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American Airlines Gets Q3 Boost From Cargo As Yields Pop

FreightWaves
·4 min read

American Airlines (NASDAQ: AAL) stepped up its cargo game in the third quarter on the strength of an 83.6% jump in cargo yield that helped the company's overall results beat investors' expectations. Cargo revenue was essentially equal to a year ago despite operating a stripped-down network.

American said Thursday it lost $2.8 billion in the third quarter, excluding special charges, compared to the year-ago period — an improvement from the $3.4 billion it lost in the second quarter as it came to grips with the economic fallout from the coronavirus pandemic. Adjusted earnings per share of minus $5.54 was better than the consensus estimate of minus $5.91.

Passenger revenue fell 73% to $3.2 billion, but cargo reveue was nearly even with third-quarter 2019 at $207 million. That's a big improvement over the $130 million in second-quarter cargo revenue, which was 41% less than in the same 2019 period. Cargo represented 6.4% of total revenue in the July-September period compared to 1.75% a year ago.

American Airlines doubled its cargo-only passenger flights from August to September and operated more than 1,900 flights to 32 destinations. Since starting passenger-freighter operations in the spring, the Fort Worth, Texas, carrier has moved 85 million pounds of cargo for businesses dealing with a global airlift shortage.

American said third-quarter passenger traffic fell 72%, with capacity down almost 60% compared to last year. Traffic is incrementally improving, but growth is slow and analysts don't expect American to break even until 2021.

More cost reductions and capital injections helped American reduce daily cash outflows to $44 million from about $58 million per day in the second quarter. The company said it expects its fourth-quarter cash burn rate to be about $25 million to $30 million per day.

The largest airline in the world by passenger traffic announced in the earnings report that it will permanently retire all 15 of its Airbus A330-200 aircraft, which have been in storage since May. The decision leaves American with an all-Boeing widebody fleet.

The airline has already removed more than 150 aircraft from its fleet through early retirements or by placing aircraft into temporary storage. It has retired the Boeing 757, Boeing 767, Embraer E190, Airbus A330-300, Bombardier CRJ-200 and certain other regional aircraft.

American also announced an agreement with Boeing to defer by two years deliveries of 18 737 MAX aircraft scheduled to be delivered in 2021 and 2022. And it finalized a series of sale-leaseback transactions to finance its remaining Airbus A321 aircraft deliveries in 2021.

View more earnings on AAL

American told the Associated Press earlier this week that it plans to return the 737 MAX to service by late December on a single route based on assumptions the Federal Aviation Administration will approve Boeing fixes to the flight software blamed for two deadly crashes that have kept the plane grounded for more than 18 months.

The company has furloughed 19,000 employees since Oct. 1 after federal wage offsets expired without being extended by Congress. Another 20,000 employees have opted for early separation or long-term leave. It reduced non-aircraft capital expenses by $700 million this year.

On the fundraising side, American said it closed $1.2 billion of financing with Goldman Sachs Merchant Bank and that it doesn't have any large non-aircraft debt maturities until its $750 million unsecured bonds mature in June 2022.

"We have a long road ahead and our team remains fully engaged and focused not just on managing through the pandemic, but on making sure we are prepared for when demand returns. We are confident that the continued efforts of our team and the actions we have taken will drive customer confidence and strengthen our company for the future," Chairman and CEO Doug Parker said.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch. / Contact: ekulisch@freightwaves.com

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