Business of Design

Why American and Southwest Airlines Had Record Annual Losses—And How Recovery Remains Elusive

After a record breaking year of annual looses, Southwest Airlines reported its first annual loss since 1972 and said it would remain cautious with capacity through March due to weak demand.

The Download: Last year was tough for airlines, namely American and Southwest, which reported record losses. Both airlines aren’t holding their breath, expecting low bookings as new travel restrictions hasten and the glacial rollout of the Covid-19 vaccine clouds hopes for a recovery in the near future. In total, U.S. airlines lost a combined $34 billion, while Southwest Airlines announced its first annual loss since 1972 and American lost $8.9 billion.

Why It Matters: CEOs repeatedly christened 2020 as the travel industry’s most difficult. American cited a net loss of $2.2 billion for the fourth quarter, and then its revenues nosedived more than 64 percent to $4 billion, in comparison with $11.3 billion one year earlier. Yet even with all the loss, sales are booming far beyond analysts’ predictions, with $3.88 billion for the fourth quarter. That said, American expects capacity in the first quarter of 2021 to be down 45 percent compared with 2019, before the pandemic crashed travel demand. The airlines expects revenues to be 60 to 65 percent lower for the first quarter, as compared to 2019.

In Their Own Words: “We don’t know exactly when we may return to prior levels of demand,” said American Airlines CEO Doug Parker. “What we do know is that we’re prepared to withstand the ongoing crisis irrespective of how long the recovery takes. We ended the year with over $14 billion of total available liquidity.”

Surface Says: Book travel now—prices have never been better. And while you may not be able to travel anytime soon, you can sleep well knowing you’re helping an industry in free fall.

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