By Alison Sider and Doug Cameron
American Airlines Group Inc. and Southwest Airlines Co. said
they were tempering expectations for an air-travel recovery, as
mounting coronavirus cases have driven down bookings by as much as
80% in some parts of the U.S.
American, which has been flying twice as much as some of its
rivals as part of a plan to capture summer demand, said Thursday
that it will pare some flying. Southwest, which also maintained
more flying this summer than United Airlines Holdings Inc. and
Delta Air Lines Inc., said cancellations are picking up and demand
looks weaker heading into fall.
Executives at American said bookings have started to slide and
business travel, which usually picks up after Labor Day, shows no
signs of resuming. "In short, the crisis continues," Chief
Executive Doug Parker said on a call to discuss results for the
The coronavirus pandemic has plunged airlines into their worst
crisis in memory after a decade of steady profits. Ebbing demand
this summer is the latest sign that the recovery is unlikely to be
quick or straightforward. Airline executives have said that travel
may not return to last year's levels until a vaccine or an
effective treatment is widely available. Tens of thousands of job
cuts could happen once federal aid aimed at paying workers runs out
at the end of September.
American's net bookings, or the difference between new
reservations and cancellations, are down 75% to 80%, said Vasu
Raja, the carrier's chief revenue officer. That is a marked
difference from May and June, when Sunbelt states were opening up
and some business travelers were returning. At one point, net
bookings in those states were down just 35% to 40%.
Amid the pandemic, American has maintained that it could adjust
quickly to signs of deteriorating demand and that its goal was to
be nimble. The world's largest airline plans to maintain
connections to its major hubs in Dallas and Charlotte, N.C., though
it will make cuts in markets more reliant on business travel that
now looks unlikely to pick up anytime soon, Mr. Raja said.
Mr. Parker said the summer strategy of more flying had helped
American reap revenue while demand showed signs of life. Revenue
per passenger flown a mile was six times higher in June than in
April, he said, and the airline reduced the rate at which it was
burning through cash from $100 million a day in April to $30
million at the end of June.
"That would not have been the case if we had flown only 20% of
our capacity," Mr. Parker said. "We're extremely happy with
American said it expects third-quarter capacity to be down 60%
from last year. The carrier told pilots in a memo this week to
prepare for schedule adjustments. Southwest still plans to keep
August capacity at 70% to 80% of 2019 levels, but with projected
cash burn of $23 million a day in the current quarter -- level with
the three months to June 30 -- said it will adjust as necessary.
Southwest executives said that demand had taken an abrupt downturn
and that the trend looks to be continuing into September.
"It's almost impossible to plan right now," Southwest Chief
Executive Gary Kelly said on an earnings call
Southwest's shares fell 1.5% to $32.79, while American's shares
rose 3.6% to $11.77.
U.S. carriers are battling to restore passenger confidence about
travel, with increasingly stringent policies on wearing masks and
with contrasting approaches to filling aircraft that are making
perceptions of safety a competitive factor.
Southwest plans to keep the middle seats on aircraft unoccupied
through October, mirroring the policy of Delta. Major airlines have
required passengers to wear masks since May, and many have expanded
those rules. United recently said it would require its passengers
to wear masks in the airport.
Southwest and American said Wednesday that all passengers over 2
years must wear masks on board, removing exemptions for medical
conditions that airlines said proved to be too big a loophole.
Delta CEO Ed Bastian told employees Thursday that the airline had
banned 120 people from future Delta flights because they had
refused to wear masks.
Delta will expand its testing program to ensure that all of its
U.S. employees are tested for Covid-19 in the next four weeks, Mr.
Bastian also said.
Southwest said it will test using thermal cameras to scan for
passengers with high temperatures at Dallas Love Field Airport,
something that Mr. Kelly has urged the Transportation Security
Administration to take on. He said Thursday that Southwest is
trying to demonstrate to federal officials that temperature checks
Airlines also are cutting costs in response to lower demand.
Southwest said 4,400 staff had taken a voluntary separation package
while an additional 12,500 will take extended time off. At the same
time, the carrier pledged to avoid any compulsory furloughs or job
cuts this year.
American earlier this month said that it would be overstaffed by
20,000 employees this fall but that it still hopes to minimize any
forced cuts through early-retirement and leave programs. Other
carriers have issued furlough notices, potentially affecting more
than 50,000 employees.
Southwest on Thursday reported a loss of $915 million in the
June quarter, compared with a profit of $741 million last year. The
carrier said that excluding special items it had a per-share loss
of $2.67; analysts polled by FactSet were expecting a loss of
American reported a loss of $2.1 billion in the quarter,
compared with a profit of $662 million a year earlier. Excluding
one-time items such as government aid to cover payroll, it had a
loss of $3.4 billion, or $7.82 a share. Analysts were expecting a
loss of $4.86 a share.
Write to Alison Sider at firstname.lastname@example.org and Doug Cameron
(END) Dow Jones Newswires
July 23, 2020 18:16 ET (22:16 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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