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American, Southwest Post Quarterly Profits, Boosted by Travel Surge, Federal Aid

Airport in Sydney, Australia, October 28, 2020.
Loren Elliott | Reuters
  • A jump in travel demand this summer boosted revenue for Southwest and American airlnes.
  • Costs rose as the carriers ramped up operations.

American Airlines and Southwest Airlines posted second-quarter profits Thursday, getting a lift from federal aid and a surge in travel demand.

Fort Worth, Texas-based American reported net income of $19 million, snapping five consecutive quarters of losses, thanks in part to more than $1 billion in federal payroll support. Revenue for the three months ended June 30 came in at $7.48 billion, up from just $1.6 billion a year earlier and ahead of Wall Street analysts' forecasts, as customers returned to the skies in droves.

Adjusting for one-time items, American had a loss of $1.1 billion or $1.69 as share.

American said it plans to pay down $15 billion in debt by 2025. The most indebted of the U.S.Ā airlines, American had a total debt of about $48 billion as of the end of the first quarter, according to FactSet.

Earlier Thursday, Southwest reported a jump in revenue in the quarter as travelers returned. The Dallas-based airline's sales rose nearly 300% from a year earlier to to $4Ā billion. That was still down 32% from $5.9 billion during the same time in 2019. Net income for the second quarter totaled $348 million, compared with a $915 million loss a year earlier.

The carrier has recently grappled with hundreds of cancellations and delays during the quarter due to bad weather, technology problems and staffing shortfalls. Over the week of the Fourth of July, it offered flight attendants and other staff double pay to pick up extra shifts.

"WhileĀ theĀ rapidĀ rampĀ upĀ inĀ JuneĀ travelĀ demandĀ provided stability to our financial position, it has impacted ourĀ operationsĀ followingĀ aĀ prolongedĀ periodĀ ofĀ depressedĀ demandĀ dueĀ toĀ the pandemic," CEO Gary Kelly said in the earnings release. "Therefore, we are intensely focused on improving our operations as we restore our network to meet demand."

Southwest said higher fuel prices and an increase in flying will drive costs higher this third quarter.

American Airlines also faced staffing shortfalls this summer and trimmed its schedule for the first half of July by about 1%. Airlines have scrambled to bring employees, from flight attendants to customer service agents, back to work to handle the spike in demand. Carriers had pleaded with staff last year to take unpaid or partially paid leaves of absence or early retirement to cut their labor costs.

U.S. airlines have recently resumed hiring pilots and other employees or announced plans to do so.

Southwest shares were down more than 3% in morning trading, while American's were off more than 1%.

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