The final results are in for 2020, and the news is not good for Fort Worth-based American Airlines and Dallas-based Southwest Airlines.
American Airlines Lost $8.9 Billion in a Year of Pandemic
American Airlines lost $2.2 billion in the fourth quarter as people stayed put in the pandemic, sending the carrier's revenue plunging by nearly two-thirds from the same period a year ago.
American predicted that similar revenue trends from late 2020 will carry over into the first three months of 2021.
The results ended a dismal year in which American Airlines Group Inc. lost $8.9 billion after earning nearly $1.7 billion the year before.
Shares of the Fort Worth, Texas, company surged more than 20% in trading before the opening bell, seemingly part of volatile trading elsewhere on Wall Street this week.
American shares jumped as much as 10% Wednesday with most of the market selling off strongly, which analysts attributed to volatile trading that has seen other stocks, notably GameStop, become wrapped up in a battle between small investors and short sellers.
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Airlines are hoping that a rollout of vaccines against COVID-19 will lead to at least a partial recovery in travel this summer or later in the year. Most people flying now are leisure travelers who typically pay lower fares. Business and international travel, which are both crucial to American and rivals such as Delta and United, are expected to recover more slowly.
The fourth-quarter loss of $2.18 billion amounted to $3.86 per share, after removing special gains. That was slightly better than Wall Street expected. Industry analysts expected per-share loss of $3.92, according to a survey by Zacks Investment Research.
A year earlier, American earned $414 million.
Quarterly revenue dropped more than 64%, to $4.03 billion in the fourth quarter, not quite as bad as Wall Street had expected.
American said it expects first-quarter revenue to lag 60% to 65% below year-ago levels. The first quarter of 2020 included the first few weeks in which the pandemic caused a steep drop in air travel.
Pandemic Pushes Southwest to First Full-Year Loss Since 1972
The pandemic is proving more damaging to Southwest Airlines than the terror attacks of 2001 or the financial crisis and recession of 2008.
Southwest Airlines Co. said Thursday it lost $3.1 billion in 2020, its first full-year loss since its early days in 1972, and said bookings for early this year have stalled in the face of high numbers of new reported cases of COVID-19 in the United States.
Southwest predicted that January revenue will fall 65% to 70% compared with the same month last year, and February revenue will fall 65% to 75%.
The Dallas-based airline posted a $908 million loss for the fourth quarter, compared with a profit of $514 million in the same quarter last year.
New U.S. cases of COVID-19 have dropped in recent weeks. Along with the rollout of new vaccines, that is giving airlines and others in the travel industry hope for improvement this summer. However, the companies are worried by new restrictions against international travel and by new variants of COVID-19.
"Travel and tourism industries face an ever-changing environment as the pandemic evolves," Southwest CEO Gary Kelly said in a statement. "While vaccine availability should mark the beginning of the end of this pandemic, current passenger booking trends do not indicate significant improvement through March."
Southwest expects to lose $10 million to $15 million a day in the first quarter after burning through about $15 million a day in the fourth quarter of 2020.
Southwest said its fourth-quarter loss, excluding non-repeating costs, came to $1.29 per share. That wasn't as bad as Wall Street expected. The average estimate of 13 analysts surveyed by Zacks Investment Research was for a loss of $1.69 per share.
Revenue fell 65% to $2.01 billion, falling short of the analysts' average forecast of $2.12 billion in the Zacks survey.
Shares of Southwest gained about 6% before the start of regular trading. Through Wednesday, the shares have lost slightly more than 5% in 2021, while the S&P 500 index has been nearly flat. Southwest has dropped 22% in the last 12 months.