American’s expanded schedule gives airline record spike
American Airlines Group Inc. surged the most on record after the carrier said it would boost July flights 74 per cent compared with this month, signalling that U.S. travellers freed from shelter-inplace orders are returning more quickly than expected.
The busiest days next month will have about 4,000 flights, up from 2,300 in June, said Vasu Raja, American’s senior vice-president of network strategy. The July figure is equivalent to 40 per cent of capacity a year earlier, compared with 30 per cent in June, the airline said Thursday. Capacity was even less in May, after a devastating collapse in flying spurred by the COVID-19 pandemic.
“People are hungry, eager to get back into the economy,” Raja said in an interview. “We feel a real confidence to fly a much bigger July.”
American’s expanded schedule builds on recent indications from rivals that customers are starting to make their way back onto planes, at least for domestic flights, after fleeing in April because of the coronavirus. While traffic is still weak by historical standards, the airline’s trends suggest that the worst has passed — and that the rebound in demand has a chance of outpacing the dire expectations the industry was outlining as recently as last month.
The airline’s shares jumped 41 per cent to US$16.72 at the close in New York, the biggest gain since trading began in 2013. American’s surge was tops on the S&P 500 Index and sparked a broader industry rally, with the next two slots on the stock gauge claimed by United Airlines Holdings Inc. and Delta Air Lines Inc.
Delta CEO Ed Bastian said Wednesday that the company plans to operate twice as many domestic flights in July as it did in May. Most will be tied to the carrier’s Atlanta hub.
American’s load factor, or the average share of seats filled per plane, climbed to 55 per cent last week from 15 per cent in April. Next month, the company will bring back some of the 450 jets it parked during the worst of the collapse in flying.
While revenue is still down 80 per cent from a year ago, that’s an improvement from the 90-per-cent drop American experienced in the depths of the crisis as demand nearly disappeared, said CEO Doug Parker.
He recently made a personal trip on Southwest Airlines Co. because American’s flights were booked to new capacity limits that have been set to promote social distancing on board. “We have a long road ahead,” Parker told CNBC.
American acknowledged the limits to the improving outlook. Demand is still weak on lucrative routes to overseas destinations, with the company planning to fly less than 20 per cent of last year’s international schedule compared with 55 per cent of domestic capacity. Also, American delayed the planned resumption of additional foreign routes by at least a month.
The domestic recovery is “tenuous,” Raja said. The Fort Worth, Texas-based company is still retiring more than 100 aircraft, including three separate fleet types.
Wall Street expects a full recovery to take years for the airline industry, with Moody’s Investors Service predicting “severely depressed” demand for flights next year and no substantial recovery until 2023.