The damage done by the pandemic to the travel and tourism sectors was underlined on Thursday as two of America’s biggest airline companies – American and Southwest – posted their biggest-ever annual losses and indicated a need for new aid in addition to the billions already provided in 2020.
A third, smaller airline, JetBlue Airways also posted a quarterly loss on Thursday in a day of red ink for the sector.
In December, US airlines received a $US15 billion government aid package for payroll costs through March, the second such program since the coronavirus swept over America in march and April.
That took the total for the year for the airline sector to a massive $US40 billion and has enabled them to hang on to more than 40,000 employees who otherwise might have been sacked. As it is the sector has already laid off tens of thousands of staff.
American posted an $US8.9 billion annual loss for 2020, its biggest on record; Southwest reported an annual loss of $US3.1 billion, its first annual loss since 1972 and JetBlue lost $US1.4 billion in 2020.
The news came two days after plane maker, Boeing revealed a record loss of nearly $US12 billion for 2020, including an $US8.4 billion loss in the 4th quarter after it wrote $US6.5 billion off the value of its yet to fly 777-X plane.
Southwest also warned that it was facing stalled demand in January and February, driven by high levels of COVID-19 cases and hospitalisations.
But Southwest’s moans might be a bit weak seeing it is continuing to add routes to its network in the downturn and taking on extra costs and will continue doing so in 2021.
American, with a larger international profile, said it would drop 19 international routes in 2021.
American and Southwest each ended 2020 with $US14.3 billion in available liquidity.
American is significantly has more debt than its rivals but said liquidity would improve to $15 billion by the end of March, reassuring investors.
American’s debt profile seems to be why it is attracting attention from the pack of small investors roaming Wall Street looking to attack stocks that are shorted by big investors.
Reuters said the attention from these packs of investors explain a hard to understand 30% plus surge in American’s share price since it was mentioned on the Reddit WallStreetbets forum. The shares are up 62% in the past three months and jumped more than 9% on Thursday.
In contrast shares in Southwest rose just 1% on Thursday to be up nearly 13% in the past three months. The Reddit pack isn’t interested because Southwest has lower debt and a stronger financial position than industry leader American.
