American Airlines lost more than $2 billion last quarter amid coronavirus
American Airlines reported a staggering $2.24 billion loss in the first quarter, around the time when the coronavirus pandemic triggered a sharp drop in air travel.
The airline's revenue fell 19% 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 U.S. has plunged 95% 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 $185 million in the same quarter last year. It was American's largest quarterly loss since merging with US Airways in 2013. American's stock has fallen 58% since the beginning of the year and was down 3% Thursday morning at just above $12 a share.
American said adjusted for non-recurring items, it lost $2.65 per share. That was worse than the average forecast of a $2.08 per share loss from 15 analysts surveyed by FactSet.
Investors, however, seemed prepared for the bad news.
Parker highlighted American's efforts to bolster its liquidity — building up enough cash, it hopes, to ride out the pandemic — including getting $5.8 billion in federal aid to help cover payroll costs through September.
American estimated that it ended March with $6.8 billion in cash and other liquidity, including $2 billion that it raised during the first quarter, and will have $11 billion at the end of June.
The Fort Worth, Texas-based airline has cut its flying schedule by 80% in April and May and 70% 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 $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 is just the tip of the iceberg, according to industry observers. U.S. airlines could lose $21 billion this year if coronavirus keeps its grip on airports in coming months, according to an estimate from the International Air Transport Association. The industry globally could lose up to $113 billion this year, the association said.
American's loss dwarfed the $534 million loss reported last week by Delta Air Lines, which is slightly larger by revenue, and a $94 million loss posted by Southwest Airlines. United Airlines was scheduled to issue first-quarter figures later Thursday.
Industry observers say they don't expect coronavirus fears to bankrupt U.S. airlines. Still, the longer it takes for health officials to contain the outbreak, the longer it will take for airlines to recover financially, they said.