American Airlines posted a net profit of $19mn and an EPS of $0.03/share for Q2, snapping a five quarter losing streak after it received more than $1bn in federal payroll support. The Texas based company reported a loss of $1.1bn or $1.69/share after adjusting for one-off items. The boost in travel demand saw the airlines report revenues of $7.5bn, up 87% QoQ. It ended the quarter with a record liquidity of ~$21.3bn. The company’s cash burn rate turned positive to a cash build of ~$1mn per day. After posting a positive quarter, the company has embarked on a deleveraging process. It made a prepayment of $950mn on a spare parts term loan due April 2023 and plans to cut debt by ~$15bn by the end of 2025 as against its previous plan of trimming debt by $8bn-10bn. The company also provided guidance for Q3 in which it indicated that the full recovery to pre-pandemic times is still a little way ahead. It expects the capacity to be lower by ~15-20% compared to 3Q2019. Total revenues are expected to be 20% lower than the corresponding quarter in 2019. The pre-tax margin excluding net special items are expected to be between negative 3% and negative 7%.
American Airlines’ 11.75% 2025s and 5.75% 2029s were up 1.18 and 0.54 to trade at 125.44 and 107.96 respectively.
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American peer Southwest also reported Q2 earnings with operating revenue of $4bn, up 300% YoY as travelers returned to the skies. Revenues were still 32.2% below 2Q2019 indicating only a partial recovery. The Dallas based airline reported a net income of $348mn after it received benefits of $724mn under the Payroll Support Program. It reported a net loss of $206mn after excluding the special items. The airlines achieved positive average daily core cash flows in June and reported operating cash flows at $2bn. Liquidity stood at $17.9bn against its outstanding debt of $11.4bn.
Southwest’s 5.25% 2025s and 3% 2026s were broadly stable at 114.24 and 107.31 respectively.
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