American, Southwest post profits on travel rebound
Quarterly reports show revenue trends improving
U.S. carriers American Airlines and Southwest Airlines on Thursday posted quarterly profits helped by a bookings rebound and federal aid, and forecast improving revenue trends in the months ahead as more people return to travel.
Executives from both airlines said they have not seen any impact from the rapidly spreading Delta variant of the coronavirus, echoing recent comments by rivals Delta Air Lines and United Airlines.
U.S. airlines, which received US$54 billion in COVID-19 relief for workers’ salaries and also took on debt to survive a deep industry crisis, are now deleveraging balance sheets and rushing to service a rebound.
“We are in the midst of an unprecedented recovery,” American chief executive Doug Parker said on an investor call where the company also outlined plans to pay down about US$15 billion of debt by the end of 2025.
Domestic leisure travel has nearly recouped 2019 levels, and American said it sees domestic business travel fully recovering next year. Southwest said it is seeing a 5-point improvement in business bookings each month.
While international travel remains beset by entry bans, American said there is a “quick and dramatic increase in bookings” whenever restrictions are lifted.
Revenues at American, the world’s largest airline, jumped 361 per cent to US$7.48 billion, beating forecasts, as it carried 44 million passengers, five times more than a year ago.
The quick ramp up has posed operations headaches for both American and Southwest, which had to cancel flights due to labour shortages. Both have recalled pilots and flight attendants and are renewing hiring plans.
Southwest CEO Gary Kelly said the company is “intensely focused” on improving its operations as it restores its network to meet demand and flagged the time it will take to hire and train new workers as a key concern going forward.
Total operating revenue at Southwest, which is more focused on domestic travel, rose nearly 300 per cent to US$4 billion from a year earlier but fell about 32 per cent from 2019.
More flying and higher fuel prices will weigh on the airline’s costs in the third quarter, it warned.
Southwest shares lost 3.6 per cent in midday trading and American stock lost 1.7 per cent, tracking U.S. airline index losses after two days of gains.
American, the world’s largest carrier, turned a US$19 million profit for the second quarter to June, including federal aid, compared with a loss of US$2.07 billion, a year earlier.
Southwest posted net income of US$348 million, or US$0.57 per share, also including aid. Excluding items, Southwest’s net loss was larger than analysts had forecast.
However, both airlines said they were profitable in the month of June even without federal funds, a first since the pandemic began in early 2020.
Alaska Air Group on Thursday reported a US$397 million profit, or US$3.15 per share, in the second quarter, including aid.
Airlines expect the recovery to continue, though United’s CEO Scott Kirby warned on Wednesday of “ups and downs” until more people are vaccinated against the virus.