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American Airlines, Southwest Signal For More Aid Amid Record Losses

American Airlines Group Inc and Southwest Airlines Co posted their largest ever annual losses this week and both signalled for additional aid from the government as the airline industry continues to struggle with the coronavirus pandemic.

Airlines in the US and across the world expect demand to improve this year as vaccines are rolled out but officials have warned that the strength of any such rebound depends on how quickly distribution plans are executed, as well as the easing of travel restrictions.

JetBlue Airways, also reporting losses this week, said that a recovery will be directly linked to a decline in the number of Covid-19 cases.

“Our fourth-quarter financial results close out the most challenging year in our company’s history,” said American Airlines Chairman and CEO Doug Parker. “However, we couldn’t be prouder of the American Airlines team and the great things they accomplished last year. Through collaboration, resourcefulness and hard work, our team did its part to keep the economy moving. The American team flew more customers than any other airline in 2020, and they did so safely and with the utmost care.

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“As we look to the year ahead, 2021 will be a year of recovery. While we don’t know exactly when passenger demand will return, as vaccine distribution takes hold and travel restrictions are lifted, we will be ready. We are confident that the actions we have taken to improve our customer experience, enhance our network and increase our efficiency position us well for the future.”

Shares in American, JetBlue and Southwest all surged in early trading despite the loss announcement and were boosted by a retail trading frenzy that pushed stock of American, among the most shorted airline stock, up by over 30% after the carrier was picked up by Reddit’s WallStreetBets forum.

Earlier in the week, American had posted an $8.9 billion annual loss, its biggest on record. However, the airline’s adjusted quarterly net loss of $3.86 per share was better than analysts’ expectations for a loss, $4.11 per share according to Refinitiv data.

Total operating revenue fell to $4.03 billion from $11.31 billion but topped analysts’ expectations of $3.88 billion.

Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated: “The COVID-19 pandemic devastated the world, and our heart goes out to all those affected. The airline industry was hit especially hard in 2020, and we incurred our first annual net loss since 1972. Our annual 2020 operating revenues declined approximately 60 percent, year-over-year, and we experienced our largest monthly decline in operating revenues in April 2020, down 92 percent, year-over-year, when the pandemic spread and shelter-in-place orders and similar restrictions were implemented throughout the country.”

Southwest reported an annual loss of $3.1 billion, its first annual loss in 38 years. The firm said it was facing stalled demand again in January and February, due to continuing high levels of Covid-19 cases and hospitalizations.

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In December US airlines received $15 billion in a government aid package, the second such program since the emergence of the pandemic, that was intended for payroll costs through March.

A US aviation union leader pleaded with Congress Thursday to extend the program for a third time, something American’s Parker has told investors the company would get behind.

“Travel and tourism industries face an ever-changing environment as the pandemic evolves. Nevertheless, our Employees have not wavered; rather, they have responded swiftly and with resolve.
They adjusted our flight schedules numerous times; implemented new health and safety protocols for Employees and Customers; and developed and deployed remote work capabilities for back-office Employees and Call Center Representatives,” Gary Kelly continued.

“On top of these notable accomplishments, our Employees delivered the U.S. airline industry’s best Customer Service, as well as a superb operational performance including exceptional on time performance and baggage handling. I am forever grateful for the heroic efforts and results by our People in the most challenging year since we began flying in 1971. Their hard work and adaptability last year did not go unnoticed, as Southwest was just named the #1 U.S. airline in the Wall Street Journal’s annual ranking for 2020, which ranks airlines on key operational performance metrics.

“We came into the year well-prepared with significant financial strength and started the year strong with an outstanding operational performance and solid net income growth, year-over-year, in January and February 2020, combined. In late February 2020, we began to experience a precipitous drop in passenger demand and bookings due to the pandemic. The situation escalated dramatically, and by mid-March 2020, trip cancellations began to exceed new bookings. We took swift action to address the unprecedented decline in passengers and revenue by significantly reducing available seat miles (ASMs, or capacity), costs, and cash spending. Annual 2020 capacity decreased approximately 34 percent, year-over-year, and we reduced annual 2020 cash outlays by approximately $8 billion, compared with original plans.”

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