American Airlines Group Inc. reported its second-quarter 2020 financial results, including:

• Second-quarter pretax loss of $2.7 billion. Excluding net special items¹, second-quarter pretax loss of $4.3 billion.
• Second-quarter net loss of $2.1 billion, or ($4.82) per share. Excluding net special items¹, second-quarter net loss of $3.4 billion, or ($7.82) per share.
• Boosted available liquidity by a net $3.6 billion in the quarter through offerings of common stock, convertible bonds and secured bonds.
• Ended second quarter with approximately $10.2 billion of available liquidity. Additionally, signed term sheet with the U.S. Department of the Treasury for $4.75 billion secured loan, which is expected to close in the third quarter, and announced two senior secured note transactions totaling $1.2 billion. The company’s second-quarter pro forma liquidity balance including these transactions would be approximately $16.2 billion.

“This was one of the most challenging quarters in American’s history,” said American Airlines Chairman and CEO Doug Parker. “COVID-19 and the resulting shutdown of the U.S. economy have caused severe disruptions to global demand for air travel. In spite of these challenges, the American Airlines team has done a phenomenal job taking care of our customers and our fellow team members.

“We have moved swiftly to improve our liquidity, conserve cash and ensure customers are safe when they travel,” Parker continued. “There is much uncertainty ahead, but we remain confident we will emerge from this crisis more agile and more efficient than ever before.”

Supporting team members, customers and communities

Caring for team members, customers and the communities it serves remains the top priority for American as it navigates the current environment.

To ensure the safety and well-being of team members and customers, American:

• Updated its policies to make face coverings mandatory throughout the customer journey and for team members while at work.
• Instituted temperature checks for team members across the system and began asking customers to certify they are symptom-free before traveling.
• Created a Travel Health Advisory Panel, comprising internal leaders and outside experts in the field of infectious disease prevention, to advise on health and cleaning matters.
• Started working with the Global Biorisk Advisory Council on GBAC STAR^TM Accreditation for cleaning and disinfection practices for its aircraft and lounges.
• Further enhanced its cleaning and disinfection procedures throughout the operation, including the use of an electrostatic spray inside each aircraft every seven days, which kills 99.9999% of viruses and bacteria within 10 minutes.

To provide customers additional flexibility, American:

• Waived change fees for customers who book new tickets for future travel by July 31, 2020.
• Extended its change fee waiver for customers who have existing tickets for travel through Sept. 30, 2020.
• Began notifying customers whose flights may be full, allowing them to move to more open flights when available at no cost.
• Expanded flexible travel waivers and name changes for corporate customers.
• Eliminated the reinstatement fee for AAdvantage^® award ticket changes made more than 60 days prior to travel.
• Provided eligible AAdvantage elite members with a credit of up to $400 to use toward an American Airlines Vacations package.

To support the communities it serves, American:

• Expanded its cargo service to transport critical goods between the United States and Europe, Asia and Latin America. American currently operates more than 310 weekly widebody and cargo-only flights and transported more than 100 million pounds of mail, goods and supplies critical to the global economy in the second quarter.
• Announced a program to provide up to 1 million Business Extra^® points to small businesses and nonprofit organizations in need of travel support.
• Worked with Deloitte to deliver more than 40,000 medical gowns to first responders at Mount Sinai Hospital in New York.
• Partnered with Hyatt Hotels Corporation to give free vacations to thousands of employees at NYC Health + Hospitals/Elmhurst Hospital.
• Donated more than 600,000 pounds of food to food banks, nonprofit organizations, schools and other groups fighting food insecurity.

Conserving cash

American continues to take steps to reduce costs and preserve cash. The airline estimates that it will reduce its 2020 total operating and capital expenditures by more than $15 billion, achieved primarily through cost savings resulting from less flying. In addition, the company implemented the following cost actions:

