After a devastating blow in the first quarter, airline equity investors hoped to get off the ground as the US economy began to open gradually after the COVID-19 outbreak.
But the second The quarterly results announced this week show that the road to recovery for US airlines will be difficult. Below we summarize the most recent results for the three largest airlines and what their executives have to say about the future.
1. American Airlines
American Airlines (NYSE 🙂 reported a loss of $ 2.1 billion in the second quarter yesterday, compared to a profit of $ 662 million in the same period a year ago. Excluding one-off items, such as government support to cover payroll, the airline reported a loss of $ 3.4 billion, or $ 7.82 per share, compared to the analysts' consensus of $ 4.86. said bookings are starting to decline again and business trips, which usually resume after Labor Day, show no signs of resuming. In short, the crisis continues, Chief Executive Doug Parker said during a phone call.
American Airlines net bookings, or the difference between new reservations and cancellations, decreased by 75% to 80%, a significant drop from May and June when Sunbelt states opened and some business travelers returned to heaven. At one point, net bookings in those states fell by only 35% to 40%.
US stocks more than doubled in value between April and June. But since the peak in June, they have lost about 50% to trade at $ 11.97 a share on Thursday.
Despite this bleak picture, there are some positive signs in American's latest report. Sales per passenger flying a mile were six times higher in June than in April. At the same time, the airline lowered the rate at which it burned cash from $ 100 million a day in April to $ 30 million at the end of June.
American said it expects third-quarter capacity to be 60% lower than last year. The carrier told pilots in a memo this week to prepare for schedule changes.
2. Delta Air
Delta Air Lines (NYSE 🙂 reported a net loss of $ 5.7 billion for the quarter to June, compared to a profit of $ 1.4 billion a year earlier. Revenue decreased 88% to $ 1.47 billion during the period. Adjusted for one-off costs, Delta lost $ 2.8 billion. The loss of $ 4.43 per share compared to the consensus of $ 4.16 among analysts surveyed by FactSet.
Delta closed the quarter with $ 15.7 billion in liquidity, which it said was sufficient to support operations for 19 months. This includes $ 5.4 billion in government support to pay wages. The company has yet to decide whether to take out an additional $ 4.6 billion federal loan.
Delta's shares rose more than 2% Thursday to trade at $ 26.09 in afternoon trading, but are still down more than 50%
Chief Executive Ed Bastian echoed the words of American Parker, saying that after the April collapse in domestic flying, the recovery had stalled. As a result, Delta will halve the number of additional flights it adds in August to 500, and capacity in the third quarter will be at best 25% of what it was a year ago.
Bastian said on an investor called Tuesday that he did not expect business flying levels to ever return to pre-pandemic levels, as companies focus again on essential travel. Analysts estimate that premium flyers account for half of Delta's revenue, the highest in the industry.
Delta also continues to limit capacity to 60% on its flights to ensure an empty middle seat.
The pause in demand recovery would cause Delta to burn $ 27 million in cash this month, in line with last month.
The airline expects the schedule for the rest of the year to be like August, warning that any recovery in air travel will not "follow a linear path."
3. Southwest
Southwest Airlines (NYSE 🙂 reported a loss of $ 915 million in the second quarter, compared to $ 741 million in net income a year earlier. Like its competitors, it warned that demand will not increase anytime soon.
Southwest reported sales were down nearly 83% to about $ 1 billion, compared to $ 5.9 billion last year, although sales in the quarter were higher than analyst estimates. The loss per share of $ 2.67 on an adjusted basis was roughly in line with analyst forecasts.
Southwest estimated that capacity in the third quarter will fall between 20% and 30% compared to last year.
CEO Gary Kelly said in a profit message:
"We were encouraged by improvements in May and June trends in leisure passenger traffic."
"However, the improving trends in earnings and bookings recently stalled in July with the increase in COVID-19 cases."
Southwest stock is not as severely punished as its two rivals. The stock has fallen 39% this year, to trade at $ 32.88 on Thursday, down 1% on the day.
Bottom Line
These earnings reports show that the largest U.S. airline stocks are unlikely to recover unless there is a vaccine to control the spread of COVID-19 to grab. While airline executives have little positive news to share at a time when people aren't ready to travel, these precipitated stocks could be a good bet for investors with a little patience.
