American Airlines To Retire Five Fleet Types Ahead Of Schedule
American Airlines is seizing on the downturn posed by the COVID-19 pandemic to streamline its fleet structure, announcing plans to retire five separate fleet types and more than 120 airliners.
All told, the moves will see Dallas/Fort-Worth-based American retire at least 80 aircraft from its mainline fleet and 41 smaller jets from its regional fleet. The mainline retirements include nine Airbus A330-300s, 34 Boeing 757-200s, 17 767-300ERs and 20 Embraer E190s. On the feeder side, American will retire all 19 of its Bombardier CRJ-200s and 22 of its ERJ-140s.
Beyond those aircraft, American CFO Derek Kerr said the company could possibly tap 42 older 737-800s, 15 A330-200s or some of its older A320ceos, as well as additional regional jets for retirement.
“By removing these fleet types, we avoid significant future maintenance expense, remove complexity from our operations, and bring forward the efficiencies associated with operating fewer aircraft types,” Kerr explained on the company’s first quarter (Q1) earnings call April 30.
All of the 767s and E190s have already been retired, ahead of the year-end target originally intended prior to the pandemic. Retirement of the 757s and A330-300s is being accelerated, having previously been expected to occur over the next few years.
Kerr said the fleet moves would lead to savings related to reduced aircraft sparing, reduced parts inventory and crew scheduling efficiencies. “Even with these changes, we retain the flexibility to pursue efficient growth through increased utilization, or further reduce our fleet to match demand across our system and hubs.”
American Airlines reported a $2.2 billion net loss in Q1, the first quarterly loss for the carrier since emerging from bankruptcy six years ago. Revenue was nearly 20% lower year-over-year, at roughly $8.5 billion.
“Never before has our airline, or our industry, faced such a significant challenge,” American chairman and CEO Doug Parker said.
American ended the quarter with $6.8 billion of available liquidity, a figure it expects to grow to $11 billion by the end of the June quarter, including $5.8 billion in federal payroll support provided under the CARES Act. The company plans to pursue an additional $4.6 billion loan under the stimulus law, bringing its projected third quarter liquidity to $17.34 billion.
The carrier estimates it will burn through roughly $70 million per day in the second quarter, a rate it expects will drop to $50 million per day by June. Combined operating and capital expenditures have fallen by more than $12 billion, largely owing to capacity cuts, airport consolidation, labor cost reductions and limited discretionary spending.
American’s system capacity is expected to be approximately 80% lower in April and May, with cuts projected to shrink slightly to 70% in June. Parker said that roughly 80% of the carrier’s flights departed in April with load factors lower than 25%.
Management reported that 39,000 of the company’s roughly 90,000-strong workforce have agreed to early-out, voluntary leave or time-off plans, including 4,500 workers that have taken early retirement. Parker said he hopes that those measures will be sufficient to avoid involuntary furloughs, although he acknowledged “it’s not a certainty” that the company can survive without resorting to furloughs down the line. Under the CARES Act, carriers receiving federal aid are barred from involuntary furloughs through Sept. 30.
“As for right now, we’re working through the summer and through the terms and conditions of the CARES Act,” said Parker. “As we get into the fall, we will certainly be working productively with our team to make sure we’re rightsized.”