American Airlines expects its second quarter 2020 revenue to decrease approximately 90% compared to the second quarter of 2019.
The company made this projection essentially considering the recent decline in demand caused by the Covid-19 pandemic.
American Airlines will also have a total system capacity of approximately 75% in the second quarter compared to the second quarter of 2019.
To preserve its liquidity position, the company has taken cost-cutting measures that have eliminated more than $ 13.5 billion from its capital and operating budgets by 2020.
These savings are achieved through reductions in maintenance expenses, marketing expenses, event and training expenses, airport facilities expenses, salaries and benefits expenses, and other volume related cost reductions, including fuel.
Along with these cost saving actions, American Airlines has recently experienced an improvement in demand conditions and has exceeded the peak of cash reimbursement activity.
American Airlines and trend
As a result, the company’s cash consumption rate has slowed from a peak of more than $ 100 million per day in April to approximately $ 40 million per day forecast for the month of June.
This marks an improvement of $ 10 million per day for the month of June compared to the company’s previous forecast of $ 50 million per day.
American Airlines seeks to reduce its cash burn rate to approximately zero by the end of 2020 as expected demand conditions continue to improve and its cost initiatives continue to gain traction.
In mid-March, the company first saw negative net bookings, where cancellations exceeded new bookings.
To better align its capacity with lower expected demand, the company reduced its capacity through a combination of schedule reductions and cancellations of nearby flights. This negative trend in net reserves persisted until the end of April.
The company’s flight system capacity decreased approximately 75% yoy in April, and decreased approximately 80% yoy in May. The company’s system capacity in June is expected to decrease approximately 75% year-over-year.