American Air CEO says bankruptcy is an option he won’t consider

American Airlines Group Inc.’s top executive sought to shut down persistent rumors that the debt-laden carrier could be forced into bankruptcy during the coronavirus travel downturn, saying it’s not among options he’ll consider.

“Bankruptcy is failure. We’re not going to do that,” Chief Executive Officer Doug Parker said Wednesday, responding to a question at the Bernstein Strategic Decisions Conference about managing the carrier’s industry-worst debt. “I don’t think people should view bankruptcy as a financial tool; it’s failure.”

Parker’s comments underscore the scrutiny American’s finances have been under since the pandemic virtually wiped out travel demand, sending the carrier and others in the industry scrambling to secure cash as they grounded planes and slashed operations to reduce spending.

American’s debt of nearly $30 billion and its decision to initially focus on government loan opportunities led to rising speculation about whether it might file for court protection from creditors. Parker predicted that no large U.S. carrier would take that path during the downturn.

“We’re all going to be fine,” he said. “We’re all going to raise enough liquidity. I don’t think you’re going to see anybody fall by the wayside in this crisis.”

Government Aid

U.S. carriers have taken advantage of $25 billion in federal aid to fund payroll costs, and American is negotiating with the U.S. Treasury Department for a separate $4.75 billion loan. Southwest Airlines Co., United Airlines Holdings inc. and Delta Air Lines Inc. all have applied for additional U.S. funding but haven’t decided yet if they’ll tap it. The companies also have raised billions more through secured loans, equity sales and other options.

American fell 58% this year through Wednesday, a decline exceeded among the five largest U.S. carriers only by United’s 65% drop.

Parker said he’s most proud of the fact that he’s never worked at a bankrupt airline during his 30 years in the industry, including 18 as a chief executive. He’s taken advantage of Chapter 11 filings by rival carriers, however, to engineer two successful mergers and a bid for Delta that ultimately failed.

Travel demand “definitely” has improved recently, with American’s load factor, or average number of aircraft seats filled, climbing to 56% over the Memorial Day holiday from 15% in April, Parker said. The airline is flying only 20% of its schedule compared with a year ago.

Other carriers also recently commented on slight improvements in travel demand as states ease restrictions and tourist attractions begin to reopen.

“We believe the worst is behind us, and we’re on the uptick,” Parker said.

While leisure demand is rising, it will take the return of business travel, including an end to corporate restrictions, to make a major difference in the industry’s rebound, Parker said.

Carriers must convince customers that extensive cleaning regimens aboard aircraft and mask requirements for passengers and crew have greatly reduced the odds of infection during flight, he said. Active virus cases among American flight attendants have fallen 90% from the peak as the new measures were adopted.