American Airlines 'not going away' because of the coronavirus crisis
Rumors have swirled about the viability of U.S. airlines since the leader of Boeing told the Today Show earlier this month that a major carrier would "most likely" fail as a result of the coronavirus pandemic.
No U.S. airline is doing well. Combined losses surpassed $5 billion in the first quarter alone, when COVID-19 only really kept would-be travelers home for a one month of the three month period. And even with the federal government's coronavirus aid package, the CARES Act, Wall Street analysts have repeatedly warned that the industry will need to significantly downsize by the end of the year.
American Airlines is one of the carriers the industry is keeping a close eye on. While it is the largest U.S. carrier by most measures, the airline also had more than double the amount of debt than competitor Delta Air Lines and nearly 40% more than United Airlines at the end of 2019. Those obligations, which must continue to be paid no matter how many flights American cancels or planes it parks, are at the center of concerns over its future.
Get Coronavirus travel updates. Stay on top of industry impacts, flight cancellations, and more.
"Number one, American is not going away," the Fort Worth, Texas-based carrier's chief financial officer Derek Kerr said in response to a question over the value of the AAdvantage frequent flyer program during the Wolfe Research Conference on Tuesday.
While Kerr was not speaking specifically to any rumors in the industry, the subtext for his comment was clearly to push back against speculation that American might be in deeper trouble than its peers.
Like most of its major competitors, American has slashed flights and parked hundreds of jets in an effort to slash costs amid the crisis. The airline will operate around 33% of its schedule in June — up from just 28% of flights in May —compared to to last year, according to Cirium schedules.
Related: What should you do with your miles if an airline is going bankrupt?
In addition, American has closed its Flagship Lounges and dining with executives saying Tuesday that they will not reopen until people are buying premium tickets at a level that warrants the reopening of lounges.
And flyers accustomed to enjoying a wide-body Boeing 767 on flights between Miami (MIA) and New York John F. Kennedy (JFK) will be disappointed to know those planes are no more. American has retired its 767s from its fleet, along with at least four other aircraft types. More could be on the way.
American continues to hemorrhage money. The airline is on track to reduce daily losses to just $50 million a day in June, American president Robert Isom assured attendees at the conference. However, the number remains above those at its peers with both Delta and United targeting losses of just $40 million a day during the same period.
Related: American has 'no plans' to close hubs when it shrinks post-coronavirus
Raymond James analysts estimate that American only has about six months of cash on hand to weather the crisis, according to a May 17 report. For comparison, Delta had about 11 months of cash and United roughly 10 months.
The bank's estimates do not include proceeds from the CARES Act. American has received $5.8 billion in payroll assistance from the government and may receive more loans.
But, airlines are seeing positive signs. Multiple executives have cited a small, if notable, uptick in bookings for the summer. This has prompted Delta to add around 100 domestic flights in June and United to move towards flying about a quarter of its schedule — up from just 10% of flights — in July.
On Tuesday, Southwest Airlines said its flights could be a third full in May, a 20-point improvement over its guidance in April. Flights could be even fuller in June if the trend continues.
Related: These are the only long-haul routes American, Delta and United plan to fly in May
American even plans to resume some key international routes to Europe and South America in June, as it begins to slowly build back its schedule.
In addition, American's fleet changes have accelerated a long-standing effort to simplify its fleet. Simplification will save it money on things like crew training and maintenance resources, but also allow it to reduce traveler disruption when something goes awry.
The airline will now fly a wide-body fleet exclusively made up of Boeing 777 and 787 jets. Prior to COVID-19, American said that it would begin offering an "enhanced" business-class seat on its new 787s beginning this year.
"We are going to go through and right-size this airline from a cost perspective... to make sure we're a profitable airline next year," Kerr said Tuesday.
Related: Air travel won't return to pre-coronvirus levels until 2023, IATA predicts
TPG featured card
at American Express's secure site
Terms & restrictions apply. See rates & fees.
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 5X | New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App. |
| 3X | Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines. |
| 2X | Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Pros
- Valuable dining and food-related credits
- Flexible rewards with airline and hotel transfer partners
- Multiple travel and purchase protections
- No foreign transaction fees
- Access to Amex Offers for additional savings (enrollment required)
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $8,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App.
- Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines.
- Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- Pay It® lets you tap in the American Express® App to quickly pay for small purchase amounts throughout the month and still earn rewards the way you usually do. Plan It® gives you the option to split up big purchases into equal monthly payments with a fixed fee. You’ll know upfront exactly how much you’ll pay.
- Updated! $120 Dining Credit: Earn up to a total of $10 in statement credits monthly when you pay with the Gold Card at Grubhub (including Seamless), Buffalo Wild Wings, Five Guys, The Cheesecake Factory, and Wonder. This can be an annual savings of up to $120. Enrollment required.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year at over 10,000 qualifying U.S. Resy restaurants after you pay for eligible purchases with the American Express® Gold Card. That’s up to $50 in statement credits semi-annually. Enrollment required.
- $84 Dunkin' Credit: Earn up to $7 in monthly statement credits after you pay with the American Express® Gold Card at U.S. Dunkin’ locations. Enrollment required.
- $120 Uber Cash on Gold: Enjoy up to $120 in Uber Cash annually with your Gold Card. Just add your Card to your Uber account and you'll get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an Amex Card for your transaction.
- New! As an American Express® Gold Card Member, you can enjoy complimentary Hertz Five Star® Status. Enjoy benefits like skipping the counter at select locations, adding an additional driver at no additional cost*, and vehicle upgrades**. Benefit enrollment and Hertz Gold+ registration are required. *Additional drivers must meet standard rental qualifications and must be a spouse or domestic partner to qualify as complimentary. Other additional drivers subject to fees. **Benefits are subject to availability and vary by location. Additional Hertz program Terms and Conditions including age restrictions apply.
- Take advantage of a $100 credit towards eligible charges* at over 1,300 upscale hotels worldwide when you book The Hotel Collection through AmexTravel.com or the Amex Travel App **. *Eligible charges vary by property. **The Hotel Collection requires a two-night minimum stay.
- Book your travel through the Amex Travel App with added peace of mind – backed by American Express® service and support. Only for American Express® Card Members.
- Whenever you need us, we're here. Our Member Services team will ensure you are taken care of. From lost Card replacement to statement questions, we are available to help 24/7.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.