American Airlines CEO: Second bankruptcy in a decade is not an option
Fort Worth, Texas – Fort Worth-based American Airlines isn’t looking at bankruptcy as an option, says CEO Doug Parker, despite burning through $70 million a day in cash and taking on billions in debt to navigate the COVID-19 pandemic.
Such a move would wipe out shareholder value and alienate lenders, Parker said at the Bernstein Strategic Decisions Conference held virtually on Wednesday.
“I don’t think people should view bankruptcy as a financial tool,” he said. “I think it’s failure. We don’t look at that as an option.”
American Airlines is trying to avoid its second bankruptcy in a decade as the COVID-19 pandemic decimated demand for air travel, especially for international tickets and business flights. American has the most debt and highest overhead costs of any major airline.
For more than two months, American and other airlines were seeing negative sales as more customers canceled bookings than bought new ones. Parker said the company has now seen positive sales for the last two-and-a-half weeks, including eight straight days of positive sales on both long, medium and short-term advance bookings.
American has more than $40 billion in debt, but will have more than $11 billion in cash by the end of the second quarter and is applying for another $4.75 billion in federal loans. American has positioned its debt so that most of it matures in two years or more. The company only has $1 billion in long-term debt maturing in the next year, Parker said.
“What’s different about this crisis versus other crises is that, you know, in the past, we’d find ourselves where it really didn’t matter if maybe somebody went away, that would be helpful to the cause,” Parker said. ” There’s no one trying to push anybody else out of business because there’s a demand problem, not a capacity problem.”
However, American and other airlines are trying to figure out how to prepare for lean months and years ahead. More than 46% of business customers the airline has surveyed still say they have a ban on travel, Parker said. Airlines are also facing months of uncertainty because of no clear vaccine for COVID-19 and a worldwide recession.
“What I think you’re going to see is in the summer of 2021, the collective U.S. airline business [will be] 10% to 20% smaller than in 2019,” Parker said. He added that American would still be a big airline.
More than 40,000 employees at American have taken some type of voluntary leave or early retirement. The airline still has “a goal” to avoid furloughs and layoffs, but Parker said he hasn’t made any promises.
“We know that we need to get the airline cost structure in line with the capacity and that means our team as well,” he said.