American Airlines Reports Massive First Quarter Loss

American and United are both plagued by terrible leadership; Delta and Southwest have far more competent management teams. No surprise that AA and UA would perform much worse as they always have even before covid19.

Remember when ol' boy Douggie said AA will never lose money again?

That was so awesome.

Nonsense. Didn't AA promised to shareholders that they will never lose money again, about an year ago?

They just broke the promise.

Doug Parker and his America West/US Airways management team need to all be removed.

AA's reputation since the "merger" AKA takeover, has been destroyed by Parker's obsession with converting AA into a low end carrier.

Provide a quality airline product that customer's would want and would appreciate.

Remove Parker and his cronies!, please!

Someone will no doubt come out and defend Dougie. “Who could’ve predicted the Coronavirus?” Except plenty of people were aware of the fact that a pandemic can (and is due to) occur. All these airline CEOs took a gamble and lost, now they want taxpayers to bail them out.

Typical American “capitalism”.

@David, so if you were CEO of American, how would you have prepared the company for this pandemic? What "gamble" did the airline CEOs take w/r/t a pandemic?

there are quite a few naive people here who dont appreciate the exceptional impact this pandemic does to the vast majority of industries, let alone avaition.

@jk
Industries but not people?

So people are meant to have prepared/ look out for themselves, while these delicate multibillion dollar corporations need the comfort of massive tax-payer support to get them through these impossible-to-predict times...?

@Ryan don’t spend your money on buybacks, for one. Don’t antagonize your customers because you think “AA will never lose money again”. He already made an idiotic $60 prediction which turned out to be completely wrong, but hey keep defending Dougie.

@jk Why are taxpayers expected to bail out companies who avoid paying taxes and messed up in a capitalist system? Shouldn’t taxpayer money be used to bail out, for instance, individual taxpayers? Would that make too much sense to understand?

AA has terrible leadership, just look at its financial and time stats performance, both are a disaster!

Delta and Southwest have done far better. While UA also had a huge loss, they have far more international exposure than AA, so it is unbelievable how AA had such a big loss.

@David, not sure why you would read my comment as defending Doug. I'm making fun of him and his idiotic statement...but ok.

@ David wrote:

@Ryan don’t spend your money on buybacks, for one. Don’t antagonize your customers because you think “AA will never lose money again”. He already made an idiotic $60 prediction which turned out to be completely wrong, but hey keep defending Dougie.

It seems to me that you are conflating two issues: 1) Parker's general management of AA; and 2) AA's readiness for a pandemic crisis under Parker. I'll address both.

Regarding the first issue, I fully agree. AA has not been well run under Parker and he has made many dumb public statements such as the $60 per share statement and the one about never again losing money. The workforce was demoralized going into this crisis and despite investing significant money in improving the premium passenger experience, the service level still was not great. For all these reasons, he needs to go.

Now, regarding the second issue (the pandemic preparedness), no CEO was going to be allowed to sit on mountains of cash as a rainy day fund. It just was not what the investment community wanted. You can make a compelling argument that the investment community was wrong and/or that managing a company with the primary objective being catering to Wall Street is wrong, but those were the rules of the game and you cannot fault Parker for playing by those rules. This is an unprecedented crisis for commercial aviation (and the country as a whole). Demand rightly dropped out from under them suddenly and to an extent that no one could have predicted even a month before it happened. Even if AA were sitting on a mountain of cash at that point, it would have not been enough to whether the storm without government support.

Short of hoarding cash (which we've seen was not realistic to expect), what else could AA have done to prepare? Not much. In fact, I'd argue that AA and the other U.S. carriers responded quite nimbly once the scope of the crisis became clear.

As for government assistance, it is absolutely necessary to preserve a vital sector of our economy (not just the airlines themselves, but all the support infrastructure that goes along with it). The notion that new entrants will come along if the existing airlines fail sounds good in theory, but in the real world the barriers to entry are too high for anyone to replace the capacity lost if a major airline were to fail.

@Ryan
“... no CEO was going to be allowed to sit on mountains of cash as a rainy day fund. ... Even if AA were sitting on a mountain of cash at that point, it would have not been enough to whether the storm without government support.”

Except, somehow, presumably miraculously, IAG seems to have been sitting on a mountain of cash which, so far, means it hasn’t asked for a penny of tax-payer support?

Much as most avgeeks hate them, IAG is spectacularly good at, er, the business of making money. Maybe because they’re not long-term subsidy junkies like, say, the US3?