• Retired four aircraft types, consisting of 20 Embraer 190s, 34 Boeing 757s, 17 Boeing 767s and nine Airbus A330-300s, along with a number of older regional aircraft. In addition, the company placed its Airbus A330-200s and certain older Boeing 737s into a temporary storage program. In aggregate, these changes remove more than 150 aircraft from the fleet and bring forward the cost savings and efficiencies associated with operating fewer aircraft types.
• Introduced additional voluntary leave of absence and early-out programs to help right-size its frontline team. American anticipates having over 20,000 more team members on payroll than needed to operate its fall schedule. In total, more than 41,000 team members have opted for an early retirement, a reduced work schedule or a partially paid leave.
• Consistent with the CARES Act, reduced its management and support staff team, including officers, by approximately 5,100 positions, or 30%.
• Announced changes to its international schedule for 2021. American expects its summer 2021 long-haul international capacity to be down 25% versus 2019 and also plans to exit 19 international routes from six hubs. These changes will allow the airline to reset its international network for future growth as demand returns.
• Reduced non-aircraft capital expense by $700 million in 2020 and another $300 million in 2021 through reductions in fleet modification work, the elimination of all new ground service equipment purchases, and pausing all noncritical facility investments and IT projects.

Bolstering liquidity

In addition to reducing its operating and capital expenditures, American has taken a number of steps to strengthen its liquidity position. The company:

• Ended the second quarter with $10.2 billion of available liquidity, including a net $3.6 billion raised in the quarter through offerings of common stock, convertible bonds and secured bonds. The company also raised $360 million through municipal facility bonds, the net proceeds from which are included in its restricted cash and short-term investments.
• Refinanced the delayed draw term loan credit facility the company entered into in March 2020, which was set to mature in March 2021. By refinancing this loan, American does not have any large non-aircraft debt maturities until its $750 million unsecured bonds mature in June 2022.
• Signed a term sheet with the U.S. Department of the Treasury for a $4.75 billion secured loan under the CARES Act. The company expects the loan to be finalized in the third quarter.
• Announced $1.2 billion of committed financing subject to final documentation and other closing conditions in the form of two senior secured note transactions to be collateralized by intellectual property and other assets with Goldman Sachs Merchant Bank. The company expects these notes to be issued in the third quarter.
• Reduced its daily cash burn rate from nearly $100 million in April to approximately $30 million in June. This improvement was driven by higher than forecast revenue and larger savings resulting from the company’s cost-reduction initiatives. The company’s second-quarter cash burn rate² was approximately $55 million per day vs. its previous forecast of $70 million per day.

Demand and capacity outlook

Passenger demand and load factors have improved since bottoming out in April, but continue to be significantly below 2019 levels. While May and June revenue trends were encouraging, demand has weakened somewhat during July as COVID-19 cases have increased and new travel restrictions have been put into place. The company will continue to match its forward capacity with observed bookings trends and presently expects its third quarter system capacity to be down approximately 60% year over year.

Notes

See the accompanying notes in the Financial Tables section of this press release for further explanation, including a reconciliation of all GAAP to non-GAAP financial information.

¹ The 2020 second quarter mainline operating special items, net principally included $1.8 billion of Payroll Support Program (PSP) financial assistance, offset in part by $332 million of salary and medical costs associated with certain team members who opted in to voluntary early retirement programs. Second quarter 2020 regional special items, net primarily included $216 million of PSP financial assistance, offset in part by $24 million of fleet impairment charges and $14 million of salary and medical costs associated with certain team members who opted in to voluntary early retirement programs.

Second quarter 2020 nonoperating special items, net principally included charges associated with debt refinancings and extinguishments.

² The company defines cash burn as the sum of all net cash receipts less all cash disbursements, but excluding the effect of new financings and new aircraft purchases.

American Airlines Group Inc. today reported its first-quarter 2020 financial results, including:

• First-quarter net loss of $2.2 billion, or ($5.26) per share. Excluding net special items¹, first-quarter net loss of $1.1 billion, or ($2.65) per share.
• Ended first quarter with $6.8 billion of available liquidity and expects to end second quarter with approximately $11 billion of liquidity.

“Never before has our airline, or our industry, faced such a significant challenge,” said American Airlines Chairman and CEO Doug Parker. “True to fashion, the American Airlines team has done a phenomenal job taking care of our customers and each other during such difficult and often heartbreaking times. We are incredibly proud of their selflessness and dedication to others.

