coronavirus

American, Southwest Report Major Losses in 2Q as Airlines Continue to Struggle

Airline executives warn travel demand will likely remain depressed until there’s a vaccine or treatment for the coronavirus

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North Texas-based Southwest Airlines and American Airlines announced major second quarter losses Thursday morning before markets opened.

Plunge in air travel demand is driving multi-billion dollar losses for airlines across the U.S.

Both American Airlines and Southwest Airlines announced drastic financial losses in the second quarter July 23. NBC 5’s Vince Sims reports the Association of Professional Flight Attendants says it is making adjustments to save jobs, while Dallas/Fort Worth International Airport and Dallas Love Field also make budget cuts to offset the revenue loss.

Airports too have to make adjustments. Both DFW and Dallas Love Field airports have made budget cuts to accommodate revenue loss. A spokesperson for Dallas Love Field feels confident they will survive the downturn.

"No concerns about that," Dallas Love Field communications manager Chris Perry said. "We do know it will take a little bit to recovery to where we were."

But it doesn't look like that recovery will be coming anytime soon.

"They've kind of pushed back their expectations of when they are going to stop losing money," Dallas Morning New Aviation writer Kyle Arnold said. "American Airlines said sometime in 2021. Southwest said probably sometime early next year. That's a lot of money to be losing and to be losing way out in the future."

Here's a breakdown of the financial struggles for the country's major air carriers.

North Texas-based Southwest Airlines and American Airlines announced major second quarter losses Thursday morning before markets opened. NBC 5’s Alanna Quillen reports that airline executives warn travel demand will likely remain depressed until there’s a vaccine or treatment for the coronavirus.

American Airlines

American Airlines is now reporting a loss of $2.1 billion for the second quarter.

Company chairman and CEO Doug Parker says the current climate is more volatile and unpredictable than ever before.

“This was one of the most challenging quarters in American’s history,” he said in a statement. “COVID-19 and the resulting shutdown of the U.S. economy have caused severe disruptions to global demand for air travel. In spite of these challenges, the American Airlines team has done a phenomenal job taking care of our customers and our fellow team members.”

What hurts the airlines trickles down. The Association of Professional Flight Attendants (APFA) is working to save jobs with early retirements and voluntary time off for American Airlines flight attendants.

"We are very concerned obviously about today's earnings or loss announcement if you will," APFA communications team member Paul Hartshorn said. "This was no surprise to us as last week American notified unions that they could potentially be in an over staffed situation going into the fall."

American's quarterly report shows the airline is working to conserve cash and convince passengers it's once again safe to fly.

American Airlines is expected to hold a call with analysts at 7:30 a.m. Southwest will hold a conference call at 11:30 a.m.

Southwest Airlines

Dallas-based Southwest Airlines is already reporting a $915 million loss in the latest quarter.

Revenue dropped nearly 83% in the quarter from a year earlier to a little over $1 billion, higher than analyst estimates.

The company warned travel demand will likely remain depressed until there’s a vaccine or treatment for the coronavirus.

“We were encouraged by improvements in May and June leisure passenger traffic trends, compared with March and April; however, the improving trends in revenue and bookings have recently stalled in July with the rise in COVID-19 cases,” CEO Gary Kelly said in an earnings release. “We expect air travel demand to remain depressed until a vaccine or therapeutics are available to combat the infection and spread of COVID-19.”

Kelly said Southwest would “aggressively and frequently” adjust its flight schedule in “this volatile demand environment.′

Shares were up 1.5% in premarket trading.

Also this week, Southwest nearly 17,000 southwest employees, or about 28% of the workforce, signed up for leaves of absence or early retirement.

The TWU Local 556, the union of Southwest Airlines flight attendants, said about 33 percent of flight attendants are affected.

“Southwest Airlines has not indicated whether this is enough to avoid furloughs, but did report to the union that warns notices would not be distributed at this time,” said Lyn Montgomery, president of TWU Local 556, in a statement. “TWU Local 556 acknowledges the sacrifice that flight attendants and their families have made to respond to the need that Southwest Airlines expressed to help mitigate the challenges brought on by the pandemic. Many chose to make the difficult decision to separate from the company or take extended leaves, to help the company they love. As usual, Southwest Airlines flight attendants have proven they are willing to do their part.”

Montgomery added, “Also, we are grateful for the service of the flight attendants who have continued to fly, meeting the daily challenges of COVID-19 with a deep commitment to continue serving customers. As aviation’s first responders, flight attendants are the front lines.”

Thousands of employees at other carriers have also signed up for unpaid or partially paid leaves or buyouts.

Airlines are prohibited from cutting jobs until Oct. 1 under the terms of $25 billion in federal aid.

Unions are now pushing for billions more in cares act aid to protect their jobs through the end of March 2021.

United Airlines

Earlier this week, United Airlines reported it lost more than $1.6 billion in the second quarter.

The airline is calling it “the most difficult” financial period in its 94-year history.

For context, United posted a $1.05 billion profit during the same quarter last year.

“One of the big challenges is, we don’t have any historical evidence on how this impacts travel,” said local CPA and attorney Bill Dendy of Elite Financial Management. “The challenges we saw from 9/11 are different from what we have seen today. And we don’t know how the consumer is going to respond.”

United said it expects to reduce its cash burn to $25 million a day in the third quarter from an average daily burn of $40 million in the second quarter. The carrier has already slashed thousands of flights and idled scores of planes to cut its costs.

United executives added it will “proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand,” which executives expect to be limited until there is a treatment or vaccine for the virus.

Delta Airlines

Delta is proposing a 15% cut to minimum pay for pilots to avoid furloughs for a year.

More than 2,200 delta pilots have volunteered to retire early.

The airline and others are warning pilots about potential furloughs when federal aid terms expire Oct. 1.

Delta also announced last week it is halving the number of additional flights planned next month to 500 a day after a recovery in travel demand eased as coronavirus cases spiked and states like New York ordered arriving travelers to quarantine.

“Airlines have to be very careful. They have high expenditures every quarter. And if they don’t have the revenues to offset these, there’s only so much runway for them to get off of the ground when it comes to earnings. They have to make money, they are concerned now about burn rates,” said Dendy.

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