MIAMIAmerican Airlines (AA) and Southwest Airlines (WN) have published positive results for Q2 2021 thanks to the recovering travel demand but also to crucial and substantial government aid.

American Eagle (Envoy Air) N299JJ Embraer E175 | Credits: Sean Brink/Airways

American Airlines Q2 2021 Financial Report

American posted a total of US$7.5bn operating revenues composed of US$6.5bn passenger revenue, US$326m cargo revenue, and US$607m listed as other revenue. The operating expense stood at US$8.35bn with an offsetting factor of US$1.3bn, a special item comprising a credit for PSP (Payroll Support Program) financial assistance, thus resulting in the final total of US$7bn.

The total operating income stands at US$441m while the total nonoperating expense totals US$432m resulting in a pre-tax income of $9m. When the government aid, listed as a pre-tax special item, is deducted the pre-tax loss amounts to US$1.4bn and the net loss to Us$1.1bn – US$1.69 x share – when Us$319m of income tax benefits are taken into account.

Thanks to the government aid the bottom line reads a positive US$19m net income or US$0.03 x share. Q2 also registered a record total liquidity of US$21.3b thanks to a positive cash burn for Q2, standing at approximately $1m x day. AA expects to keep this trend going but expects a downtrend for 2022 with liquidity dropping at Us$10-12m.

American also plans to pay down approximately US$15bn of debt by end of 2025, a significant step up when compared to the previous $8 to 10m targets. Also potentially planned is the use of excess cash flow for using cash instead of debt for certain aircraft deliveries and the payment of prepayable debt.

“We have taken a number of steps to solidify our business through our Green Flag Plan and it shows in our second-quarter results.” Doug Parker, American Airlines CEO Click To Tweet

Doug Parker, AA Chairman and CEO, also added: “We have reshaped our network, simplified our fleet and made our cost structure more efficient, all to create an airline that will outperform competitors and deliver for customers. The green flag has dropped and we are ready thanks to the tremendous efforts and dedication of the American Airlines team.”

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Southwest Airlines Boeing 737-800 N8581Z – Photo : Luca Flores/Airways

Southwest Airlines Q2 2021 Financial Report

Southwest reported a Q2 net income of US$348m – US$0.57 x share – including an offsetting factor of $724m related to salaries, and benefits expenses linked to the Payroll Support Program (PSP) government aid under the provisions of the American Rescue Plan At 2021. When excluding the special item revenue, the PSP, the net loss for Q2 stands at US$206m or US$0.35 x share.

The Q2 operating revenue of IS$4bn shows a downtrend of 32.2% when compared to the equivalent period of 2019. The generated cash flow for Q2 stands at $2b with a free cash flow of US$1.9bn, the core cash burn amounted to $1m per day in Q2 with a positive cash flow of approximately US$4m x day. At the end of June, the total liquidity stands at US$17.9bn and the outstanding debt at US$11.4bn.

Southwest has shown better performances at the end of Q2, with operating revenues continuously improving thanks to increased traffic for leisure passengers. Business travel continued to show deceiving results with a 69% downtrend for June, which is however a better result when compared to a minus 77% registered in May or the negative 80% for April. Data are compared with 2019 figures.

“…we are intensely focused on improving our operations as we restore our network to meet demand. I am beyond thankful for our People…”Gary C. Kelly, Southwest Airlines CEO Click To Tweet

“Second quarter 2021 marked an important milestone in the pandemic recovery as leisure travel demand surged. We generated net income in June 2021, representing our first monthly profit without taking into account the benefit of temporary salaries and wages cost relief provided by PSP proceeds, since the negative effects of the pandemic began in March 2020,” commented Gary C. Kelly, WN Chairman of the Board and CEO.

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Featured image: Luca Flores/Airways