American Airlines announced its second-quarter results today. Unsurprisingly, the airline posted a substantial loss for the period ending June 30th. American suffered a $2.1 billion loss, with revenues down 86.4% to just to $1.6 billion from $11.960 billion. In the same period last year, the airline posted a $662 million net profit. The airline also predicted it would not return to 2019 levels until at least 2022.
American Airlines has become the latest in a string of carriers to post significant losses for Q2 2020. Unsurprisingly, airlines are still suffering as the virus outbreak continues to restrict capacity and keep travel demand low. In a statement, American Airlines said,
“Passenger demand and load factors have improved since bottoming out in April, but continue to be significantly below 2019 levels. While May and June revenue trends were encouraging, demand has weakened somewhat during July as COVID-19 cases have increased.”
Revenue breakdown
The airlines operating revenues came in at $1.6 billion. Broken down, this equates to $1.1 billion in passenger revenue, $130 million in cargo revenue, and $384 million in other revenues for airport lounges, loyalty programs, and partnerships. However, operating expenses of $4.1 billion offset revenues.
A significant portion of expenses was staff salaries, which cost the airline $2.5 billion. The airline also spent $217 million on fuel and fuel tax. Regional expenses mounted up to $801 million, with maintenance costing $287 million.
Other operating expenses included $315 million on rent and landing fees, $499 million depreciation and amortization as well as $568 million classified as other expenses. This includes everything from catering costs, hotels for crew members, and ground handling. The total operating loss was $2.5 billion before taxes leaving the final net loss of $2.1 billion. Including non-operating expenses, the net loss totaled $2.7 billion.
Cost-saving and the future
Although it posted a huge loss, American did manage to reduce its daily cash burn to around $30 million in June. In April, it reported a daily cash burn of $100 million. However, the airline has warned that further cost-cutting is likely. It has warned staff that up to 25,000 jobs are at risk come October. The airline is still encouraging staff to take early retirement and voluntary exit schemes to minimize its outgoings. However, once the deadline of September 30th passes, the airline can start laying off staff. Before then, it must keep staff to meet the terms of the CARES act loan.
Layoffs are highly possible as the airline has stated it believes capacity for the third quarter will be down 60% compared to the same period last year. This equates to approximately 20,000 extra staff, which will not be needed to operate the airline’s autumn schedule. However, American expects its $4.75 billion from the US government to be finalized in the third quarter.
Looking even longer-term, the airline predicts that its international long-haul capacity in summer 2021 will be down 25% compared to 2019. The airline has also made changed to its fleet, retiring four aircraft types early, including 20 Embraer 190s, 34 Boeing 757s, 17 Boeing 767s, and nine Airbus A330-300s. The resultant savings on maintenance and modification means the airline hopes to save $300 million in 2021.
Hope for recovery?
American Airlines’ predictions for the rest of this year and into 2021 make it clear that it does not except to recover to 2019 levels very soon. As international travel restrictions continue, American must be prepared for more losses. Worryingly, the recent rise in cases may be delaying any hope of recovery by the end of this year.