American and Southwest add to the airline industry’s 2Q losses
DALLAS — Two major airlines reported huge second-quarter losses Thursday, and their leaders warned the new surge in U.S. coronavirus cases has stalled the recovery in air travel and added to their industry’s disarray.
American Airlines posted a loss of more than $2 billion, and Southwest Airlines lost $915 million. That pushed the combined second-quarter loss of the nation’s four biggest airlines to more than $10 billion.
Southwest CEO Gary Kelly said he was encouraged by a pickup in leisure travel during May and June after the dark days of March and April. Southwest added flights for July and August.
Then in the past few weeks, a surge in U.S. COVID-19 cases caused bookings to fall, Kelly said. Southwest rewrote its August schedule, dropping some flights.
“We’re just going to have to be prepared to have a lot of volatility and be prepared to make frequent adjustments,“Kelly said, “because it’s really almost impossible to plan right now.”
American — with hub airports in Texas, North Carolina and Arizona and a big operation in Miami — benefited when Sun Belt states eased health restrictions in the spring to boost their economies.
Bookings by small and medium businesses in Texas rose from 10,000 in April to 45,000 in June, even while corporate bookings were nearly zero, executives said.
The airline added flights in June and July, hoping to capture an increase in summer leisure travel. The gambit apparently worked. However, after Labor
Day, about 40 percent of American’s revenue typically comes from business travel.
“It’s pretty unreasonable at this point to think that we’ll be anywhere close to that” this fall, said Vasu Raja, the airline’s chief revenue officer.
He said American still plans to increase flying from Dallas-Fort Worth and Charlotte but will trim routes that depend on business travelers.
Analysts believe the Aprilthrough-June quarter will turn out to be the industry’s low point. The recovery, however, is likely to be slow and uneven.
United Airlines executives said this week that eventually they expect revenue to rise to 50 percent of last year’s level — they didn’t say when — and stay around that depressed mark until a vaccine is widely available.
Alaska Air Group also announced staggering losses Thursday in its second quarter earnings report. The airline lost $214 million in the past three months, despite the government’s infusion of $362 million in a grant through the Payroll Protection Program.
Earlier, Delta Air Lines reported a $5.7 billion loss that was worsened by writing down investments in global airline partners that have filed for bankruptcy protection, and United lost $1.6 billion.
U.S. air travel plunged as much as 95 percent this spring. Between them, American and Southwest carried 15.4 million passengers from April through June. In the same period a year earlier, more than 98 million people jammed on to their planes.
With all those lost ticket sales, airlines have turned to cutting costs and hoarding cash in a desperate bid to hang on until the shadow of COVID-19 passes. They are mortgaging planes and hocking their frequent-flyer programs.
Bloomberg News calculates about 400,000 airline workers already have been fired, furloughed or told they may lose their jobs due to the coronavirus.
British Airways, Deutsche Lufthansa AG, Emirates Airline and Qantas Airways Ltd. are among the carriers announcing thousands of dismissals and unpaid leave programs.
Even the pilots and cabin crew who manage to keep their jobs are, in general, facing salary cuts.
The 400,000 job-loss figure is for airlines worldwide and covers pilots and cabin crew, who have found themselves on the front lines of the virus fight when they’re at work.
More airlines are likely to lay off workers in October, when federal payroll help runs out. American has sent layoff warnings to 25,000 employees, United sent them to 36,000, and Delta warned more than 2,500 pilots.
The number of layoffs could be smaller if enough employees take severance packages and quit. At Southwest, which never has furloughed employees, Kelly said he doesn’t expect any layoffs this year because roughly 4,400 employees took buyouts and more than 12,000 will take temporary leaves of absence.
American, based in Fort Worth, reported a loss of $2.07 billion, compared with a year-ago profit of $662 million. Excluding special items, the loss equaled $7.82 per share, nearly matching the average forecast of 17 analysts polled by FactSet for a loss of $7.84 per share.
Revenue plummeted 86 percent to $1.62 billion but still beat the analysts’ prediction of $1.44 billion.