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Who Will Survive the COVID-19 Crisis: Southwest or American Airlines?


  • The U.S. airline industry is losing money as the COVID-19 pandemic reduces travel demand by 95%.

  • Huge debt and operating cost of American Airlines makes it more vulnerable to the pandemic.

  • Southwest Airlines’ strong liquidity puts it in a better position than peers to fight COVID-19.

The U.S. airline industry will never be the same again after the COVID-19 pandemic.

Amid the global lockdown, U.S. airlines grounded over 2,200 airplanes as they saw a 95% decline in travel demand, according to Reuters. One of the biggest problems with the pandemic is no one knows how long it will last.

By the time things normalize, most U.S. airlines could file for bankruptcy. Only the ones with a strong balance sheet and cash flows will survive.



America's largest airline carriers are struggling to stay afloat amid the COVID-19 pandemic. It seems like Southwest is in a better position to ride out the crisis than American Airlines. | Image: AP Photo/Rick Bowmer


  • The U.S. airline industry is losing money as the COVID-19 pandemic reduces travel demand by 95%.

  • Huge debt and operating cost of American Airlines makes it more vulnerable to the pandemic.

  • Southwest Airlines’ strong liquidity puts it in a better position than peers to fight COVID-19.

The U.S. airline industry will never be the same again after the COVID-19 pandemic. Amid the global lockdown, U.S. airlines grounded over 2,200 airplanes as they saw a 95% decline in travel demand, according to Reuters. One of the biggest problems with the pandemic is no one knows how long it will last. By the time things normalize, most U.S. airlines could file for bankruptcy. Only the ones with a strong balance sheet and cash flows will survive. The full-year 2019 earnings of the top four U.S. air carriers show that they have substantial operating costs, equating to 85-90% of their revenue. About 30-40% of these costs are allocated to salaries. That’s why jobs are usually the first to go whenever the airline industry faces a crisis.


American Airlines (NASDAQ: AAL), the world’s largest carrier, has $7 billion in liquidity. But in 2019, it also had massive debt ($30.5 billion) and negative free cash flow. Given that its quarterly operating cost is up to $10 billion, the company doesn’t have enough liquidity to survive more than a month without flying.

American Airlines is controlling cost by reducing its capacity by 60% in April and by 80% in May. It has also granted voluntary leaves and early retirement to a third of its employees. Apart from reducing cost, American has applied for $12 billion in government aid.