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American Airlines posts record $8.9 billion annual loss as it looks to 2021 for ‘year of recovery’

Losses during the COVID-ravaged year wipe out more than four years of earnings at the Fort Worth-based airline.

American Airlines lost $8.9 billion last year when COVID-19 pushed the air travel industry to desperation, including a $2.2 billion loss to finish the final three months of 2020.

After losing nearly $100 million a day in April, the Fort Worth-based carrier managed to cut its losses to just $30 million a day in the fourth quarter, often through drastically reducing schedules, government aid and employees taking leave.

The end of the historically challenging year for airlines is only making way to the equal challenge of rebuilding a company and an industry that’s still struggling to draw customers as the coronavirus pandemic continues to ravage the globe and vaccine distribution fails to spur travel demand.

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And while 2021 is off to a sluggish start even for the coronavirus era, CEO Doug Parker is hoping to strike an optimistic tone as the company tries to push through the next few months until a COVID-19 vaccine gets to enough people to make travel feel safe again.

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“As we look to the year ahead, 2021 will be a year of recovery,” Parker said in a statement. “While we don’t know exactly when passenger demand will return, as vaccine distribution takes hold and travel restrictions are lifted, we will be ready.”

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It was a similar message echoed by other CEOs at airlines such as United and Delta, which had already reported deep losses for 2020.

Meanwhile, Dallas-based Southwest Airlines reported a $3.1 billion loss for 2020, the first annual loss for the company in 48 years.

But even American’s massive $8.9 billion loss isn’t the biggest in the industry. Atlanta-based Delta Air Lines was $12.9 billion in the red in 2020, going from the most profitable to the least profitable carrier in just a year. Chicago-based United lost $7.1 billion last year.

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American is now trying to plot a path forward that includes fewer employees and fewer planes than it had before the pandemic started.

“We could eventually reach 2019 levels of capacity with approximately 10% fewer aircraft,” American chief financial officer Derek Kerr said.

American’s 2020 loss makes even previous disasters and recessions look small.

The company lost $6.5 billion over three years between 2001 and 2003, a period that combined the struggle of the 2001 terrorist attacks with financial problems at the company. American lost $9.7 billion during a six-year period between 2008 and 2013, which culminated in bankruptcy and a merger with US Airways.

But after bankruptcy and the merger, American rode a wave of six straight profitable years that resulted in $17.7 billion in earnings.

Parker famously proclaimed in 2017 that the company would never lose money again and his prediction remained true even if American struggled to land planes on time and was near the bottom of the rankings in areas such as mishandled bags and customer complaints.

But even record-high profits couldn’t prepare American Airlines for 2020 and the COVID-19 pandemic, which swept through the country and the world swiftly in March and stifled an air travel recovery for the rest of the year.

American’s revenue was down 62% for 2020. Planes were 65% full on average and the number of passengers dropped to 65 million, compared with more than 155 million the year before. International traffic dropped by 76.5% for the year with little recovery, as total passenger miles for international was down 81.7% in the fourth quarter.

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American furloughed and laid off 19,000 employees on Oct. 1 when stipulations on the carrier’s $4.2 billion federal payroll support grants ran out. It recalled those workers just before Christmas when Congress approved another $15 billion for airlines. American is in line to receive about $3.2 billion to again cover worker pay through March 31.

Still, after raising about $13 billion in debt and equity in 2020, the company finished the year with $14 billion to carry it through the next few challenging months.

“What we do know is that we will be prepared to withstand the crisis, irrespective of how long the recovery takes,” Parker said in a call with investors and reporters.

While many of those workers have been officially recalled and are receiving paychecks, most haven’t returned to work yet, and it’s unclear if they’ll be needed before the end of March.

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“We are definitely going to need to address this unless demand starts to pick up,” Parker said. “We’re already talking to our union about things we’re going to need to do.”

The next few months could only add challenges until a vaccine has reached a majority of the population.

The Biden Administration swiftly enacted international testing and quarantine requirements after the new president took office earlier this month. This week, Reuters reported that the Centers for Disease Control and Prevention was in talks with the executive branch about possible testing requirements on domestic travel to stop mutated and more contagious strains of the COVID-19 virus from spreading across the country before vaccines can be distributed.

Airlines have been supportive of international testing to help open borders to countries mostly closed to travelers, but domestic travel requirements could stifle already lackluster demand.

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International testing and quarantine requirements have resulted in a drop in demand for flying to and from foreign countries, Parker said. But he said he would want to make sure domestic travel requirements “wouldn’t restrict demand.”

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