American, southwestern, Alaska post-wind-supported profits – but real losses. Now expecting increased business travel

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U.S., Southwest and Alaska airlines managed in the second quarter with a little help from their 535 friends in Congress, where each reported Thursday that they made smaller profits thanks to wage subsidy payments from the federal government aimed at preventing tens of thousands of layoffs during the pandemic .

But like their rivals Delta and United, who previously reported second-quarter results, Southwest, Alaska and American all reported adjusted losses in the second quarter – albeit much less than in previous quarters – when government support was backed by the calculations.

Fort Worth-based Americans said its small profit of $ 19 million – the first profit after five straight quarterly losses during the pandemic – was adjusted to a loss of $ 1.1 billion. Dollars after one-time accounting adjustments. The largest such adjustment was by far for federal wage subsidy payments received by the carrier. This loss was equal to $ 1.69 per share. Shares.

Dallas-based Southwest, meanwhile, said its $ 348 million profit was similarly adjusted to a loss of $ 206 million. On this adjusted basis, the company’s losses amounted to 35 cents per share. Shares.

Alaska, based in Seattle, reported a profit of $ 397 million in the second quarter, but a loss of $ 38 million or $ 30 cents per share. Share after adjustment for $ 489 million in federal wage support payments and other non-recurring items.

A rapid recovery in demand for leisure travel in the second quarter drove all three airlines’ dramatic revenue increases. America’s revenue jumped to $ 7.48 billion in the second quarter. That’s just $ 1.6 billion in the second quarter last year, when the pandemic’s impact on airlines and travel demand was at its worst. It also rose from $ 4 billion. In revenue in the first quarter. Still America’s revenue in the second quarter fell nearly 38% from the $ 12 billion in revenue it reported from the second quarter of 2019, before the pandemic.

Similarly, Southwest’s revenue in the second quarter increased by DKK 4 billion. Dollars four times from the turnover of 1 billion. Dollars, it had a year earlier, and was almost double the turnover of 2.1 billion. Dollar, it reported from the first quarter of this year. Men de 4 mia. Dollars in the second quarter revenue was still 32% less than the 5.59 billion. Dollars that Southwest brought during the second quarter of 2019.

Alaska’s second-quarter revenue more than tripled to $ 1.5 billion from just $ 421 million in the second quarter of 2020. But the second quarter of 2019, before the pandemic, Alaska brought in nearly $ 2.3 billion in revenue, meaning that this year’s second-quarter revenue remains down 35% from the pre-pandemic level.

Managers at all three airlines said they expect demand for leisure travel to continue at or above current levels throughout the rest of the summer. After Labor Day, which traditionally marks the end of the summer holiday season, U.S. officials said they expect to see demand for higher prices for business prices rise. During a call Thursday morning with analysts and journalists Chief Revenue Officer Vasu Raja said that corporate offices will begin reopening in large numbers in September and that he expects this will result in significantly increased volumes of domestic business travel four to six weeks later – in the end of September and the first half of October – after those who return to their offices are able to set their new work priorities and schedule appointments with customers, suppliers and others with whom they will visit face – to – face.

Southwest and Alaska officials said they also expect demand for business travel – and revenue – to increase by the end of the summer holiday season. But Southwest in particular carefully avoided predicting profits beyond the current third quarter. Both Alaska and U.S. executives said they expect to be profitable in both the third and fourth quarters without the help of government money.

But southwestern executives noted that on July 26, they completed its project to start selling tickets through the SABER reservation system and the positive impact that will have on its previously announced plans to increase its domestic business travel market share. Historically considered a cheap, low-cost airline, Southwest has in normal times become the largest U.S. airline in terms of domestic passengers. With its growth, especially in larger cities, Southwest is beginning to shift more attention toward catching a larger share of domestic business travelers, who typically pay higher fares. That’s why it’s starting to sell tickets through SABER on Monday, and why it’s already doing so through the other major booking systems, Amadeus and Travelport. These systems facilitate more travel for businesses because companies can use these systems to better track and compare not only fares but also their cost over large volume discount agreements they negotiate with airlines. Previous Southwest’s absence from these various reservation systems made it difficult or impossible for it to compete for many corporate travel contracts.

Tom Nealon, Southwest’s president, said in a conference call with analysts and journalists that his airline’s seven largest corporate accounts – all of which are professional service companies providing consulting, accounting and similar services – have all removed the restrictions on employee travel that they ‘d imposed early in the pandemic. This, he explained, gives Southwest executives confidence that the recovery in demand for business travel is already underway and will very likely increase significantly by the end of the year.

“We expected business travel this year to be up to around 50%” of what it was before the pandemic “by the end of this year,” he said. “But right now it looks like we have fallen by 50% by the end of this quarter. It happens faster ”than previously expected.

In Southwest’s earnings release, CEO Gary Kelly proclaimed his airline’s balance sheet strength, which he said is “unmatched in the US aviation industry and a competitive differentiator.

”Pr. On 30 June 2021, our total liquidity was DKK 17.9 billion. $. The average nuclear combustion was approx. $ 1 million a day, “and” we achieved a positive average cash flow in June 2021; “adding approximately $ 4 million a day to its cash reserves.” Based on our current booking trends and cost outlook, we hope to be profitable, both on a GAAP and non-GAAP basis, again in the third and fourth quarters of 2021. ” GAAP refers to generally accepted accounting policies. ”

U.S. officials also noted in their conference call that their airline became cash-flow positive in the second quarter and is now adding to its cash pile at a rate of about $ 1 million a day. The airline also announced that it was repaying as much as $ 950 in debt backed by the carrier’s spare parts in a transaction today. This debt, which was taken up to secure the carrier’s liquidity below the height of the pandemic-caused cratering of travel demand, was not to be paid until 2023. By paying the early US liquidity fell from $ 21 billion at the end of the second. quarter to just over $ 20 billion now.

Derek Kerr, U.S. Chief Financial Officer, said that while the airline will maintain the historically high level of liquidity for some indefinite months ahead, he expects it to reduce the balance sheet to between $ 10 billion and $ 12 billion starting sometime next year. To do so, he said, the airline will start paying its debts.

“The solution of American balance has begun,” Kerr said.

Alaska’s chief commercial officer Andrew Harrison said his airline’s operations had returned to approx. 80% of its pre-pandemic size by the end of the second quarter, and that he now expects both the size of Alaska’s operations and demand, especially among business travelers, to increase faster in the second half of the year. In part, he said it would be the result of California’s decision not to remove most of the restrictions that had kept many workers there from returning to their offices until mid-June, and which had severely limited demand for to travel to and from the state. Now that California is open, Harrison said, demand for Alaska’s flights in the western region is booming and that it’s on top of increasing demand for Alaska’s fleet of new flights to and from popular sunshine destinations in Florida, Texas and elsewhere.

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