Executives at American Airlines are confident that moves made last year to streamline the carrier’s fleet and headcount will reap big gains once demand picks up, although the timing of a recovery remains uncertain.
Fort Worth-based American expects to be able to deploy 100% of 2019 levels of capacity by year-end, despite having 10% fewer aircraft, as it upgauges its fleet to newer, larger models. In 2020, the company removed more than 150 mostly older planes, leaving it with four main fleet families, down from nine previously. The carrier now boasts the youngest fleet among its legacy airline peers, with an average age of just 11.2 years.
American took delivery of 10 Boeing 737-8s in the 2020 fourth quarter (Q4), following the FAA’s recertification of the model in November 2020 after a 21-month grounding. The company plans to continue receiving new aircraft in 2021, including eight more 737-8s, 19 787s and 16 Airbus A321neos, according to CFO Derek Kerr. In 2022, it plans to take delivery of 26 more A321neos—but only if they are fully financed first.
“Not surprisingly, the aircraft that we exited were the least cost-efficient aircraft in our fleet,” Kerr said on a call with analysts Jan. 28. “With only four mainline aircraft types remaining, we will see improved aircraft utilization and operational efficiencies in the back-half of 2021 through the increasing gauge, reduction in inactive aircraft and maintenance allocations.”
Kerr said American is on track to save $500 million per year after trimming its management ranks by a third in 2020. The company also furloughed 19,000 frontline workers—more than any other U.S. carrier—after federal payroll support expired in fall 2020. These employees were recalled to payroll through March 31 after the U.S. government extended a second round of support to carriers in late December.
But with 2021 first quarter (Q1) demand little improved from 2020, American CEO Doug Parker said management will likely have to furlough those workers once again come April 1, unless the government extends a third round of payroll support to airlines.
“April 1 is approaching, and demand hasn’t gotten much better, so we are definitely going to need to address this, unless demand starts to pick up,” Parker said. The company’s unions are in talks with the Biden administration about including more airline aid in the next round of federal stimulus. “We would obviously be supportive of that,” Parker said.
American recorded a net loss of $2.1 billion in Q4 2020, while total revenues were down 64% year-over-year (YOY). Management expects little improvement in Q1, with revenues expected to fall between 60% and 65% year-over-year. System capacity in Q1 is expected to be down 45% from 2019 levels, little changed from Q4 2020.
Despite announcing a nearly $9 billion full-year net loss for 2020, American’s stock price soared as much as 50% during intraday trading on Jan. 28, as retail investors piled into shares of heavily shorted companies. The stock later pared most of its gains after trading was halted by popular brokerage Robinhood around mid-day.
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