Doug Parker: cargo has been a ‘bright spot’ for American Airlines

Yahoo Finance’s Adam Shapiro sat down with American Airlines Chairman and CEO Doug Parker to discuss how American Airlines is weathering the pandemic, what the airline has learnt from coronavirus, and what can be expected in 2021 from the company.

Video Transcript

ADAM SHAPIRO: That industry, the airline industry, has been perhaps the most deeply impacted this year by the pandemic. Parker, like other CEOs at other airlines, has had to lay off employees in 2020. So I asked him if more layoffs were coming in 2021.

DOUG PARKER: No. There won't. Again, never say never. Who knows if things get worse. But all indications are that things are gradually going to get better. And certainly once the vaccine is distributed, things will be stronger. So we certainly don't anticipate that. We did-- it was one of the worst days of my career the day we had to furlough 19,000 people in October. But when we did that, we did it at the trough, and did so with full understanding-- we didn't want to do one more than we needed to.

So I don't-- I certainly don't suspect there will be more. And indeed, I'm hoping we can begin recalling people even if PSP's not passed sometime in the new year. But what I really hope is PSP extension gets passed and we're recalling people here in the next couple weeks.

ADAM SHAPIRO: A two part question here for you, you've gone to great lengths on behalf of your customers, changing some of the requirements, the change fees, those are all pretty much gone at this point. So going forward, describe to me what it's going to look like for a customer who flies American. The other is that cash burn number. At the end of the third quarter you were at 44 million. Are you making gains and getting that lower as we head into the new year? Would you be cash burn neutral spring of next year, do you think?

DOUG PARKER: Yeah, two questions that are really hard to answer, frankly, just because of where we sit in the cycle. The cash burn number, definitely getting better. We [INAUDIBLE] our cash burn per day for the fourth quarter is going to be somewhere between $25 million and $30 million a day, which is well below where it's been in prior quarters, but still, a lot of cash burn.

Fortunately, we're going to end the year with over $14 billion of cash. So we have more than enough to withstand that kind of burn. But we don't expect it to stay there. When we go positive, that's the hard part. I don't know for certain. It depends on how quickly demand comes back. It's tied a lot to the vaccine distribution. It's tied a lot to how quickly businesses start putting people on the road again. So, but certainly not unreasonable to assume that it's sometime mid-next year. But at this point, it's fully dependent upon demand. We've done everything we can on cost. It's going to be when demand returns.

As to what our customers will see, again, that's a-- what you're going to see in American Airlines is what we always do, providing reliable service, efficient service, more service to more places than anybody else in the world and with people that provide exceptional care for customers and safety along the way. There are going to be some new rules. There are clearly the standards, who knows where we're going to be in terms of wearing masks and things like that at that point.

But safety is always first. Safety will be first. And we're just going to make certain that we're meeting the needs of our customers in that regard as well as we provide safe and efficient travel around the globe.

ADAM SHAPIRO: And the last question for you brings us back to what we were talking about, the vaccine and the importance of cargo. One thing that, when we cover the airlines, we talk about passenger loads ad revenue per passenger, all of that. We don't always talk about cargo. And yet, the bright spot-- if you can call it that-- in this pandemic, despite the reduction in fleet size, despite the reduction in flights, in the third quarter, your cargo revenue generation was essentially the same as it had been a year ago. Tell me more about the important role cargo is playing for the airline survival.

DOUG PARKER: Yeah, you gave the-- you gave the relevant facts. What's happened is, again, given that half the cargo that's flown around the world travels in the bellies of commercial airlines, not just freight-- not just cargo aircraft. Half of it's traveling in bellies of airplanes that are truly flying just to move passengers. When demand for passenger travel drops as much in so many aircrafts, therefore, aren't flying across the oceans, those that are have a lot of cargo-- a lot of cargo to manage.

So, and again, because there's so little capacity flying around in passenger carriers, there's enough cargo demand to actually make it, in some cases, viable for we airlines to fly across the oceans just for the cargo. That's never been the case before, and won't be the case in the future. But it is one of the nice-- one of the very few things that I guess we can call a silver lining.

But look, it only exists because we're not flying as many airplanes as we should to take care of passengers. But the cargo still needs to move. And because cargo still needs to move, that capacity is needed-- the belly capacity is needed. And we're able to offset some of the pain from this. But we don't anticipate that will continue once we get passengers flying again.