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U.S. Air Carriers Lose More Than $10 Billion a Month – Report

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U.S. airlines from American Airlines Group Inc (AAL) to Delta Air Lines Inc. (DAL) are collectively burning more than $10 billion in cash a month, Reuters reported referring to an industry trade group testimony.

According to the testimony prepared by Airlines for America ahead of a U.S. Senate hearing on Wednesday, the airline industry is averaging fewer than two dozen passengers per domestic flight as the coronavirus-related restrictions have brought air travel to an almost complete halt.

The four largest U.S. airlines are averaging just 17 passengers per domestic flight and 29 passengers per international flight, according to the testimony.

“The U.S. airline industry will emerge from this crisis a mere shadow of what it was just three short months ago,” Airlines for America chief executive, Nicholas Calio, will say, according to his prepared testimony.

Furthermore, net booked passenger numbers have plunged by almost 100% year-on-year. In case, airlines would refund all passenger tickets, including nonrefundable or canceled ones, “this will result in negative cash balances that will lead to bankruptcy,” the industry group warned.

Calio said airlines “anticipate a long and difficult road ahead. ... History has shown that air transport demand has never experienced a V-shaped recovery from a downturn.”

U.S. airlines incurred huge losses in the first quarter and are implementing broad cost-cutting plans, as well as taking steps to shore up its cash buffers in an effort to cope with the crisis in the aviation industry. Ailing planemaker Boeing Co (BA) this week raised $25 billion in debt financing, while GE Aviation announced that it was planning to cut as much as 25% of its workforce.

Shares in U.S. airlines took another hit this week after billionaire Warren Buffett said that its investment conglomerate Berkshire Hathaway (BRK.A) divested all of its stakes in the country’s four largest carriers.

American Airlines stock dropped 2.4% to $9.29 in midday U.S. trading, taking this month's plunge to 22%. Shares are down some 68% since the beginning of the year.

Five-star analyst Brandon Oglenski at Barclays on Monday lowered the stock’s rating to Sell from Hold, with a $7 price target, reflecting 26% downside potential in the shares in the coming 12 months.

Overall Wall Street analysts have a Moderate Sell consensus rating on the stock based on 8 Sells, 5 Holds and 3 Buys. The $13.82 average price target is more optimistic than Barclays’ outlook and implies a 49% gain in the shares in the coming year. (See American Airlines stock analysis on TipRanks).

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