American Airlines: Small-Business Travel Demand Steadily Improving

Business Travel News 4/22/2021

AAA World Article

American Airlines is seeing early signs of corporate travel recovery even with little showing from the segment in current bookings.

The carrier's first-quarter passenger revenue declined 58.6 percent year over year to $3.2 billion, and revenue was flat compared with the fourth quarter but improved as the first quarter progressed, American Airlines president Robert Isom said in an earnings call on Thursday. This week, daily net bookings have recovered to 2019 levels, boosted by "strong leisure demand" within the United States and to Mexico, the Caribbean and Latin America, he said.

Similar to Delta Air Lines and United Airlines, American's bookings for corporate and long-haul travel have recovered only to about 20 percent of 2019 levels. Even so, the carrier expects to see corporate business pick up after the summer.

"Small business demand, which was roughly 17 percent of our system revenue, has been improving steadily as vaccination rates have increased and as markets reopened," Isom said. "An increasing number of our largest corporate accounts are coming back to the office and indicating that they'll be traveling in the third quarter, and are confirming in-person board meetings, conferences and events for this year."

American Airlines CEO Doug Parker also rebuffed a question from an analyst who asked whether the carrier would be better served to reduce its focus on corporate business, instead aiming for a balance that was about 80 percent leisure and 20 percent corporate. "We're building a network that will serve business better than any other network," Parker responded.

American plans to have its Latin American network by this summer about the same size as 2019, but the transatlantic and transpacific networks remain "much more challenged" and will be only about 40 percent of 2019 levels, Isom said. Those routes will account for only 3 percent of total seat capacity at the summer peak.

The U.S. State Department this week raised its warning level to "Do Not Travel" for several countries, including Mexico, Canada and much of Europe, meant to better correspond with guidance from the U.S. Centers for Disease Control and Prevention's cautions about Covid-19 spread. American Airlines chief revenue officer Vasu Raja said it was "too early to tell" if that would have an impact on bookings but that the carrier was prepared if it does.

"The way we've configured [the network] for this summer is to make it resilient to these kinds of changes," Raja said. "Eighty-five percent of capacity is in the domestic system, because we realize the recovery isn't just going to be choppy from a demand perspective but from a market-opening perspective as well."

American Airlines reported a net loss of $1.3 billion for the first quarter, compared with a loss of $2.2 billion in the first quarter of 2020. The carrier's cash burn rate for the first quarter was $27 million per day, but it was cash-positive for the month of March, excluding debt principal and cash severance payments, Parker said.


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