DALLAS (AP) — Major airlines reported huge second-quarter losses Thursday and warned that the recovery in air travel seen in April has stalled as coronavirus cases surge in the U.S.
American posted a loss of more than $2 billion, and Southwest lost $915 million. That pushed the combined loss of the nation’s four biggest airlines to more than $10 billion in just three months.
Between them, American and Southwest carried 15.4 million passengers from April through June. A year earlier, more than 98 million people jammed on to their planes.
With all those lost ticket sales, airlines have turned to cutting costs and hoarding cash in a desperate bid to hang on until the shadow of COVID-19 passes.
Southwest CEO Gary Kelly said he was encouraged by a pickup in leisure travel during May and June after the dark days of March and April.
“However, the improving trends in revenue and bookings have recently stalled in July with the rise in COVID-19 cases,” he said. “We expect air travel demand to remain depressed until a vaccine or therapeutics are available to combat the infection and spread of COVID-19.”
Analysts believe the April-through-June quarter will turn out to be the industry’s low point. The recovery, however, is likely to be slow and uneven. United Airlines executives said this week that eventually they expect revenue to rise to 50% of last year’s level — they didn’t say when – and stay around that depressed mark until a vaccine is widely available.
Earlier, Delta Air Lines reported a $5.7 billion loss that was worsened by writing down investments in global airline partners who have filed for bankruptcy protection, and United lost $1.6 billion.
With little money coming in from ticket sales — American and Southwest said second-quarter revenue fell 86% and 83%, respectively — airlines are left to fixate on slashing costs and raising available cash by mortgaging more planes and hocking their frequent-flyer programs.
Layoffs are almost certain in October, when federal payroll help runs out.
American, based in Fort Worth, Texas, reported a loss of $2.07 billion, compared with a year-ago profit of $662 million. Excluding special items, the loss equaled $7.82 per share, nearly matching the average forecast of 17 analysts polled by FactSet for a loss of $7.84 per share.
Revenue plummeted 86%, to $1.62 billion, which beat the analysts’ prediction of $1.44 billion.
CEO Doug Parker called it “one of the most challenging quarters in American’s history.” He said there is “much uncertainty ahead,” but expressed confidence American — the most heavily indebted among U.S. airlines — will pull through.
Dallas-based Southwest’s loss, adjusted to remove special items, worked out to $2.67 per share, slightly better than the analysts’ forecast of $2.73 per share.
Revenue plunged 83% to $1.01 billion. Analysts expected $948 million.
Seattle-based Alaska Airlines said it lost $214 million compared with a $262 million profit a year earlier. Revenue fell 82%.
The airlines had hoped to see stronger demand for travel by late summer. Instead, they have scaled back plans for more flights since U.S. coronavirus cases began surging in June. American said it will operate at 40% capacity from July through September.
“Airlines are starved for cash and profits right now, and they will be quick to add capacity once there is demand,” said Cowen analyst Helane Becker.
United CEO Scott Kirby said this week he expects prices to fall in the short run as airlines fight for passengers. That is already happening — Southwest said its average one-way fare during the second quarter was $134, down from $157 in the same, pre-pandemic period of 2019.