(Reuters) – American Airlines Group Inc and Southwest Airlines Co posted their biggest-ever annual losses on Thursday, saying there is a need for additional government support as the industry continues to falter from the coronavirus pandemic.
US airlines expect demand to improve this year as vaccines become more widely distributed, but have warned that the strength of any recovery will depend on the pace of vaccine introduction and the relaxation of travel restrictions.
JetBlue Airways, which also posted a quarterly loss on Thursday, said a recovery is directly related to a drop in COVID-19 cases.
Still, stocks of those three airlines surged early in the trade, spurred by a retail trade frenzy that pushed the U.S.’s stock – that’s the most-shorted airline – up a whopping 32% after the carrier was named on it. WallStreetBets forum from Reddit.
American posted an annual loss of $ 8.9 billion, its largest loss on record, although its adjusted net loss of $ 3.86 per share per quarter was better than analysts’ expectations for a loss of $ 4.11 per share, according to data from Refinitiv.
Total operating income fell from $ 11.31 billion to $ 4.03 billion, but exceeded analyst expectations of $ 3.88 billion.
Southwest reported an annual loss of $ 3.1 billion, the first annual loss since 1972, and said it was related to stalled demand in January and February, driven by the high COVID-19 cases and hospitalizations.
So far, vaccine rollouts in the US have been patchy and a range of European countries are discouraging travel and introducing more travel restrictions in an effort to stem the spread of new infections.
The United States on Tuesday began demanding negative COVID-19 testing for people entering the country from abroad, including U.S. citizens, a move that airlines say caused a decline in bookings, although they continue to view testing as a necessary strategy to travel re-open the longer term.
The US government has talked about mandatory COVID-19 testing for domestic flight travelers, but Doug Parker, American Airlines Chief Executive, said such tests would be difficult.
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In December, US carriers received a $ 15 billion government package for labor costs through March, the second program since the coronavirus began to beat demand last year.
A US aviation union leader on Thursday urged Congress to extend the program for a third time, a move American Parker told investors who would back the company.
A $ 1.9 trillion COVID-19 relief proposal unveiled by President Joe Biden this month has $ 20 billion in new support for public transportation, but no new money for airline payrolls.
US airlines continued to burn millions of dollars in cash every day in the fourth quarter as costs outpaced revenues, despite strong cost-cutting efforts for this year.
American and Southwest each ended 2020 with $ 14.3 billion in available liquidity. American has significantly more debt than its competitors, but said liquidity would improve to $ 15 billion by the end of March, reassuring investors.
Southwest has taken advantage of the crisis to add new routes, a strategy it intends to pursue this year.
American, with a larger international profile, said it would leave 19 international routes by 2021.
Both airlines are major operators of Boeing Co’s 737 MAX, which was approved to resume commercial operation in November after a 20-month safety ban.
American resumed passenger flights late last year, and Southwest plans to fly the jets again on March 11.
Reporting by Sanjana Shivdas in Bengaluru and Tracy Rucinski in Palm Coast, Fla .; Additional reporting by Shariq Khan, Sagarika Jaisinghan and Ankit Ajmera in Bengaluru; Editing by Nick Zieminski and Matthew Lewis