American’s $4.3 Billion Loss Worst Among Major Domestic Airlines

American Airlines reported the biggest loss among the four major carriers, with a second-quarter pretax loss of $4.3 billion. To cut costs, the airline retired certain aircraft, and reduced their staff by over 45,000 employees.

Of the four major airlines based in the United States, American Airlines reported the worst second quarter of 2020, ravaged by the COVID-19 pandemic. In a press release, the Fort Worth-based carrier announced a second-quarter pretax loss of $4.3 billion, which excludes net special items.

American Trims Both Fleet and Staff to Conserve Cash

To stay aloft, the airline says their goal is to reduce total operating and capital expenditures by $15 billion. While their primary strategy is operating less flights, the airline is also trimming numbers within their own ranks.

During the second quarter, the airline retired a total of 80 airframes. The grounded types include 20 Embraer 190s, 34 Boeing 757s, 17 Boeing 767s and nine Airbus A330-300s. Combined with other groundings and temporary storage, the airline removed over 150 aircraft from their current operations.

In addition, the airline is actively working to reduce their expenses by cutting their payroll. In the report, American noted over 41,000 team members accepted an early retirement package, a reduced work schedule or partially paid leave. Among management and support staff, an additional 5,100 people have been eliminated.

Yet, the airline still believes they will be overstaffed by 20,000 people by Oct. 1, 2020 – when they are allowed to start layoffs from their support from the CARES Act. To those ends, American sent WARN notices to 25,000 employees in July 2020.

Through the cuts, the airline was able to reduce their daily burn rate from around $100 million per day in April 2020, down to $30 million per day in June 2020.

Airline Anticipates 60 Percent Drop in Capacity Year-Over-Year

While the airline noted that May and June 2020 provided some optimism, new COVID-19 cases and local lockdowns are hurting their bottom line. Looking forward through the next three months, capacity is expected to drop by nearly two-thirds compared to the same period in 2019. Moreover, to achieve the goal of right-sizing their international network for when the industry begins to recover over the next two years, the airline will end international service to 19 destinations from six hubs.

American is also accepting additional government money for the remainder of the year. The carrier signed a term sheet with the U.S. Treasury to accept a $4.75 billion secured loan from the CARES Act. The loan is expected to be finalized and disbursed in the third quarter.