s largest quarterly loss since merging with US Airways in 2013.
American said that adjusted for non-recurring items, it lost US$2.65 per share. That was worse than the average forecast of a US$2.08 per share loss from 15 analysts surveyed by FactSet.
Investors, however, seemed prepared for the bad news. Shares of American Airlines Group Inc were down eight per cent shortly after the start of regular trading.
Parker highlighted American’s efforts to bolster its liquidity – building up enough cash, it hopes, to ride out the pandemic – including getting US$5.8 billion in federal aid to help cover payroll costs through to September.
American estimated that it ended March with US$6.8 billion in cash and other liquidity, including US$2 billion that it raised during the first quarter, and will have US$11 billion at the end of June.
The Fort Worth, Texas-based airline has cut its flying schedule by 80 per cent in April and May, and 70 per cent in June. It has grounded hundreds of planes. Nearly 39,000 employees have accepted early retirement, partially paid leave or fewer hours of work. Cheaper fuel caused by the collapse in energy prices will contribute to a reduction of more than US$12 billion in its 2020 spending, the airline said.
“There is no way to overstate the gravity of the situation for the airline industry, and difficult decisions lie ahead for all of us,” Parker and company President Robert Isom said in a letter to employees. They said they are confident American and the airline industry “will fight through this successfully”.
American’s loss dwarfed the US$534-million loss reported last week by Delta Air Lines, which is slightly larger by revenue, and a US$94-million loss posted by Southwest Airlines.