American, Southwest add to airline loss parade in third quarter.
American, Southwest suffer losses in the billions in the third quarter
North Texas’ airlines are parking more airplanes, negotiating pay cuts and planning a smaller future, possibly for years to come.
Dallas-based Southwest Airlines and Fort Worth-based American Airlines reported historic financial losses Thursday as the COVID-19 pandemic continues to hammer the aviation industry.
The quarterly losses — $2.4 billion at American and $1.2 billion at Southwest — come on top of multibillion- dollar losses during the first half of 2020 and airlines are warning that the last three months of the year will be bleak as well.
Those record losses, along with warnings that the rest of the year won’t be significantly better, have airline executives scrambling to find ways to boost revenue and cut costs, sometimes permanently.
“We still have a long road to re
covery,” American Airlines CEO Doug Parker said in a call with investors.
The financial situation is unsustainable at the current state of the travel industry. United Airlines lost $1.8 billion in the second quarter and Delta Air Lines lost $5.7 billion. Each airline is still burning through more cash each day than it is making.
At American, employee costs of $2.7 billion outpaced passenger revenue of $2.5 billion during the quarter.
American and Southwest both expect planes, on average, to only be about half full in the remaining months of the year, even after canceling thousands of flights in an effort to match diminished demand.
American Airlines said Thursday that it is retiring another 15 aircraft, the last of its Airbus A330-200 planes. The company has now retired about 110 jets since the beginning of the pandemic, including many of its wide-body jets that were mostly used on longhaul international flights, a segment that likely won’t recover anytime soon.
The airline also pushed back the delivery of up to 18 of its Boeing 737 Max aircraft in 2021 and 2022.
American Airlines already furloughed or laid off 19,000 on Oct. 1, employees that were being subsidized by $ 4.1 billion in federal government grants. Among those were about 1,500 administrative and support employees, on top of about 3,500 workers that already took buyouts.
In the future, Parker expects American Airlines to be a smaller, leaner airline that will have to operate more efficiently.
“We’ve done things like reduce 30% of our management,” Parker said. “We’re not going to bring that back.”
However, Parker said American Airlines has cut costs so sharply this year that it doesn’t have much more room to trim.
In order to break even, Southwest said it will need to double the amount of money the company brought in during the three-month period that ended Sept. 30, CEO Gary Kelly said.
“Right now, you have far too many seats that are available chasing too few customers,” Kelly said.
Southwest made one move to cut costs by removing the 65% limit on seat sales on each flight starting Dec. 1, opening middle seats for purchase for the first time since June.
Business travelers, an important spending segment in the industry, will still be down 50% to 60% by the end of next year, Kelly said. Those travelers historically book more expensive flights closer to their travel dates and spend more on upgrades.