AA is still spending money to retrofit to Oasis configuration. This configuration has been widely lauded in the blogs and media as an example of airlines not giving a sh*t about customers, in an already hostile passenger environment due to cramped quarters. Even the bathroom on this plane is infamous for how small it is.

I think it's disgusting and unforgivable to proceed with this project (and spending to retrofit existing planes to this configuration), particularly in today's environment and after taking taxpayer money. Customers (including myself as EXP and Lifetime PLT) should vote with their wallets on this one. i know I will....

Probably a lot of creative accounting to ensure a larger cash grab from the US government.

“US airlines will never lose money again.” LOL.

Terrible situation but companies have to plan for bad events. Just in the last 20 years we've had multiple stock crashes, 9/11, tons of nasty storms and now the virus. Do a better job of preparing for the bad times and I'd be more sympathetic.

It is like some person making decent money but saves nothing for retirement and wants to whine about having no money. Uh, what did you do to make your situation better over the last 30+ years? Spending on too big houses or BMWs don't get any sympathy from me.

i support Ryan's view and notwithstanding the negative aspect of his management nobody could have planned for this. BA gets assistance from UK in the form of furlough that offsets 80% of wages and they will rationalise going forward. Likewise a similar scheme exist in Spain for Iberia, in addition to government loans.

@rich wrote:

Terrible situation but companies have to plan for bad events. Just in the last 20 years we’ve had multiple stock crashes, 9/11, tons of nasty storms and now the virus. Do a better job of preparing for the bad times and I’d be more sympathetic.

It is 2015 and you are CEO of American Airlines. Congratulations! Among the issues on your desk are (in no particular order): unions that made concessions in 2001, 2008 and 2011 that now want more in wages and benefits, increased international competition from the ME3 carriers, premium passengers demanding better ground and in-flight service, large institutional investors complaining about the stock price, uncertainty in the oil market, the threat of terrorism and the risk of an external shock that could upend your operation. Please explain how you would address all these issues while still "preparing for the bad times", which we'll define as a major global pandemic that leads to government imposed social distancing and a 90% drop in flight loads, almost overnight, such that you would not need to avail yourself of government assistance when that "bad time" comes.

@jk
You’re not comparing like-with-like.

BA received 80% of wages for furloughed staff from a govt initiative open to every UK business to prevent them immediately laying off staff. It wasn’t a subsidy. We’re now seeing a proposal from BA to make ~1/3rd staff redundant, as soon as the furlough scheme ends.

But BA is not asking (yet?) for any govt subsidy to save it. And it has argued strongly against other airlines receiving tax-payer money, so seems unlikely to ask for itself.

BA is much smaller than any of the US3: so how is it sitting on a cash mountain that is so much bigger than those they’ve got? Why have they had to beg their govt for tax-payer cash, while BA has not?

@David

"Shouldn’t taxpayer money be used to bail out, for instance, individual taxpayers? Would that make too much sense to understand?"

Yes, individuals should get bailouts too.
GOOD NEWS. It's called food stamps, unemployment benefits, shelter, and food banks.
And on this special occasion, there is an extra $1200 for a new TV and beer to enjoy it with.

When people complain about corporations getting bailouts, they forgot to look in the mirror.

@TNP

I assume IAG was sitting on the cash for a planned acquisition, not planning for a rainy day?

October 1st, 2020 will be D-Day for airline workers around the country. Will be interesting to see how this whole thing plays out here. I just do not see people returning in masses for quite some time as the 30,000,000+ people out of work are broke and won't be going anywhere for awhile!

Interesting times!

@John
Both. IAG always has a big “war chest” for opportunistic takeovers; and it’s also a rainy day reserve.

So in 10 years when I read this blog and the US3 airlines are sitting on huge wads of cash, not one person should complain. You will be directed to this post and the sage advice given by commentors. I'm like an elephant, I never forget!

Folks, the good times are over. UA, AA, and DA will be just like Frontier and Spirit...just with makeup to cover the not so desirable parts. Why do you think they introduced basic economy? Airlines only REALLY make money when they are run like what they are meant to be - a public good to get from point A to point B. What incentive do the big three have to not be a prettier version of a discount airline that charges for sodas and other things? Do you realize how much taxes and fees come out of a plane ticket? All other fees like sodas and carry on bag is pure profit for the airlines. I’m telling you...you all are in la la land if you think Airlines will remotely be like they were. It’s about survival at this point. If one airline offers one ticket price with drinks included and another airline offers a cheaper ticket, same destination and everything, but no drink included, Most will take the cheaper ticket and bring their own soda. We are heading that way....I’m telling you.