American Airlines Group Reports First-Quarter 2020 Financial Results

FORT WORTH, Texas — American Airlines Group Inc. (NASDAQ: AAL) today reported its first-quarter 2020 financial results, including:

First-quarter net loss of $2.2 billion, or ($5.26) per share. Excluding net special items¹, first-quarter net loss of $1.1 billion, or ($2.65) per share.
Ended first quarter with $6.8 billion of available liquidity and expects to end second quarter with approximately $11 billion of liquidity.

“Never before has our airline, or our industry, faced such a significant challenge,” said American Airlines Chairman and CEO Doug Parker. “True to fashion, the American Airlines team has done a phenomenal job taking care of our customers and each other during such difficult and often heartbreaking times. We are incredibly proud of their selflessness and dedication to others.

“We have moved quickly and aggressively to reduce our costs and bolster our liquidity,” Parker continued. “We are particularly grateful for the $5.8 billion in financial assistance American will receive through the Payroll Support Program, and we appreciate the bipartisan congressional and U.S. Department of the Treasury and Department of Transportation support to protect airline jobs and ensure a strong and competitive U.S. airline industry.

“We have a lot of difficult work ahead of us. And while there is still uncertainty in what’s to come, we are confident that through the dedication of the American Airlines team and our swift actions, we will get through this for our team, our customers and our shareholders.”

COVID-19 response

In response to the precipitous drop-off in demand, American has acted quickly to take care of its team members, customers and communities; reduce costs; and improve its liquidity position.

Taking care of team members, customers and communities

Caring for team members, customers and the communities American serves remains at the heart of the airline’s actions in the first quarter.

To ensure the safety of team members and customers, American:

Enhanced its cleaning procedures through expanded fogging and the use of an EPA-approved disinfectant in high-touch areas.
Purchased face masks for frontline team members and made them required for flight attendants starting May 1.
Began distributing sanitizing wipes or gels and face masks to customers. This will expand to all flights as supplies and operational conditions allow.
Temporarily relaxed its seating policies and adjusted airport procedures to encourage social distancing.
Reduced onboard food and beverage service to limit contact.

To provide customers additional peace of mind, American:

Extended waivers for travel occurring through the end of September 2020, enabling customers to change plans and travel through December 2021, and waived change fees for customers who purchase new tickets by May 31, 2020, for future travel.
Introduced flexible travel waivers and name changes for corporate customers.
Made it easier for top-tier customers to earn AAdvantage® elite status this year.
Extended 2020 AAdvantage status into early 2022 for all members.
Extended all paid Admirals Club memberships by six months.

To support the communities it serves, American:

Launched the company’s first cargo-only flights since 1984 to transport critical goods between the U.S. and Europe, Asia and Latin America. American is currently able to transport more than 6.5 million pounds of critical goods weekly on its cargo-only flights.
Donated more than 100 tons of food to food banks in the company’s hub cities.
Raised, with customer participation, approximately $3 million for the American Red Cross to support workers on the front lines of the COVID-19 pandemic.
Donated thousands of supply kits to patients and health care workers and care packages to U.S. military members in quarantine.

Rightsizing the airline and its cost structure

American estimates a reduction of more than $12 billion in its 2020 operating and capital expenditures, achieved through lower fuel expense and a series of actions. The company:

Reduced system capacity by approximately 80% in both April and May, and 70% in June, including schedule changes announced today.
Accelerated the retirement of four aircraft types, consisting of 20 Embraer E190s, 34 Boeing 757s, 17 Boeing 767s and nine Airbus A330-300s, along with a number of older regional aircraft. These changes remove operating complexity and bring forward cost savings and efficiencies associated with operating fewer aircraft types.
Suspended all nonessential hiring, paused noncontractual pay increases, reduced executive and board compensation, and implemented voluntary leave and early retirement programs to reduce labor costs. In total, nearly 39,000 team members have opted for an early retirement, a reduced work schedule or a partially paid leave.
Deferred marketing expenditures and reduced contractor, event and training expenses.
Consolidated its footprint at its airport facilities.

Maximizing liquidity

To bolster liquidity, the company:

Ended the first quarter with $6.8 billion of available liquidity, including approximately $2 billion raised during the quarter.
Obtained the right to access $10.6 billion in financial assistance through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Recently had its unencumbered assets appraised and believes the value of those assets is in excess of $10 billion, excluding the value of the AAdvantage program. The company expects to pledge a portion of its assets as collateral for future financings, including the approximately $4.75 billion secured loan American has applied for under the CARES Act.
Suspended its capital return program, including share repurchases and the payment of future dividends, in accordance with the CARES Act.
Does not have any large non-aircraft debt maturities for more than 24 months, outside of the recently arranged $1 billion, 364-day delayed draw term loan facility.

American’s average estimated second-quarter 2020 cash burn rate is expected to be approximately $70 million per day. As the company’s cost initiatives gain traction, its estimated daily cash burn rate is expected to decline over time to approximately $50 million per day for the month of June. Based on its current forecast, the company expects to have approximately $11 billion of liquidity at the end of the second quarter.

Conference call and webcast details

The company will conduct a live audio webcast of its earnings call today at 7:30 a.m. CDT, which will be available to the public on a listen-only basis at aa.com/investorrelations. An archive of the webcast will be available on the website through May 31.

Notes

See the accompanying notes in the Financial Tables section of this press release for further explanation, including a reconciliation of all GAAP to non-GAAP financial information.

¹ In the first quarter of 2020, the company recognized $1.4 billion in net special items before the effect of income taxes. The 2020 first quarter mainline operating special items, net principally included $744 million of fleet impairment charges, which consisted of a $676 million non-cash write-down of aircraft and spare parts and $68 million in write-offs of right-of-use assets and lease return costs associated with the company’s mainline fleet, principally Boeing 757, Boeing 767, Airbus A330-300, and Embraer E190 aircraft, which are being retired earlier than previously planned as a result of the decline in demand for travel due to COVID-19. The company also recognized $218 million of one-time labor contract expenses resulting from the ratification of a new contract with its maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases, and $205 million of salary and medical costs associated with certain team members who opted in to a voluntary early retirement program.

First quarter 2020 regional operating special items, net included an $88 million non-cash write-down of regional aircraft, principally certain Embraer E140 and Bombardier CRJ200 aircraft, which are being retired earlier than previously planned as a result of the decline in demand for travel due to COVID-19.

In addition, the company recognized $217 million in nonoperating net special items in the first quarter of 2020, which principally included mark-to-market net unrealized losses associated with certain equity investments and treasury rate lock derivative instruments.