American Airlines reported a net loss of $2.4 billion for the third quarter as the Covid-19 pandemic led to a 73.4% decline in year-over-year revenues.
Nevertheless, executives for the carrier expressed optimism Thursday that the crisis is giving it an opportunity to improve its position vis-a-vis competitors when the industry finally recovers.
"[It] does provide the opportunity to take the largest airline in the world and essentially shut it down and build it back," CEO Doug Parker said on the company's quarterly earning call.
Prior to the pandemic, American was underperforming chief competitors United and Delta on operating margin and passenger revenue per available seat mile (PRASM), both key industry metrics.
During the third quarter, American's PRASM of $5.43 remained the lowest of the Big Three.
But chief revenue officer Vasu Raja said the airline is making moves to increase its revenue premiums by shifting more flying into its largest hubs. American, he said, currently has 75% of its capacity touching its four largest hubs, which in the third quarter were Dallas, Charlotte, Phoenix and Chicago O'Hare. In its largest hubs, the carrier earns a revenue premium of 40%, he said. That compares to the revenue deficit of 10% that American struggles with at its two smallest hubs in comparison to other carriers.
The airline declined to identify its smallest hubs in a follow-up email, but figures provided by the flight data company OAG show that in September, New York JFK, New York LaGuardia, Washington Reagan and Los Angeles saw the fewest flight operations among American's 10 hubs.
American moving capacity toward its larger hubs, especially Dallas and Charlotte, dovetails with airline demand trends during the pandemic, which favor leisure locations in the U.S. Sun Belt as well as Mexico and those Caribbean markets that have reopened. Central American and South American countries also have begun to open faster than transatlantic and transpacific destinations, a benefit to American, which buoyed especially by its Miami hub, has a bigger footprint in those areas than its network rivals.
Raja said American expects to lean on newly enhanced partnerships with JetBlue and Alaska to enhance its connectivity offerings in its less profitable coastal regions, while it focuses more of its own flying on the more profitable hubs.
"We think there is a real path out of it where American can produce at a different revenue than it might have before," he said in reference to the Covid-19 crisis.
For the third quarter, American reported revenues of $3.17 billion, beating analyst expectations by $360 million, according to the website Seeking Alpha.
The carrier expects its fourth-quarter capacity to be down more than 50% year over year.
American's cash burn rate was $44 million per day in the third quarter. The company projects cash burn in the fourth quarter to be $25 million to $30 million per day.
American had $13.6 billon in liquidity entering the quarter, with an option to borrow an additional $2 billion from the Treasury Department.