American Airlines Defers MAX Deliveries Following $2.4 Billion Net Loss

American Airlines has posted a sizeable $2.4 billion loss today for the third quarter of 2020. Despite the tough operating environment, American finished the quarter with more than $15 billion in liquidity, thanks to aggressive cost-cutting and cash-raising activities. One of those actions has been to defer deliveries of 18 Boeing 737 MAX, which should have arrived over the next 24 months.

American Airlines has posted a net loss of $2.4 billion for the third quarter of 2020. Revenue was down 73% year on year to $3.2 billion, largely as a result of an almost 60% reduction in available seat miles. Commenting on the results, CEO Doug Parker said,

“During the third quarter, we took action to reduce our costs, strengthen our financial position, and ensure our customers return to travel with confidence. The American Airlines team is doing a remarkable job taking care of our customers and each other during the most challenging time in our industry’s history.

“We have a long road ahead and our team remains fully engaged and focused not just on managing through the pandemic, but on making sure we are prepared for when demand returns. We are confident that the continued efforts of our team and the actions we have taken will drive customer confidence and strengthen our company for the future.”

Despite the poor results, the airline celebrated its wins during the period. It noted achievements, including the elimination of change fees, preflight COVID testing for passengers to Hawaii and Costa Rica as well as its new travel tool to help passengers fly with confidence.

Facing such a substantial loss, American Airlines has been working hard to bolster its liquidity and conserve cash. To date, the airline estimates it has removed approximately $17 billion from its operation and capital budgets throughout 2020. While most of this was achieved through reduced flying, other actions have taken place also.

Notable in the filing today is the deferral of 18 Boeing 737 MAX aircraft, which should have been delivered to the airline in 2021 and 2022. These will now not arrive with AA until 2023 and 2024.  In American Airlines’ 10Q filing, the airline noted the situation with the MAX, saying,

“We do not have financing commitments in place for the remaining eight Boeing 737 MAX Family aircraft scheduled to be delivered in 2021, however, we do have rights to defer these eight Boeing 737 MAX Family aircraft from 2021 to 2023. In addition, we also have rights to defer to 2023-2024 the 10 Boeing 737 MAX Family aircraft currently scheduled to be delivered in 2022.”

As well as deferring the MAX, American has completed a sale-and-leaseback process for its incoming Airbus A321 deliveries due to take place in 2021. The airline says that it now has financing secured for all new aircraft deliveries through next year.

In terms of outlook, the airline is planning to operate at a reduced capacity for the rest of 2020, forecasting less than 50% of 2019’s levels through the fourth quarter. Long-haul international is expected to be down approximately 75% year on year.


Leave a Reply

Your email address will not be published. Required fields are marked *