Airlines

American Airlines shares jump as carrier eyes zero cash burn by year's end

Key Points
  • American Airlines shares jumped after its forecast of zero cash burn by the end of the year.
  • The carrier said it would use its frequent flyer program as collateral for a federal coronavirus loan.
  • An increase in demand is helping offset its cash burn, while revenue this quarter is expected to fall 90%.
A traveler wearing a protective mask walks past an American Airlines Group Inc. plane tail fin at Ronald Reagan National Airport (DCA) in Arlington, Virginia.
Andrew Harrer | Bloomberg | Getty Images

American Airlines shares jumped more than 16% on Friday after the carrier said an uptick in travel demand is helping trim its daily cash burn to $40 million from a previous forecast of $50 million.

The Fort Worth, Texas-based carrier said that it aims to wipe out its cash burn by the end of the year. 

American reiterated a forecast that it still sees revenue in the second quarter down 90% from a year ago, when it posted sales of close to $12 billion. The airline last week said it plans to add more flights, particularly for the domestic market as some demand returned.

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Through June 8, American has been flying an average of 129,000 passengers a day and its flights are 62% full, though capacity is down 70% from a year ago. In May, the carrier said it flew 85,000 travelers a day with a load factor of 47% and capacity off 75% from May 2019.

Despite the increase in demand, the number of people passing through checkpoints at U.S. airports is down 81% from a year ago, according to the Transportation Security Administration.

American has applied for a $4.75 billion federal loan under the CARES Act and said Friday that it plans to pledge a chunk of its AAdvantage frequent flyer program as collateral. It said AAdvantage is estimated to be worth between $19.5 billion and $31.5 billion. 

American's shares are down close to 42% so far this year.