A bird flies in the foreground when a Southwest Airlines plane lands at McCarran International Airport on May 25, 2020 in Las Vegas, Nevada.
Ethan Miller | fake pictures
American Airlines and Southwest Airlines posted quarterly losses Thursday and their CEOs warned of falling demand as coronavirus cases rise in many parts of the U.S.
Revenue fell for both Texas-based operators during the second quarter as the virus spread throughout the United States, dropping more than 86% in the quarter in American to $ 1.6 billion from about $ 12 billion a year earlier. Southwest sales fell nearly 83% to just over $ 1 billion from $ 5.9 billion last year.
The CEOs of both airlines do not expect a full recovery in demand until there is a vaccine or treatment for Covid-19.
Rising infection rates, along with restrictions on travel abroad and in states like New York, are shattering airline hopes for a swift recovery in demand, leading them to cut flights as they compete to reduce cash consumption.
“We will have to work harder now and adjust capacity in August and September to meet our goal of continuous reduction and daily cash burn,” Southwest CEO Gary Kelly told investors. “We were on a path to break even by the end of the year. That is still my goal. But the first quarter may be more realistic.”
Southwest estimated that its capacity for the third quarter will decrease between 20% and 30% from last year.
“We will let demand serve as a guide to our future capacity levels,” said American Airlines chief financial officer Derek Kerr. “We will continue to be relentless in identifying additional ways to improve our cash burn rate going forward.”
He said the airline would likely cut more capacity in August and September.
Southwest had a net loss of $ 915 million in the second quarter and American recorded a net loss of $ 1.2 billion. American said it reduced its cash burn rate from $ 100 million a day in April to $ 30 million a day in June after it cut idle flights and planes and thousands of employees voluntarily took time off. Southwest’s cash burn fell to $ 16 million a day in June from $ 30 million a day in April.
Staff reduction
Southwest Airlines said it is preserving its record of never laying off workers in its nearly five decades of flight, at least for now. That’s thanks to about 17,000 employees who have taken partially paid volunteer time off or purchases.
The airline “does not intend to seek permits and layoffs, or cut pay and benefits” until the end of the year, adding: “We will continue to plan multiple weak scenarios and maintain our readiness.”
Airlines are prohibited from firing or firing workers until September 30 under the terms of a $ 25 billion federal aid package designed to protect jobs.
Last week, American Airlines warned 25,000 employees that their jobs could be at risk, urging them to apply for voluntary separation and early retirement packages.
“Without a doubt, the most difficult part of the pandemic is the impact it has had on our team members,” CEO Doug Parker and airline president Robert Isom said in a note from employees. “We hope that the enhanced volunteer programs that are now open will help reduce or eliminate permits.”
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