American Air is holding extra cash as market stays ‘choppy’

Bloomberg

American Airlines Group Inc will hold on to more of its record $21 billion in cash amid continued uncertainty over the industry’s recovery from a pandemic-driven slump.
The carrier previously said it would bring liquidity down to between $10 billion and $12 billion at some point next year, with anything above that level being used to pay off debt. In a presentation for investors, American said it’s reevaluating its plans, without specifying how much cash it expects to retain or for how long.
A slowdown in bookings and an uptick in canceled trips that began last month is persisting into September, forcing American to reduce its third-quarter revenue expectations. Similar comments from other carriers have fuelled concern that a full travel recovery will be delayed.
“Because things are choppy, we’re not ready yet to take cash levels down, so we’re going to hold on to cash as long as we can,” Chief Financial Officer Derek Kerr said in remarks at a Cowen Inc transportation conference.
The carrier doesn’t plan to delay debt repayment.
American remains committed to its plan to reduce debt by more than $15 billion by the end of 2025, Kerr said, by using excess cash and free cash flow. About $8 billion to $10 billion of that amount will be through amortisation of existing debt. The airline in July prepaid a $950 million loan collateralised by spare parts that was due in April 2023.
Separately, Southwest Airlines Co is re-evaluating the minimum amount of cash it wants to keep on the balance sheet going forward, said Bob Jordan, an executive vice president who will become chief executive officer in February.