Two airlines reported massive third-quarter losses Thursday amid a pandemic that has decimated demand for air travel and as Congress has thus far failed to extend the bailout that was keeping them aloft.
American Airlines posted $2.4 billion in quarterly loss, while Southwest Airlines reported a record $1.16 billion loss in the third quarter.
CEOs of both companies appealed to Congress to extend the Payroll Support Program of the CARES Act, which pumped $25 billion into the airline sector before the legislation expired this month.
American Airlines announced third-quarter losses of $2.4 billion on October 22. The airline started to furlough 19,000 workers earlier in the month after Congress allowed airline payroll relief to expire
Southwest announced record quarterly losses over over $1 billion on October 22. The airline also said it would stop the practice of blocking out middle seats [above] starting December 1
‘We urge our federal leaders to pass an economic relief package that includes a clean, six-month extension of the Payroll Support Program (PSP) to further protect jobs and crucial air travel,’ Southwest Chief Executive Officer Gary Kelly said.
American Airlines Chairman and CEO Doug Parker said a proposed extension of the PSP enjoys ‘enormous’ bipartisan support, but the failure of Republicans and Democrats to agree on a broader COVID relief package has blocked it.
‘Elections matter, but there’s nothing polling higher than a COVID relief stimulus package,’ Parker told investors on a call Thursday.
As House Speaker Nancy Pelosi (D-California) negotiates with Treasury Secretary Steven Mnuchin on the terms of a second COVID relief bill, Senate Democrats on Wednesday blocked a proposed $500 million Republican package they saw as insufficient.
Southwest has thus far avoided furloughing employees by asking workers to accept pay cuts
Ridership on U.S. foreign and domestic flights rebounded over the summer after bottoming out during the most severe lockdowns during the spring. Still, U.S. airlines are carrying only a fraction of the passengers they did last year
Without an extension to the airline relief package, the airline industry in the U.S. began furloughing 50,000 workers this month. Of those, 19,000 are American Airlines employees.
The four largest carriers in the U.S. have shed about 150,000 employees this year through voluntary or temporary leave.
For its part, Southwest has thus far avoided furloughs by asking its employees to take pay cuts. Kelly told employees in a memo earlier this month that company leaders and non-contract employees would face a 10 percent salary hit, CNN reported.
Unions representing Southwest workers would be asked to make concessions as well.
Amid their losses, both companies touted lower negative cash flows in the third quarter.
American and Southwest both reported increasing revenues and lower rates of cash burn, but both airlines are far from reaching a break-even point
American burned about $44 million a day in past three months, compared to $58 million in the second quarter.
Southwest reported a cash burn of $16 million per day in the third quarter, versus $23 million per day in the second.
Both companies forecasted lower burn rates for the fourth quarter.
Demand for air travel has plummeted amid the global pandemic. April saw just 3.2 million passengers on U.S. foreign and domestic flights, compared to 76.7 million in April 2019.
American Airlines announced that it expected its system capacity in the fourth quarter of 2020 would be just over half what it was in the same period last year
Even as U.S. ridership rebounded slightly over the summer, U.S. airlines served in July fewer than a third the passengers they did in July 2019, according to federal statistics.
Carriers have cut flights and routes in response. American Airlines reported Thursday its system capacity would be slightly more than 50 percent what it was over the same period last year.
Airline revenues have rebounded since the depths of the lockdowns this spring, but break-even is still far off.
Southwest announced Thursday it would seek to increase revenue by selling every available seat on all flights starting December 1, joining United and American.
The airline had been keeping open middle seats on many flights to enable social distancing among passengers.