Billions in Losses? Could be Worse ✈

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Billions in Losses? Could be Worse

This year has been less than ideal for many industries, but airlines have been some of the companies hit hardest by the pandemic. That trend was on full display when American and Southwest reported earnings yesterday morning. The companies lost 2.4 and 1.2 billion dollars respectively, but both stock prices went up on the day showing the dismal expectations for the industry.

Investors were impressed with strategies both companies took to trim cash burn. American cut its daily cash burn by $14 million from the previous quarter and estimates it can cut another $15 million next quarter. The company has started furloughing 19,000 employees after an aid bill contingent on keeping workers expired last month.

American has been the most vocal airline in lobbying Congress for a new aid bill to provide $25 billion for the industry. No deal has been reached as Democrats and Republicans play a game of political chess over a new round of stimulus.

Southwest CEO Gary Kelly gave an interview yesterday about the past quarter and outlook, and one intriguing statement he made was that he believes it could be 10 years before the business travel sector recovers. Because of this, the focus for Southwest will be on leisure fliers. If it does take a full decade for corporate travel to return to its pre-pandemic levels, it could be a tough 10 years for airlines even as other sectors fully recover.

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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