American Airlines Sees Higher Loads And Lower Cash Burn This Month

American Airlines is starting to see its fortunes improve. In today’s 2020 Annual Shareholder Meeting, CEO Doug Parker stated that the airline’s load factors had increased dramatically since May. This, coupled with aggressive management, has allowed American to reduce its cash burn to $40 million per day this month.

American 737
June has brought some good news for the Dallas-based carrier. Photo: Getty Images

Higher loads on American’s planes

In the month-to-date load factor for June, American has seen a domestic load factor of 62%. Systemwide, including international scheduled capacity, that load factor this month is about 58% thus far.

This is up from recent months. In April, the airline’s load factor was 15% while, in May, that improved to 47%. Doug Parker is “encouraged” by the recent trends and notes that there is an appetite to travel. He further stated that he expects “to see more customers return as more states, businesses, and attractions open up.”

American Airlines passengers
Higher load factors were a good sign for AA. Photo: Getty Images

In the first-quarter earnings call, Doug Parker stated that 80% of American’s flights are going out with lower than 25% load factors. From then to today, that is a major increase in loads.

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Lower cash burn rate for American

Previously, in American’s first-quarter earnings call, the airline had planned for cash burn in June to reach about $50 million per day. However, Doug Parker credits both higher loads and aggressive management that brought it down to $40 million per day this month.

If the trend continues, expect that daily cash burn rate to continue to go down– a good sign for the airline. As part of this, American has been focused on aggressive cost-cutting. Plus, the airline has passed its worst month for refunds this year and is starting to fill in its schedule.

Cancun Airport Getty
Lowering cash burn was an essential goal for American this quarter. Photo: Getty Images

The retirement of some aircraft will also ensure that American does not have any excess capacity. Most of these aircraft are older, inefficient jets like the 757s and 767s. Meanwhile, the A330-300s were a bit of an oddball with only a small number in the fleet, the costs for keeping up that fleet were not worth it for AA.

Confidence in the future

Throughout the meeting, Doug Parker emphasized confidence in the future. The airline industry is on a rebound. After some grim prospects earlier that included the concern of a major airline going bankrupt, American has indicated that bankruptcy is not in the cards for the airline.

American 757
With older aircraft out, American is emerging smaller but “right-sized” for the future, according to Doug Parker. Photo: Getty Images

In the coming weeks, American will continue to secure additional financing and maintain capacity as needed. As for a full return to schedules, Doug Parker did not offer specific dates. Although, based on American’s current route planning, it will likely be three to five years out. But, that will depend on how demand turns out.

For now, the next biggest concern coming up for the airline is the September 30th expiration of the Payroll Support Grants coming from the federal government. While US flight attendants have called for that aid to be extended, it is unlikely that additional government funds will be made available through 2021.

Do you think things are starting to improve for American Airlines? When do you think American will return to a full schedule? Let us know in the comments!