“We have moved quickly and aggressively to reduce our costs and bolster our liquidity,” Parker continued. “We are particularly grateful for the $5.8 billion in financial assistance American will receive through the Payroll Support Program, and we appreciate the bipartisan congressional and U.S. Department of the Treasury and Department of Transportation support to protect airline jobs and ensure a strong and competitive U.S. airline industry.

“We have a lot of difficult work ahead of us. And while there is still uncertainty in what’s to come, we are confident that through the dedication of the American Airlines team and our swift actions, we will get through this for our team, our customers and our shareholders.”

COVID-19 response

In response to the precipitous drop-off in demand, American has acted quickly to take care of its team members, customers and communities; reduce costs; and improve its liquidity position.

Taking care of team members, customers and communities

Caring for team members, customers and the communities American serves remains at the heart of the airline’s actions in the first quarter.

To ensure the safety of team members and customers, American:

• Enhanced its cleaning procedures through expanded fogging and the use of an EPA-approved disinfectant in high-touch areas.
• Purchased face masks for frontline team members and made them required for flight attendants starting May 1.
• Began distributing sanitizing wipes or gels and face masks to customers. This will expand to all flights as supplies and operational conditions allow.
• Temporarily relaxed its seating policies and adjusted airport procedures to encourage social distancing.
• Reduced onboard food and beverage service to limit contact.

To provide customers additional peace of mind, American:

• Extended waivers for travel occurring through the end of September 2020, enabling customers to change plans and travel through December 2021, and waived change fees for customers who purchase new tickets by May 31, 2020, for future travel.
• Introduced flexible travel waivers and name changes for corporate customers.
• Made it easier for top-tier customers to earn AAdvantage® elite status this year.
• Extended 2020 AAdvantage status into early 2022 for all members.
• Extended all paid Admirals Club memberships by six months.

To support the communities it serves, American:

• Launched the company’s first cargo-only flights since 1984 to transport critical goods between the U.S. and Europe, Asia and Latin America. American is currently able to transport more than 6.5 million pounds of critical goods weekly on its cargo-only flights.
• Donated more than 100 tons of food to food banks in the company’s hub cities.
• Raised, with customer participation, approximately $3 million for the American Red Cross to support workers on the front lines of the COVID-19 pandemic.
• Donated thousands of supply kits to patients and health care workers and care packages to U.S. military members in quarantine.

Rightsizing the airline and its cost structure

American estimates a reduction of more than $12 billion in its 2020 operating and capital expenditures, achieved through lower fuel expense and a series of actions. The company:

• Reduced system capacity by approximately 80% in both April and May, and 70% in June, including schedule changes announced today.
• Accelerated the retirement of four aircraft types, consisting of 20 Embraer E190s, 34 Boeing 757s, 17 Boeing 767s and nine Airbus A330-300s, along with a number of older regional aircraft. These changes remove operating complexity and bring forward cost savings and efficiencies associated with operating fewer aircraft types.
• Suspended all nonessential hiring, paused noncontractual pay increases, reduced executive and board compensation, and implemented voluntary leave and early retirement programs to reduce labor costs. In total, nearly 39,000 team members have opted for an early retirement, a reduced work schedule or a partially paid leave.
• Deferred marketing expenditures and reduced contractor, event and training expenses.
• Consolidated its footprint at its airport facilities.

Maximizing liquidity

To bolster liquidity, the company:

• Ended the first quarter with $6.8 billion of available liquidity, including approximately $2 billion raised during the quarter.
• Obtained the right to access $10.6 billion in financial assistance through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
• Recently had its unencumbered assets appraised and believes the value of those assets is in excess of $10 billion, excluding the value of the AAdvantage program. The company expects to pledge a portion of its assets as collateral for future financings, including the approximately $4.75 billion secured loan American has applied for under the CARES Act.
• Suspended its capital return program, including share repurchases and the payment of future dividends, in accordance with the CARES Act.
• Does not have any large non-aircraft debt maturities for more than 24 months, outside of the recently arranged $1 billion, 364-day delayed draw term loan facility.

American’s average estimated second-quarter 2020 cash burn rate is expected to be approximately $70 million per day. As the company’s cost initiatives gain traction, its estimated daily cash burn rate is expected to decline over time to approximately $50 million per day for the month of June. Based on its current forecast, the company expects to have approximately $11 billion of liquidity at the end of the second quarter.

