American Airlines Reports Third Quarter 2020 Net Loss of $2.4 Billion or $4.71 per Share
- Joe Breitfeller
- Oct 22, 2020
- 3 min read
The airline’s third quarter revenue declined 73 percent year over year to $3.2 billion on a 59 percent reduction in available seat miles (ASMs). Excluding net special items, American Airlines reported a third quarter net loss of $2.8 billion or $5.54 per share.
On Thursday (October 22, 2020), American Airlines announced their third quarter 2020 financial results with a pre-tax loss of $3.1 billion. Excluding net special items, the carrier’s third quarter pre-tax loss was $3.6 billion, and the company reported a 73% year-over-year revenue decline to $3.2 billion on a 59% reduction in total available seat miles (ASMs). The company’s third quarter net loss was 2.4 billion or ($4.71) per share and when net special items are excluded, the net loss is reported as $2.8 billion or ($5.54)/share. The airline ended the third quarter with approximately $13.6 billion in liquidity. During October, the company also increased their borrowing capacity under the U.S. CARES Act by $2 billion to a total of $7.5 billion, increasing their pro-forma liquidity balance to around $15.6 billion. In Thursday’s announcement, American Airlines’ Chairman and CEO, Doug Parker, said,
“During the third quarter, we took action to reduce our costs, strengthen our financial position, and ensure our customers return to travel with confidence. The American Airlines team is doing a remarkable job taking care of our customers and each other during the most challenging time in our industry’s history. 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. 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.”
American Airlines has removed approximately $17 billion from their operating and capital budgets for 2020 through aggressive cost reduction and cash preservation measures. The carrier has removed over 150 aircraft from their fleet through early retirements or temporary storage. American previously announced the retirements of their Boeing 757/767, Embraer E190, Airbus A330-300 and Bombardier CRJ-200 fleets along with other regional aircraft types. The airline will also permanently retire their entire fleet of 15 Airbus A330-200s. American Airlines has reached an agreement with Boeing for the deferral of 18 737 MAX aircraft scheduled to be delivered in 2021 and 2022 by two years. Additionally, the airline finalized sale-leaseback transactions to finance their remaining 2021 Airbus A321 deliveries, thereby securing funding for all planned deliveries through 2021.
With the expiration of the Payroll Support Program (PSP) provision of the U.S. CARES Act on September 30, 2020, American Airlines furloughed 19,000 team members, in addition to 20,000 employees who have opted for early out or long-term leave programs.
The carrier has reduced their non-aircraft expenses for 2020 by $700 million and plans a further $300 million savings in 2021 by reducing fleet modification work, the elimination of ground service equipment (GSE) purchases and suspending all noncritical facility and IT project investments. During the third quarter, American closed two senior secured note transactions with Goldman Sachs Merchant Bank for total proceeds of $1.2 billion. The company does not have any major non-aircraft debt maturities until June 2020, when $750 million in unsecured bonds mature. Additionally, the airline announced authorization to issue up to $1 billion of equity in an at-the-market offering to further boost liquidity.
Finally, American Airlines reported that they have reduced their daily cash burn rate to around $44 million per day during the third quarter, an improvement from their $58 million daily cash burn in the second quarter. Four the fourth quarter, the company expects to reduce their daily cash burn rate to approximately $25-30 million daily.
American Airlines’ purpose is to “care for people on life’s journey.” Shares in the American Airlines Group, Inc., trade on NASDAQ under the ticker symbol AAL and the company’s stock is included in the S&P 500. On Thursday morning, October 22, 2020, Shares in American Airlines Group (NASDAAQ: AAL), were trading 1.61% lower at $12.54/share (10:38 AM EDT).
Source: American Airlines