American Airlines Posts $2.4B Quarterly Loss; Street Sees 22% Downside

American Airlines posted a $2.4 billion quarterly loss as the pandemic-induced travel halt put a dent on its peak summer season. Shares are declining 1.3% in Thursday’s pre-market trading.

American Airlines (AAL) swung to a $2.4 billion loss in the third quarter from a $435 million profit during the same period last year, but still beat the Street consensus by $360 million. Excluding net special items, the airline reported third-a quarter net loss of $5.54 per share, exceeding the Street consensus by 21 cents. Revenues in three months to September 30, plunged 73% to $3.2 billion year-on-year.

Notably, American Airlines lowered its daily cash burn rate to $44 million per day in the third quarter from $58 million per day in the second quarter. For the current quarter, the carrier presently expects its cash burn rate to be about $25 to $30 million per day.

“During the third quarter, we took action to reduce our costs, strengthen our financial position, and ensure our customers return to travel with confidence,” said American Airlines CEO Doug Parker. “We have a long road ahead and our team remains fully engaged and focused not just on managing through the pandemic, but on making sure we are prepared for when demand returns. We are confident that the continued efforts we have taken will drive customer confidence and strengthen our company for the future.”

American Airlines said it ended the third quarter with about $13.6 billion of total available liquidity and expects to finish the fourth quarter with more than $13 billion in total available liquidity, which excludes any proceeds from the recently announced $1 billion at-the-market equity offering.

Although the airline saw improvements in passenger demand and load factors during the third quarter, both remain significantly below 2019 levels. For now, it forecasts 4Q system capacity to be down more than 50% year-on-year, with long-haul international capacity down about 75% during the same period.

Shares in American Airlines have lost 56% of their value so far this year as US airlines have been burning through billions of dollars incurring huge losses and implementing broad cost-cutting plans, as well as taking steps to shore up their cash buffers. (See American Airlines stock analysis on TipRanks).

Seaport Global analyst Daniel Mckenzie this month reiterated a Buy rating on the stock based on the assumption of a travel recovery in 2021.

However, in the near-term Mckenzie expects the industry to incur more large losses, including $8.5 billion in the fourth quarter, with “a downward bias tied to a second wave that appears increasingly likely per experts.”

Overall, the rest of the Street has a moderately bearish outlook on the stock. The Moderate Sell analyst consensus breaks down into 5 Sells, 2 Holds, and 2 Buys. That’s with a $10 average analyst price target implying 22% downside potential lies ahead over the coming year.