Conference call and webcast details

The company will conduct a live audio webcast of its earnings call today at 7:30 a.m. CDT, which will be available to the public on a listen-only basis at aa.com/investorrelations. An archive of the webcast will be available on the website through May 31.

Notes

See the accompanying notes in the Financial Tables section of this press release for further explanation, including a reconciliation of all GAAP to non-GAAP financial information.

• ¹ In the first quarter of 2020, the company recognized $1.4 billion in net special items before the effect of income taxes. The 2020 first quarter mainline operating special items, net principally included $744 million of fleet impairment charges, which consisted of a $676 million non-cash write-down of aircraft and spare parts and $68 million in write-offs of right-of-use assets and lease return costs associated with the company’s mainline fleet, principally Boeing 757, Boeing 767, Airbus A330-300, and Embraer E190 aircraft, which are being retired earlier than previously planned as a result of the decline in demand for travel due to COVID-19. The company also recognized $218 million of one-time labor contract expenses resulting from the ratification of a new contract with its maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases, and $205 million of salary and medical costs associated with certain team members who opted in to a voluntary early retirement program.

First quarter 2020 regional operating special items, net included an $88 million non-cash write-down of regional aircraft, principally certain Embraer E140 and Bombardier CRJ200 aircraft, which are being retired earlier than previously planned as a result of the decline in demand for travel due to COVID-19.

In addition, the company recognized $217 million in nonoperating net special items in the first quarter of 2020, which principally included mark-to-market net unrealized losses associated with certain equity investments and treasury rate lock derivative instruments.

American Airlines Group Inc. today reported its fourth-quarter and full-year 2019 financial results, including these highlights:

• Fourth-quarter 2019 earnings were $0.95 per diluted share. Excluding net special items¹, earnings were $1.15 per diluted share, up 19% year over year.
• Full-year 2019 earnings were $3.79 per diluted share. Excluding net special items², earnings were $4.90 per diluted share, up 8% year over year.
• Accrued $213 million for the company’s profit-sharing program in 2019, including $74 million in the fourth quarter.
• Returned $1.3 billion to shareholders in the form of dividends and share repurchases in 2019.

“During the fourth quarter, we made important progress to address the issues that impacted our business in 2019, and, thanks to our incredible team, we ended the year with our strongest operational quarter on record,” said American Airlines Chairman and CEO Doug Parker.

“While our results for the quarter reflect this progress, we know there is more work to be done. Looking to 2020, we are focused on three key areas. First, we will continue to deliver operational excellence and build on our strong fourth-quarter results. Our team has done a tremendous job, and we will keep driving improvement in key operational metrics in the year ahead. Second, we will deliver those results while growing where we have a competitive advantage in our most profitable hubs. And third, these initiatives combined with our capital plan will enable us to drive significant free cash flow in 2020 and beyond.”

Fourth-Quarter Revenue and Expenses

Pre-tax earnings were $571 million in the fourth quarter of 2019. Pre-tax earnings excluding net special items for the fourth quarter of 2019 were $679 million, a $90 million increase from the fourth quarter of 2018, or 15.1% year-over-year increase from the same period last year.

Continued strength in passenger demand and a record passenger load factor drove a 3.4% year-over-year increase in fourth-quarter 2019 total revenue to a record $11.3 billion. Driven by a 2.4% increase in passenger load factor, passenger revenue per available seat mile (PRASM) grew 0.9% to 14.72 cents, a record for the fourth quarter. Cargo revenue was down 18.3% to $216 million due primarily to a 15.6% decline in cargo volume. Other revenue was up 5.4% to $750 million due primarily to higher loyalty revenue. Fourth-quarter total revenue per available seat mile (TRASM) increased by 0.5% compared to the fourth quarter of 2018 on a 2.9% increase in total available seat miles.

Total fourth-quarter 2019 operating expenses were $10.6 billion, up 2.1% year over year, driven primarily by higher salaries and benefits, maintenance, and regional expenses. Total fourth-quarter 2019 cost per available seat mile (CASM) was 15.06 cents, down 0.8% from fourth-quarter 2018. Excluding fuel and net special items, consolidated fourth-quarter CASM was 11.59 cents, up 2% year over year.¹

2020 Priorities

In 2020, American is focused on operational excellence, efficient and profitable growth, and generating significant free cash flow.

