Three Points From This Morning’s American Airlines Earnings Call

American Airlines seems to be gearing up for another run at is single most profitable investment: lobbying in Washington DC. They haven’t been formally engaged by the government over domestic Covid testing requirements, suggesting such a plan may be farther off or less real than some have speculated. And they continue to bring on a lot of new aircraft, seeing that as effectively costless because of cheap financing.

  • Airline CEO Doug Parker stammered in response to a question about government subsidies, demand hasn’t recovered for air travel and effective April 1 they’re allowed to re-furlough employees, so he offered that unions have been talking to the Biden administration about including more subsidies in the next stimulus bill addressed in Congress. Bailout number 3 as predicted by Jamie Baker at J.P. Morgan Chase in October.

    American is spending less about one-tenth of the subsidies from round two paying furloughed employees, they pocket the rest, and most won’t even work during the covered period.

    The airline is unwilling to spend more of its subsidies on employees, < href="https://viewfromthewing.com/southwest-airlines-wont-furlough-anyone-through-2021-will-spend-airline-aid-on-employees/" target=_blank>the way that Southwest Airlines is doing, so why should taxpayers?

  • Dawn Gilbertson asked the awkward question: why are you supportive of international testing, but not domestic testing? Parker first said it’s because he thinks international testing can open up travel that’s currently closed, while domestic travel wouldn’t, then he stammered a bit to say they haven’t actually come out against domestic testing. Parker says “no one has talked to us officially” about domestic testing, and he’ll make the case that flying is safe. The bottom-line though is that any dichotomy in position the airline takes isn’t about public health.

  • 19 new Boeing 787s are coming this year, in addition to all of the narrowbodies and upgauging in New York and Washington National to all two-class regional jets. They’re increasing capacity even with parked planes and despite limited demand. That’s going to mean a lot of cheap fares into the future.

I’m very badly looking forward to getting back in the air, and for me that means mostly flying American Airlines and Southwest Airlines. I’m hoping American will extend my 2020 systemwide upgrades past June 30, 2021. Surely a year’s extension wouldn’t be unreasonable, considering that when the first extension happened it wasn’t obvious things would go this badly or go on this long.

The Alaska Airlines and JetBlue partnerships are exciting for American Airlines customers. It’s the network and partnerships that are driving value. The airline needs to focus on delivering its own quality product, however, and that’s an area that they are lagging.

Fundamentally with higher costs and most debt American is going to need to earn a revenue premium compared to the industry in order to climb out of the hole they’re in and they haven’t yet demonstrated an awareness of this, in my opinion, let alone a plan for doing so.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. The good news is it appears Joe is not about to soon impose mandatory covid testing for domestic flights. At least not for the next three weeks, as American is not discussing at this time with the guberment how that would work and the start date of any testing would likely be 14 days after Joe signs an EO. That being said, deep in the NYT story about the latest news about the Novavax vaccine is the concerning news that the South African COVID variant is causing re-infection of those previously having the original COVID strain.

  2. @Dougie – possibility of reinfection via South African strain isn’t new news, and we don’t have a lot of data on this yet that I have seen – how many reinfections, who is getting reinfected? eg is it people with very mild symptoms the first time who didn’t mount a robust immune response? people with compromised immune systems? are they people who are re-infected getting severe Covid?

    The Novavax results are highly encouraging, and it will be shameful to the extent that the US FDA won’t accept a UK trial for consideration of an EUA. We should have approved the AstraZeneca vaccine. And Sanofi had to put off its vaccine because of issues with older people… instead of pushing forward making it available to younger people in the meantime.

    We need jabs in arms of vaccines that are safe and meet a threshold of effectiveness. And it doesn’t appear we are getting that.

  3. Not sure if you’ve noticed, but customers are paying 18% more to fly on DAL than AAL (revenue passenger yield). I fully expect that revenue yield advantage to continue well past the resumption of travel: DL has been honest and cared for passengers; AA packed them up and doesn’t even clean planes the way it “commits” to (as an aside, can any lawyer please file a class action lawsuit on this, please?). The smart money, and business traveler, is well aware that Delta is more trustworthy.

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