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American Airlines Cargo Revenue Sinks, Along With Q2 Profit

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American Airlines Cargo Revenue Sinks, Along With Q2 Profit

American Airlines Group, Inc. (NASDAQ: AAL) has offered cargo-only flights during the COVID-19 pandemic, but the new line of business didn't overcome the lost cargo moved on passenger airplanes that were grounded in the second quarter.

The Fort Worth, Texas-based airline on Thursday reported $130 million in cargo revenue for the quarter ended June 30, down 41% from the same quarter last year. Cargo revenue for the first half of the year amounted to $277 million, 37% below 2019.

American said it currently operates more than 130 weekly widebody and cargo-only flights. It transported more than 100 million pounds of mail, goods and COVID-19 supplies worldwide in the second quarter.

The airline suspended most information technology projects during the pandemic, but pressed ahead this spring with a three-year cargo systems modernization effort that reduced freight-related systems from about 100 to 10 and digitized paperwork.

Earlier this month, American reorganized the cargo division's management.

Cooling cash burn

Overall, American posted a second quarter $2.7 billion pretax loss on a nearly $10 billion drop in revenue from last year. Total revenue for the second quarter reached $1.6 billion, down 86% compared to the prior year.

CEO Doug Parker said on Thurday's earnings call that the airline's biggest priority is continuing to reduce cash burn across the system. The airline estimates that it will reduce 2020 operating and capital expenditures by more than $15 billion from a year ago, including $700 million in non-aircraft capital expenses by eliminating purchases of ground handling equipment and IT projects.

Contributing to the savings is the retirement of more than 150 planes.

American said 41,000 employees took advantage of its early retirement program, but reiterated that it still has more than 20,000 people on the payroll than it needs to operate in the fall.

The airline has eliminated some international passenger flights and plans to exit 19 more, limiting availability for air cargo to those markets.

American ended the second quarter with $10.2 billion in available liquidity and could soon have another $4.75 billion if it finalizes an emergency loan from the U.S. government. 

Leaner airline

Parker said the airline will continue to downsize while business and leisure travel remain depressed.

According to the carrier, net passenger bookings in the southern states are already down nearly 80% due to the recent rise in COVID-19 cases. The region is traditionally one of the richest markets for summertime travel.

Nonetheless, Parker told attendees during a morning investors' call that he believes there will be long-term, positive benefits for American from the pandemic.

Leadership had the opportunity to "take a look at the largest airline in the world, shut it down, and start it from scratch," he said. "That's a real opportunity that we're using. That allows us to add back only what makes sense."

Related news

American Airlines warns of 25,000 job cuts

American Airlines announces new cargo president

Pandemic fails to dampen AA Cargo's IT esprit

Click for more FreightWaves/American Shipper articles by Chris Gillis.

Photo: Flickr/Prayitno

 

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