• Operational excellence: Running a reliable operation is a significant driver of customers’ likelihood to recommend and American’s goal to become customers’ airline of choice.
• Efficient and profitable growth: Grow in high-revenue markets that produce at or above average unit revenues, largely due to new gates in Dallas-Fort Worth and Charlotte, North Carolina.
• Generating significant free cash flow³: Use free cash flow to naturally de-lever the company’s balance sheet and return capital to American’s shareholders.

Operational Excellence

Over the past several months, American’s operational performance has shown significant improvement, including the company’s best-ever performance for both the holiday peak travel period and the entire fourth quarter of 2019. American achieved record results for combined mainline and regional on-time departures, on-time arrivals and completion factor.

“We are very pleased with the trajectory of our operation and are well on our way to delivering operational excellence,” said American Airlines President Robert Isom. “As we look ahead to 2020, we will continue to strengthen our operation and expect to see continued improvements in our reliability metrics.”

Efficient and Profitable Growth

American is committed to growing its network efficiently and profitably. In 2019, the company added 15 new gates at Dallas Fort Worth International Airport. This growth resulted in a 21% increase in city pairs served and strong unit revenue. The company also added four new gates at Charlotte Douglas International Airport, with plans for three additional gates beginning in 2020. In addition, the company expects to upgauge 14 gates at Ronald Reagan Washington National Airport with dual-class regional jets when the new regional concourse opens in 2021.

Significant Free Cash Flow, Share Repurchases and Dividends

With American’s historic fleet renewal program winding down, the company’s level of capital investment is expected to decline. The company is committed to generating significant free cash flow for its shareholders in 2020 and beyond and presently expects to generate approximately $6 billion in free cash flow³ over the next two years.

In the fourth quarter of 2019, American returned $285 million to shareholders through the repurchase of 9.9 million shares of common stock and also paid $44 million in dividends. As of Dec. 31, 2019, the company had $565 million remaining of its existing $2 billion share repurchase authorization.⁴ In aggregate, American has returned more than $13.5 billion to shareholders over the past five years through share repurchases and dividends, including $1.3 billion in 2019.

American declared a dividend of $0.10 per share to be paid Feb. 19, 2020, to stockholders of record as of Feb. 5, 2020.

Fleet Update

On March 13, 2019, a directive from the Federal Aviation Administration grounded all U.S.-registered Boeing 737 MAX aircraft. American’s fleet currently includes 24 MAX aircraft with an additional 76 aircraft on order. As a result of this directive, American canceled approximately 10,000 flights in the fourth quarter of 2019.

The company has removed all MAX flying from its flight schedule through June 3, 2020, and will continue to asses this timeline.

Notes

See the accompanying notes in the Financial Tables section of this press release for further explanation, including a reconciliation of all GAAP to non-GAAP financial information.

¹ In the fourth quarter of 2019, the company recognized $108 million in net special items before the effect of income taxes. The 2019 fourth quarter mainline operating special items, net principally included $85 million of merger integration expenses and $39 million of fleet restructuring expenses. These were partially offset by nonoperating net special items of $39 million primarily related to mark-to-market net unrealized gains associated with certain equity and other investments.
² For the full year 2019, the company recognized $644 million in net special items before the effect of income taxes. Total operating special items totaled a net charge of $641 million, which principally included $271 million of fleet restructuring expenses, a $213 million non-cash impairment charge principally related to the planned retirement of the company’s Embraer E190 fleet, and $191 million of merger integration expenses, offset in part by a $53 million credit to reduce certain litigation reserves. The company also recognized $3 million of nonoperating net special items.
³ Free cash flow is defined as operating cash flow minus total capital expenditures plus proceeds from sale-leaseback transactions.
⁴ Share repurchases under the company’s repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Any such repurchases that may be made from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors. The company is not obligated to repurchase any specific number of shares and its repurchase of AAG common stock may be limited, suspended or discontinued at any time at its discretion and without prior notice.
⁵ American is unable to reconcile certain forward-looking projections to GAAP, as the nature or amount of special items cannot be determined at this time.