American Airlines Takes A Beaten

The COVID-19 pandemic is wreaking havoc in the airline business and speculation is rife that many of these companies must either merge or go out of business.

American Airlines Group Inc (AAL.O) has now joined Delta Air Lines (DAL.N) in forecasting a 90% slump in second-quarter revenue.

The company has cut $13.5 billion from its operating and capital budgets for the year through “significant cost reduction actions” around marketing, maintenance, events, training, airport facilities, and other areas. The company said it has “passed the peak in cash refund activity.”

The U.S. airlines has said that a modest recovery in demand was helping slow their daily cash burn rates in June, after the COVID-19 pandemic led to hundreds of flight cancellations.

Many airlines are now adding back flights in July as demand modestly rebounds.

American Airlines expects its daily cash burn rate to slow to about $40 million in June, and said it plans to fly 55% of its domestic schedule and nearly 20% of its international schedule in July.

“The company has recently experienced improving demand conditions and has passed the peak in cash refund activity,” American Airlines said in a statement.

However, as the duration and severity of the COVID-19 pandemic remain uncertain, the company said it expects its fiscal 2020 results to be materially impacted.

American Airlines shares have fallen 50% so far this year as the S&P 500 SPX has declined 7%.

Nigel Bell, Readers Bureau, Fellow

Edited by Jesus Chan

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