Yahoo Finance Why the COVID-19 vaccine is part of American Airlines flight plan to recovery
American Airlines (AAL) stock jumped roughly 10% last week on news that it is returning the 737 Max to service and the airline is ready to start shipping COVID-19 vaccines as soon as they receive U.S. Food and Drug Administration (FDA) approval.
“This is going to be the biggest distribution effort in history, as we all work and distribute as fast as we can,” American Airlines Chairman and CEO Doug Parker told Yahoo Finance Live.
American has been shipping medicine and vaccines for several decades. Last month it began test flights with pharmaceutical and cargo companies preparing to distribute the coronavirus vaccine. In some cases, like Pfizer’s vaccine, it must be stored at temperatures close to minus 100 degrees Fahrenheit.
“The containers themselves that are loaded onto the aircraft contain the cooling units. And again, other than the dry ice that is being used by someone like Pfizer,” American already has the cold storage facilities at its airport hubs, Parker said.
“We have a huge hub in Philadelphia. We at American, because of the pharmaceutical companies in and around Philadelphia, we've been doing this for a long time. We are good at it. We're prepared to do it,” Parker said confidently.
Congress ‘will do what’s right’
Before the pandemic, American was the largest U.S. airline based on fleet size and passengers carried. But the coronavirus pandemic decimated the global airline industry severely impacting every carriers’ balance sheet.
In March, Congress passed the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which gave all the airlines roughly $50 billion in grants and loans to save jobs through the Payroll Support Program (PSP). It expired last September.
“It was one of the worst days of my career that day we had to furlough 19,000 people in October,” Parker said. “But when we did that, we did it at the trough and did so with full understanding that we didn't want to do one more than we needed to,” he added.
In a recent SEC filing American said, “rising COVID-19 case counts and associated travel restrictions in the immediate period leading up to the Thanksgiving holiday have resulted in a slowing of net bookings growth, which has persisted into December.”
As a result, American expects its daily cash burn in the fourth quarter to fall between $25 million and $30 million dollars.
“Fortunately, we're going to end the year with over $14 billion of cash,” Parker pointed out. “So we have more than enough to withstand that kind of burn, but we don't expect it to stay there. When we go positive, that's the hard part. I don't know, for certain, it depends on how quickly demand comes back.”
It is one of the reasons the airline industry is lobbying Congress to include additional airline employee payroll support in another round of stimulus. Parker said the money is needed to keep grounded pilots and staff up to date on required training necessary to return to the air. Parker said he expects Congress to do “what's right, not just for airlines but for our country,” to get through the next four months of the pandemic.
“The vaccine will be distributed,” Parker insisted. “But to be distributed as quickly as it can be requires those airplanes to be flying and to have pilots that are trained to fly them. And that's not going to happen unless we get this PSP,” Parker warned.
Taking flight
American plans to return the Boeing 737 Max to commercial service December 29 with direct flights between Miami and New York City. Last week, Parker and his wife flew from Tulsa to Dallas on the first 737 Max commercial flight since the Federal Aviation Administration (FAA) cleared the plane for service last month.
“I've seen those mechanics that have dedicated the last 22 months to take care of those aircraft, and they're just proud as can be to have done everything they can to make sure that now they're flying and they're safe,” Parker said.
Returning the 737 Max to service is just one bright spot as American looks to the future. Cargo is another.
It’s one item on American’s third quarter balance sheet that has continued to generate revenue at the same levels as it did a year ago. The upcoming vaccine delivery program will soon be included in those numbers.
“Half the cargo around the world flies in the bellies of commercial aircraft, and certainly in wide-bodies. International wide-bodies are a big part of that. So we're all going to be critical pieces of this vaccine distribution,” Parker predicted.
Parker said he feels good about how American has treated its team and its customers getting through the pandemic. “I feel great about how when people are ready to return, where American's going to be in terms of our ability to serve and to serve safely,” he stressed. Adding, “our team is going to be prepared to do so.”
Adam Shapiro is co-anchor of Yahoo Finance Live 3pm to 5pm.
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