United States Airlines Still Burning Cash Amid Choppy Demand

Despite a welcome Thanksgiving holiday period boost, the big airlines in the United States continue to struggle and burn cash. In their latest filings with the Securities Exchange Commission (SEC), the airlines give an interesting insight into the state of their coffers, what it’s costing to keep the airlines going, and how they see the immediate future playing out. Overall, it isn’t a pretty picture.

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Airlines in the United States are still burning tens of millions each day. Photo: Vincenzo Pace | JFKJets.com

United Airlines burning $15 to $20 million a day this quarter

Chicago-based United Airlines reported to the SEC last month that it was burning through around US$15 million to $20 million per day this quarter. This is in addition to the $10 million per day United is paying out for debt principal payments and severance payments.

“In the last week, ending November 18, 2020, there has been a deceleration in system bookings and an uptick in cancellations as a result of the recent spike in COVID-19 cases,” said United Airlines in an SEC filing.

Capacity at United Airlines is down 55% compared to the fourth quarter of 2019, and revenue is expected to be down by down 67%.  The airline expects a rocky road to recovery, telling the SEC;

(United Airlines) does not currently expect the recovery from COVID-19 to follow a linear path and, as such, the Company’s actual flown capacity may differ materially from its currently scheduled capacity.”

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United Airlines expects a choppy road to recovery. Photo: Los Angeles International Airport

American Airlines tops out, burning up to $30 million per day

Over at American Airlines, they are burning between $25-$30 million per day staying in the air. The airline has a handy $14 billion in liquidity. But it too is blaming an uptick in COVID-19 cases for a downturn in travel bookings.

“Like others in the industry, American Airlines has seen a slowing in demand and forward bookings due to the recent acceleration of the pandemic,” the airline said in its latest SEC filing.

“Following a strong start to the fourth quarter of 2020, rising COVID-19 case counts and associated travel restrictions in the immediate period leading up to the Thanksgiving holiday have resulted in a slowing of net bookings growth, which has persisted into December.”

Like United Airlines, American Airlines says it’s difficult to get a handle on future timelines and traffic predictions. American Airlines calls the current environment volatile and difficult to predict.

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Delta burning cash too, but striking an optimistic note

Compared to American Airlines, Atlanta-based Delta Air Lines is positively parsimonious in its daily cash burn. Delta is currently going through around $12 million to $14 million per day.

“That’s a solid improvement from the $24 million daily burn rate in the third quarter,” says Ed Bastian, CEO at Delta.

Bastian differs slightly from his opposites at United and American. He acknowledges some slowing of demand and forward bookings as COVID-19 cases rise across the United States. But the Delta boss thinks there is some light at the end of the tunnel.

“We’ve always said this was going to be a choppy recovery, and that’s been true in recent weeks.

“Revenues are slowly coming back, but we still expect to be at just 30% of our 2019 levels for the fourth quarter.

“I’m encouraged that we are still on track to reach the break-even point in the spring, and that outlook has been bolstered by continued positive developments with vaccines.”

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Delta has cut its daily cash burn in half. Photo: Don Watson / Sea-Tac Airport

Southwest expects to burn $11 million a day this quarter

Southwest’s latest SEC filing is about a month old. Events move pretty fast these days, and there’s been some water under the bridge since then.  But in October, Southwest Airlines was burning through about $10 million a day. In the fourth quarter of the year, Southwest flags this could rise slightly to $11 million per day.

Southwest Airlines told the SEC it expected its fourth-quarter 2020 capacity to decrease approximately 40%, year-over-year.

“Passenger demand and booking trends remain primarily leisure-oriented and inconsistent by region, and Southwest Airlines continues to plan for multiple scenarios for its fleet and capacity plans.

“Southwest Airlines will continue to monitor demand and booking trends and adjust capacity, as deemed necessary, on an ongoing basis.”

There are some commonalities across the airlines here. While cash burns are still high, particularly at American Airlines, all the airlines’ daily cash burns are under control. Secondly, all the airlines note how unpredictable the external environment is and how much it impacts their operations. And they don’t expect this to change anytime soon.

What do you think? Do the latest comments by the airline CEOs surprise you? Post a comment and let us know.

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