American Airlines Reports Significant Losses In Quarter One

American Airlines Reports Significant Losse
Courtesy: American Airlines

American Airlines Reports Significant Losses In Quarter One

American Airlines is the last of the four major U.S. airlines to report its quarter one earnings.  Last week, both Delta Air Lines and United Airlines their forecast of their expected reported quarterly earnings.  Earlier this week, Southwest Airlines reported their quarterly earning.  Today, American Airlines reported their quarterly earnings, and they show a loss of $2.2 billion.

The airline’s total operating revenue was $8.5 billion, and its total operating expenses were $11.1 billion.  That means the airline operated at a loss of $2.5 billion.  After taking into account non-operating expenses and tax benefits, the airline suffered a $2.2 billion net loss overall.  The airline suffered a $1.1 billion loss if not including net special items.

In a statement, American Airlines CEO Doug Parker said:

Never before has our airline, or our industry, faced such a significant challenge.  True to fashion, the American Airlines team has done a phenomenal job taking care of our customers and each other during such difficult and often heartbreaking times. We are incredibly proud of their selflessness and dedication to others.

We have moved quickly and aggressively to reduce our costs and bolster our liquidity.  We are particularly grateful for the $5.8 billion in financial assistance American will receive through the Payroll Support Program, and we appreciate the bipartisan congressional and U.S. Department of the Treasury and Department of Transportation support to protect airline jobs and ensure a strong and competitive U.S. airline industry.

The release also highlighted the measures the airline is taking to cut costs during the downturn.  That includes:

  • Reducing capacity by 80% in April and May and 70% in June;
  • Accelerating the retirement of four aircraft types;
  • Suspending all non-essential hiring;
  • Deferring marketing expenditures; and
  • Consolidating its footprint at airport facilities.

Bottom Line

This is not good news for American Airlines, but it is also not entirely shocking.  No airline expected to report positive news after quarter one earnings.  They are also gearing up for even worse results from quarter two, where the entire three months is impacted by coronavirus.  In the first quarter, the impacts from coronavirus only began to be felt in early to mid-March.

As governors list stay-at-home orders, all four companies will need to compete as people (hopefully) take to the air again, albeit at a likely lower rate.

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