American Airlines Generates Cash As Rebound Gathers Pace

Business is continuing to improve at American Airlines. The Fort Worth-based airline released its latest operational update on Thursday, June 3. In its SEC filing, American Airlines says bookings and load factors continue to strengthen and close in on 2019 levels. For the first time in 14 months, American Airlines generated more cash than it spent.

American Airlines is seeing strong forward booking and passenger loads. Photo: Denver International Airport

“As of June 2, the seven-day moving average of its net bookings was approximately 90% of the level experienced in the same period of 2019,” American Airlines says in its filing.

“In addition, American Airlines’ domestic load factor for the month of May was approximately 84% and greater than 88% over the Memorial Day holiday.”

A remarkable rebound for American Airlines

The filing confirms a remarkable rebound for American Airlines. Over the northern winter, American and its United States-based competitors were relatively pessimistic about business for the first half of 2021. The rebound took American and its competitor airlines by surprise.

According to flight data website, an average of 22,152 daily departures are scheduled by all commercial airlines across the United States for the week of June 4 – June 10. The compares with an average of 26,614 daily departures in the same week in 2019 and an average of 10,425 daily departures in the same week last year.

“I want to say how incredibly proud we are of the American Airlines team and everything they’ve been able to not only withstand but accomplish over the past 14 months,” Chief Financial Officer Derek Kerr said at the Wolfe Research Global Transportation and Industrials Conference in late May.

“What we see are pretty consistent, it’s been pretty consistent with our last quarterly call that as we go into the summer and beyond, we’re still seeing yields at or above 90%.”

Strong demand from leisure travelers is powering American Airlines’reboind. Photo: Charlotte Douglas International Airport

Leisure yields at American Airlines this summer should exceed 2019 levels

In its SEC filing, American Airlines confirmed they expect this strength in bookings to continue well into the northern summer and beyond if there are no further disruptions.

“Assuming a continuation of current trends, (American Airlines) expects leisure yields to approach or exceed the corresponding 2019 levels during the peak summer travel period.”

The two underperforming parts of the American Airlines business are domestic business travel and its international network.

Business travel in the first quarter of 2021 ran at 30% of 2019 levels at American Airlines. Derek Kerr says the signs are encouraging but any business travel rebound varies across industry type and organizational size. Client-facing businesses are getting back on the road. On the flip side, government agencies and bureaucracies are being slow to their unwind business travel restrictions.

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American Airlines says international travel is slowly picking up from a very low baseline. Bright spots include leisure demand to Mexico, the Caribbean, and Latin America.

“Long-haul international travel is starting to show encouraging signs,’ said Mr Kerr. “Travel restrictions are being revised and lifted in certain parts of Europe as well, which we expect will continue to be the case as vaccinations are rolled out.”

Business travel and long-haul international travel show signs of recovery but continue to underperform at American Airlines. Photo: Denver International Airport

American Airlines starts to generate cash

In Thursday’s filing, American Airlines says it expects its network-wide capacity between April and June inclusive to be down 20%-25% compared to the second quarter of 2019. American Airlines expects total revenue to be down 40% this quarter compared to the same 2019 quarter.

However, on the back of a strong rebound in domestic operations, American Airlines generated cash in May – the first time that’s happened since March 2020. By the end of June, the airline expects to be sitting on liquidity exceeding $20 billion. It marks a remarkable rebound for American Airlines.