Kerr is the chief financial officer of
American has the most debt among all
Kerr spoke recently to The Associated Press. The answers have been edited for length.
Q. American is coming off its first profitable quarter, excluding government aid, since the pandemic started. Planes are packed. What's going to happen to revenue after
A. Leisure is really, really strong. Small business is back 100% also, because those businesses had to survive, they are out flying. Corporate business is back about 65%, 75%. As we look out at bookings ... we don’t see any huge change from a revenue standpoint as we go forward.
Q. Spot prices for jet fuel prices have eased in the last couple of months, but they're still double the price before the pandemic. Why doesn't American hedge against fuel spikes like
A. Hedging is insurance. It’s very expensive, and you can’t insure your entire portfolio of fuel. The airline industry is the No. 2 user of fuel. If we all hedged fuel, we'd move the fuel price and actually drive the fuel price up. Plus you put a risk on the company (if oil prices fall). And then the last thing is you have a natural hedge today — as fuel increases, the industry can raise revenues. We have passed on pretty much the fuel increases that are out there.
Q. American predicts nonfuel costs in the third quarter will be up 12% to 14% compared with the third quarter of 2019 on a per seat, per mile basis. Can you get costs under control?
A. It’s not necessarily a cost issue, it's a utilization of the fleet issue. If we flew our entire fleet, that (cost per seat per mile) would only be up about 2%. We’ve built these airlines, from a cost perspective, to fly more, and we’re not flying more because of the resources that we need to do that.
A. There is a pilot shortage at the (regional airlines) because the mainline carriers (like American,
Q. When will your profit margins return to pre-pandemic levels?
A. It's actually the same answer, because obviously that growth will come back at a much cheaper cost because the costs are already here. That will improve the margins over time.
A. Right now we’re going to hold on to that liquidity until we feel like we’ve totally turned the corner. We did have one profitable quarter. That's awesome, it's great, I’m proud of everybody here that that worked to get to that point, but we need to sustain that. We are going to take (
A. We’re in really good shape that we don’t have any debt that has come due. We paid off the
Q. Where do you find sources for financing planes?
A. We can do commercial banks. We can do market EETCs (publicly traded securities called enhanced equipment trust certificates). The market for EETCs is open still right now. It’s probably at 100 or 200 basis points bigger than what we have done in the past, but that's still very attractive financing in this environment.
Q. Is an equity raise on the table?
A. It is not on the table right now. We have enough liquidity to make it through any downturn.
Q. What about share repurchases when the prohibition (a condition of federal pandemic aid) expires
A. There is no plan to do any share repurchases. All of our excess liquidity will go to pay off debt.
A. If it does impact revenues, we would hold on to liquidity longer than than we have. It doesn’t mean that we’re not going to hit our
Q. American's stock is being shorted much more often than the shares of
A. It doesn’t concern me, but it’s really driven by the balance sheet and the differences between the airlines. We need to continue to make profits. We need to continue to stay on the plan that we’re on, return the airline to profitability, return the reliability of the airline, and everything will take care of itself.
A. This COVID time has been the hardest of all the times. A recession is one thing, where revenues go down 5% or 10%. When you get to a situation where you have zero receipts and you don’t know when you’re going to get out of this, that was the toughest time.
Q. Could American have survived without the federal aid?
A. American had negative receipts in the month of
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