Airline losses mount but the worst appears to be over

The red ink continued to flow at US airlines in the first quarter. But after a year of massive losses, airlines are showing signs that better times lie ahead.

“While the pandemic is not over, we believe the worst is behind us, in terms of the severity of the negative impact on travel demand,” said Southwest CEO Gary Kelly, whose airline reported a loss of $1 billion in the quarter, excluding special items, including another round of financial assistance from the US government.

Kelly said with vaccination rates rising and the pent-up demand for travel, “We are experiencing steady weekly improvements in domestic leisure bookings, which began in mid-February 2021.”

The story and the outlook was much the same at American Airlines, which reported a loss of $2.7 billion in the first quarter, excluding special items.

“With the momentum underway from the first quarter, we see signs of continued recovery in demand,” said CEO Doug Parker.

Southwest actually reported a positive net income with the help of the latest round of federal help. It also reported a slightly smaller than loss excluding items. American reported a net loss even with the federal help. But the good news there was American had stopped burning through cash in March, although that cash burn rate doesn’t include severance or debt payments.

Rivals Delta and United had previously reported they stopped burning through cash in March. Southwest said it expects to achieve positive cash flow later this quarter.

Shares of both Southwest and American rose about 2% in premarket trading on the news.