American Airlines had a loss of more than $2.2 billion in the first three months of the year as the coronavirus pandemic drove down demand for air travel.
American's revenue dropped nearly 20% from a year earlier to $8.52 billion, slightly below analyst estimates. The airline's shares fell 4.9% to $12.01. The loss was the airline's first since 2013 and the biggest since at least 1998, as far back as FactSet data show.
American, like other airlines is facing a sharp decline in passengers because of Covid-19 U.S. airline travel volumes have dropped by about 95% in recent weeks from a year earlier as travelers stay home because of concerns about the virus and shelter-in-place orders.
U.S. airlines earlier this year, fresh off of their 10th consecutive year of profitability, were expecting further growth in air travel demand. The coronavirus upended those plans, forcing them to park hundreds of planes and cut routes to better match paltry ticket sales.
"Never before has our airline, or our industry, faced such a significant challenge," American's CEO, Doug Parker, said in an earnings release.
The company has raced to cut costs, slashing flights, freezing hiring and retiring some jetliners early. In the second quarter it expects to burn through roughly $70 million in cash a day, which it forecast to fall to about $50 million a day in June. Close to 39,000 employees have volunteered for unpaid or partially paid leave, Parker said in a staff memo. American had more than 133,000 staff members as of the end of last year.
American, which started the year with more debt than other U.S. carriers, is also taking steps to shore up liquidity, which it expects to increase to $11 billion at the end June, up from $6.8 billion at the end of the first quarter. American had more debt than its competitors before the crisis.Â
"We all are going to emerge from this with more debt than we entered. That's how we're going to survive it," Parker told CNBC Thursday. He said that while paying off debt will be a priority coming out of the crisis, "we'll still be in better condition than our industry was in years before" referring to a period of bankruptcies throughout U.S. airlines following the Sept. 11 attacks.
American said it can access $10.6 billion in federal payroll grants and loans under the $2.2 trillion coronavirus relief package Congress approved last month.
The payroll grants prohibit recipients from involuntarily furloughing or cutting the pay rates of any workers through Sept. 30. However, many employees are working fewer hours, meaning smaller paychecks for workers, because of the reduced flight schedules.
J.P. Morgan airline analyst Jamie Baker said the airline's plan didn't go far enough and that "management is taking an increasingly perilous, knife's edge approach in hoping to ride out the crisis.
"Put differently, current liquidity and further liquidity options appear increasingly insufficient to weather much less than a fairly robust recovery in passenger demand, in both absolute terms and relative to peers," he wrote.
American lost $2.65 per share on an adjusted basis in the three months ended March 31, compared with a $185 million profit in the same period last year. The airline took $744 million in fleet impairment charges as it retires aircraft like its Boeing 757s and 767s ahead of schedule as travel demand drops. It also reported a one-time expense of $218 million for a new contract with aircraft and fleet maintenance workers.
Correction: An earlier version of this story incorrectly stated that the loss was American's largest since 2008. It is the airline's biggest loss since at least 1998, according to FactSet.