American Airlines has recorded a $-2.067 billion net loss or a $-2.659 billion pre-tax loss in Q2, it announced on July 23. The HY1-loss mounted to $-4.308 billion net and $-5.549 billion pre-tax. While its competitor United used to describe Q2 on Tuesday as the “most difficult in our history”, American CEO Doug Parker calls it “one of the most challenging in American’s history.”
Passenger revenues were down -89.9 percent to $1.108 billion in Q2 or -57.5 percent to $8.788 billion for HY1. Where United gained a little extra on cargo, AA’s cargo revenues were lower in both quarters to $130 million in Q2 (-41 percent) and $277 million in HY1 (-36.9 percent).
This resulted in net operating revenues of $1.622 billion in Q2 (-86.4 percent) and $10.137 billion in HY1 (-55 percent). The operating income was $-2.486 billion in Q2 and $-5.034 billion in HY1.
There are more numbers that confirm how difficult the April-June quarter has been. Passenger enplanements for the mainline airline were down -86.4 percent to 5.4 million versus 40 million in the same quarter last year. In HY1, enplanements stood at 35.8 million compared to 76.5 million in 2019.
Capacity in available seat miles dropped 78.4 percent to 13.647 million in Q2 and 45 percent to 66.836 million in HY1. Load factors in Q2 were just 42.1 percent compared to 87.5 percent last year.
Regional faired little better, with enplanements -81.2 percent to 2.911 million in Q2 and -48.8 percent to 14.7 million in HY1.
By region, the one most affected has been that to Asia Pacific with revenues passenger miles down by -98.9 percent, the Atlantic by -98,1 percent, Latin America by -97.4 percent, and Domestic by -83.6 percent in Q2.
Cash burn down to 30 million per day
American has done all to reduce costs, reducing its daily cash burn from $100 million in April to $30 million in June. Retiring 34 Boeing 757s and seventeen 767s, nine Airbus A330-300s, twenty Embraer E190s plus thirteen Embraer E175s, four Embraer E140s, and three Bombardier CRJ200s older regional aircraft resulted in a $675 million non-cash write-down on the aircraft and spares plus $68 million in write-downs in right-of-use assets and return costs. Fifteen A330-200s and seven 737-800s have been placed in storage. In total 150 aircraft have been taken out of service.
Capex has been reduced by $700 million this year down from the planned $3.7 billion and will be down another $300 million in 2021 from the planned $2.1 billion, as investments in modifying aircraft cabins on 737s and A321s, IT projects, and the purchase of new ground equipment have all been deferred.
AA is working with Boeing on finalizing the deliveries of seventeen MAX 8s, of which thirteen have been built. The airline hopes to have them all this year, but this depends on the re-entry into service of the type. American still plans to take all 100 aircraft on order.
Surplus of 20.000 employees this fall
Over 41.000 employees have opted for early retirement, a reduced work schedule or partially paid leave, while management has been reduced by 5.100 staff of 30 percent. American expects to have a surplus of 20.000 employees this fall and has notified them of potential involuntary severance of their contracts, this depending on how the market will recover from Covid-19. Demand had picked up in May and June but new travel restrictions caused by new corona cases have resulted in lower bookings in July. Q3 capacity is expected to be down by 60 percent compared to last year.
Q2 has been used to strengthen its financial position. By the end of June, liquidity stood at $10.2 billion. This includes $3.6 billion raised through offerings of come stock and bonds and the refinancing of a $750 million loan with maturity until June 2022. American has signed up for a $4.75 billion loan under the CARES act that should be finalized in Q3, just as $1.2 billion is two secured note transactions. Mainline operations received $1.8 billion in payroll support in Q2 to cover expenses.
American has $7.3 billion capacity of credit facilities left plus $3.77 billion in unencumbered assets.
Doug Parker is cautious about the pace of recovery: “In what we see, nothing gets back to the level of 2019. That will not happen until we have a vaccine.” From July 29, all passengers over two years will be required to wear face masks in an update of its safety procedures.
