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Coronavirus Causes American to Lose $2.2 Billion in First Quarter

American Airlines Cancellation Cornavirus Refund Change Fee Waiver

American Airlines is joining United Airlines as a carrier who lost over $1 billion due to the novel Coronavirus outbreak in the first three months of the year. In a pre-market opening announcement, the Fort Worth-based airline announced a net loss of $2.2 billion to open 2020.

Massive system capacity cuts pair with aircraft retirements

After flyers stopped taking to the skies because of Coronavirus concerns, American’s total operating revenues dropped by nearly 20 percent compared to the same time period in 2019. Like their other legacy competition, the carrier is taking the opportunity to reduce costs and improve liquidity throughout the organization.

With capacity cut by 80 percent in May 2020 and 70 percent in June 2020, the airline will speed up the retirement timeline of several older fleet aircraft. This includes 20 Embraer 190s, 34 Boeing 757 airframes, 17 Boeing 767 aircraft and nine Airbus A330-300s. Additional regional aircraft will also be retired.

The airline has also moved to offer employees early retirement options, reduced work schedules or partial voluntary paid leave. Around 39,000 employees have accepted the airline’s offer. With hiring on a freeze and reduced leadership wages, some of those positions may not return.

Despite the changes, the airline continues some operations. In recent weeks, American launched their first cargo-only flights since 1984, with the capacity to ship over 6.5 million pounds of goods and personal protective equipment weekly.

American accepts $10 billion from the CARES Act

Despite having $6.8 billion in available liquidity, the airline is accepting over $10 billion in support from the CARES Act aviation bailout funds. The support breaks down to $5.8 billion from the Payroll Support Program, and a $4.75 billion loan option from the U.S. Treasury. American has not announced if they will follow suit of their competition and offer the government stock options as a result of taking the loan.

Furthermore, the airline is considering all options to raise money and keep cash in hand. American claims their assets are valued over $10 billion, which includes the AAdvantage loyalty program. The carrier could look for ways to monetize and leverage their frequent flyer program in the coming months to reduce their daily cash burn currently estimated at $70 million per day.

“We have moved quickly and aggressively to reduce our costs and bolster our liquidity,” American Airlines chairman and CEO Doug Parker said in a press release. “We have a lot of difficult work ahead of us. And while there is still uncertainty in what’s to come, we are confident that through the dedication of the American Airlines team and our swift actions, we will get through this for our team, our customers and our shareholders.”

SamirD May 6, 2020

And it's not just the big companies, we're losing $1000/day due to the loss of revenues. It seems like the chinese government did their job right of destroying the world...

holiosan May 6, 2020

They can sell all of those stocks that they bought back to artificially inflate the price, dividends and and executive bonuses. After that, we'll see if they deserve a bailout.

at-qbkilla May 1, 2020

Lufthansa is losing 1M Euro per HOUR.

flyshooter May 1, 2020

The coronavirus didn’t cause the loss. The governments intervention in the marketplace caused the loss.

rylan April 30, 2020

I think Delta said their cash burn rate is expected to be ~50M per day in May.