American Airlines lost $931 million in the fourth quarter and the omicron variant of COVID-19 is delaying its recovery from nearly two years of pandemic.
First-quarter revenue is expected to be down about 20% to 22% compared with the first quarter of 2019, and it will fly slightly less than it did two years ago, the airline said Thursday.
ALSO READ: Air India gets FAA technical nod to fly Boeing 777, resume flights to New York
CEO Doug Parker, who retires this spring, said over the past year that American has swung from periods of high travel demand followed by declines as new variants of COVID-19 emerged, creating an unprecedented challenge to airlines' ability to plan.
Our results were significantly improved over 2020, but the impact of the omicron variant has affected the timing of a full revenue recovery, Parker and Robert Isom, who will become CEO in March, said in a note to employees.
Frequently Asked Questions
A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.
There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.
Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.
American's loss compared with a loss of nearly $2.2 billion a year ago. Excluding certain items, the Fort Worth, Texas-based company said it would have lost $1.42 per share. Analysts expected a loss of $1.46 per share, according to a FactSet survey.
Revenue was $9.43 billion, more than double a year ago and slightly above the $9.34 billion forecast from analysts.
The airlines saw strong demand from holiday travelers at Thanksgiving and Christmas, but as the year ended they were struggling with staffing shortages caused by omicron. The combination of winter storms and employees calling in sick led to thousands of flight cancellations in late December and early January.
American's report came a day after United Airlines reported a $646 million loss for the fourth quarter and said the omicron surge will cause it to fly less than it hoped in the first half of this year. United forecast that first-quarter revenue will fall 20% to 25% and costs will rise from the same period in 2019. Last week, Delta Air Lines posted a $408 million loss.
Delta CEO Ed Bastian said bookings were not likely to improve until late February, with omicron making the seasonally weak first quarter even weaker.
The airlines are hoping that the surge passes quickly enough for travelers to get back on planes during spring and summer.
Helane Becker, an airline analyst for Cowen, said domestic leisure travel is above 2019 levels but the virus is delaying the full re-opening of offices and keeping business travelers grounded. Another issue, she said, is continuing uncertainty over restrictions on international travel.
Consumers have a difficult time booking international trips with any certainty given changing rules and testing mandates, Becker said in a note to clients.
Shares of American Airlines Group Inc. rose more than 1% in trading before the market opened on Thursday.