Airline

American Airlines 2020 net loss reaches $8.9bn

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American Airlines 2020 net loss reaches $8.9bn

American Airlines Group has reported a 64% decline in fourth-quarter revenue to $4bn, and a net loss of $2.2bn. The airline posted a full year 2020 net loss of $8.9bn (excluding net special items the loss was $9.5bn).

American ended the fourth quarter with approximately $14.3bn of total available liquidity, which is expected to rise to $15bn at the end the first quarter of 2021.

“Our fourth-quarter financial results close out the most challenging year in our company’s history,” said American Airlines chairman and CEO Doug Parker.

“As we look to the year ahead, 2021 will be a year of recovery. While we don’t know exactly when passenger demand will return, as vaccine distribution takes hold and travel restrictions are lifted, we will be ready. We are confident that the actions we have taken to improve our customer experience, enhance our network and increase our efficiency position us well for the future.”

American has removed more than $17bn from its operating and capital budgets for 2020 primarily through reduced flying, and incorporated more than $1.3bn of permanent non-volume, non-fuel efficiency cost-saving measures into 2021 operating plan.

The airline has reduced its daily cash burn rate from nearly $100 million in April 2020 to approximately $30 million in the fourth quarter, driven by revenue and cost-reduction initiatives. American has retired a number of aircraft types and deferred deliveries of Boeing MAX aircraft as well as closing several sale-leaseback deals to finance its new A321s.

American has also reduced its non-aircraft capital expense by $700 million in 2020 and another $300 million in 2021 through reductions in fleet modification work, the elimination of ground service equipment purchases, and pausing noncritical facility investments and IT projects.

To date, more than 20,000 employees have opted for voluntary early out or long-term partially paid leave during the year, and the company reduced its management and support staff team by approximately 30%.

During the fourth quarter, American also launched its first cargo-only flights since 1984 to transport critical goods, including the COVID-19 vaccine, and increased service to include 41 destinations for strategic cargo-only opportunities. American moved nearly 800 million pounds of critical goods around the world in 2020, including 167 million pounds on the airline’s more than 5,200 cargo-only flights.

Compared to the first quarter of 2019, American expects its first-quarter system capacity to be down 45%, with total revenue expected to be down 60 to 65%.

American has indicated that it plans to seek new financing as its says there are no assurances that “any of the mitigating actions we have taken will suffice to sustain our business and operations through the pandemic,” the company said in a stock filing.

American said it would try to issue secured and unsecured debt securities, equity securities and pursue credit facilities.

American shares rose more than 40% as investors short the stock – a move that has retail investors on Reddit’s r/wallstreetbets community suggesting it will be the next company it invests in to halt the benefits from the shorting activity. The same tactic was utilised to great effect with the GameStop shares earlier this month.

Cowen’s Helane Becker in a research note today suggested American should use the spike in its share price as an opportunity to issue equity to alleviate its debt burden and de-lever its balance sheet.