American Reports Pre-Tax Loss of $3.1 Billion, But Still Sees AAdvantage as a Bright Spot

Even though American Airlines posted a significant loss, there’s optimism about their frequent flyer program and how cardholders are spending. The Fort Worth-based carrier posted a pre-tax loss of $3.1 billion for the third quarter of 2020, but say their credit card program have not fallen at the same rate as other parts of the business.

While American Airlines says the third quarter 2020 loss is part of the COVID-19 pandemic, the airline says that their credit card programs with Barclays and Citi have not lost as much momentum as the core business. In their report released Oct. 22, 2020, the airline posted a pre-tax loss of $3.1 billion, translating to a net loss of $2.4 billion or $4.71 per share.

American AAdvantage Co-Branded Cards Remain Positive Spot for Airline

For American’s leadership, the third quarter was about controlling costs and managing a future path beyond COVID-19. To bolster confidence in the travel experience, the airline launched COVID-19 testing for flyers heading to certain markets, as well as introducing the SurfaceWise2 coating to kill viruses and germs beyond cleaning cycles.

“We have a long road ahead and our team remains fully engaged and focused not just on managing through the pandemic, but on making sure we are prepared for when demand returns,” airline CEO and board chairman Doug Parker said in a statement. “We are confident that the continued efforts of our team and the actions we have taken will drive customer confidence and strengthen our company for the future.”

One of the positive notes for American was the performance of their loyalty program, AAdvantage. In addition to making changes to reduce loyalty status requirements and offering more benefits for all fare levels, leaders at the airline say that spending on their co-branded credit cards with Barclays and Citi have not suffered the same losses as their core airline business. In the fourth quarter of 2020, the airline wants to work closer with both banks and Mastercard, to ensure their products remain top-of-mind for cardholders.

“Indeed our co-brand program has — our revenues haven’t fallen nearly at the rate of overall passenger revenue, simply because people continue to keep spending out there,” Vasu Raja, chief revenue officer of American, said during the earnings call as quoted by a Seeking Alpha transcript. “As we look at consumers more broadly, savings are up, people are spending, they’re spending on different things.”

Earlier in 2020, American said the AAdvantage program could be valued as high as $31.5 billion.

More Aircraft Retirements Imminent for American

As a means to continue conserving cash and maintain liquidity, American’s aircraft retirement plan was accelerated throughout the quarter. In addition to retiring over 150 various airframes, the airline decided to retire all 15 of their Airbus A330-200 aircraft. The airline’s widebody frames will be limited to the Boeing 777 and the 787 Dreamliner.

Looking forward, American says they will continue to cut their fourth quarter capacity in half compared to the last three months of 2019, while long-haul international capacity will be cut by 75 percent. While they maintain $15.6 billion in liquidity, the airline’s burn rate through the third quarter remained at $44 million. Their goal for the end of the year is to reduce their daily spending to between $25 and $30 billion.