“Our only goal is to make sure we have enough cash”
“Our only goal is to make sure we have enough cash,” CFO Derek Kerr said during the carrier’s earnings call Thursday. American ended the first quarter with $ 6.8 billion in cash.
Analysts had wondered if the American was threatened with bankruptcy given the difficult operating conditions during the coronavirus crisis.
The carrier on Thursday announced further reductions in June schedules, saying it would suspend 70% of domestic capacity and 80% of international capacity, compared to June 2019. It will also delay the start of some previously announced international services for start in May and June.
In the first quarter, excluding special items, the carrier lost $ 1.1 billion or $ 2.65 per share. Including items, the loss was $ 2.2 billion or $ 5.26 per share. Capacity was down 9%, 2% in domestic markets and 41% in the Pacific. Boardings fell by 17% and fuel consumption by 10.5%.
Revenue was $ 8.5 billion, down 20% from the same quarter a year earlier. Freight generated revenue of $ 147 million or 1.7%.
Nonetheless, American said it ended the first quarter with $ 6.8 billion in cash on hand, including about $ 2 billion raised in the quarter, and expects to end the current quarter with about $ 11 billion in cash. cash.
The shares were trading at $ 11.60, down 1.04 cents, during pre-market trading about 30 minutes before the opening bell.
The carrier estimates a reduction of more than $ 12 billion in operating and capital expenses in 2020, due to lower fuel costs; reductions of 80% in April and May and 70% in June; earlier decommissioning of older aircraft and deferred spending. First quarter operating expenses totaled $ 11.1 billion.
American said it was granted the right to access $ 10.6 billion in financial assistance through the CARES Act. The carrier said its recently assessed unencumbered assets are worth more than $ 10 billion, excluding the value of the AAdvantage program.
The carrier plans to pledge part of its assets as collateral for future funding, including a CARES law-backed loan of around $ 4.75 billion.
American has had no material non-aeronautical debt maturities for more than 24 months, other than the recently arranged 364-day $ 1 billion drawdown term loan facility.
American’s estimated average cash consumption rate in Q2 2020 is expected to be around $ 70 million per day. Its estimated daily consumption rate is expected to drop to around $ 50 million per day for the month of June, leaving $ 11 billion in cash at the end of the second quarter.
“Never before has our airline, or our industry, faced such a significant challenge,” CEO Doug Parker said in a prepared statement.
“We have acted quickly and aggressively to reduce our costs and strengthen our liquidity,” Parker said. “We are especially grateful for the $ 5.8 billion in financial assistance that American will receive through the Payroll Support Program.”
During the quarter, American made its first cargo-only flights since 1984. The carrier can now carry more than 6.5 million pounds of critical cargo each week on its cargo-only flights.