Like fellow network airlines Delta and United, American
expects to be a smaller airline at the end of the Covid-19 crisis. But the
carrier won’t eliminate any hubs, senior vice president of strategy Vasu Raja said
Thursday.
“We do not plan for mass scaled hub closures. In fact, our
hubs are a massive asset,” Raja said during the American’s Q1 earnings call.
American’s biggest hub is Dallas/Fort Worth. Other hubs are in
Charlotte, New York, Chicago, Miami, Los Angeles, Phoenix, Philadelphia and
Washington.
May capacity will be down 80% and American expects capacity
to be down 70% in June. But even if operations begin to normalize by next year,
American expects to be flying 100 fewer aircraft than previously planned.
The carrier entered the Covid-19 pandemic with approximately
950 aircraft. Since then, American has retired its Boeing 767 widebodies and
Embraer E190 regional aircraft. It will accelerate retirement of its Boeing
757, Airbus A330-300 and Bombardier CRJ200 planes.
Raja said American is pursuing fleet simplification in lieu
of reducing hubs. Having fewer aircraft types will reduce costs related to
parts and tooling. It will also make the airline nimbler, enabling American to
more easily move aircraft to respond to demand. Raja said the carrier will also
lean on partnerships, including its renewed relationship with Alaska, so that
it can offer certain routes to customers at a lower cost.
He said that American is uniquely good at providing
convenient connections to customers in the U.S. and worldwide thanks to its hub
network.
“We have no plans to close any hubs. In fact, far from it,”
Raja said.
With the Covid-19 pandemic raging, American reported a $2.2
billion net loss in the first quarter, compared to a net profit of $185 million
during the first quarter last year. Operating revenue dropped 19.6%, missing
analyst estimates by $490 million, according to Seeking Alpha.
The carrier ended the quarter with $6.8 billion in
liquidity. Buoyed by $5.8 billion in Cares Act disbursements, along with a plan
to borrow another $4.75 billion through the Cares Act, American expects to end
the June quarter with more than $11 billion in liquidity. In addition, American
said it has more than $10 billion in unencumbered assets that can be used for
collateral, although a portion of those assets would be used to secure that
$4.75 billion federal loan.
The carrier expects to average $70 million in daily cash
burn during the second quarter. However, cash burn should decrease over the
course of the quarter, averaging $50 million per day in June.