US Airlines Are Hurting, But They Still Have Plenty of Cash on Hand

The pandemic is still roiling, the capacity numbers are still down, and airlines are still suffering financially.

But that doesn’t mean they don’t have cash on hand.

CNN Business is reporting that the country’s four largest airlines still have cash on their balance sheets in closing out 2020. American, Delta, United and Southwest actually have a combined $31.5 billion in cash, in fact, up from $13 billion a year earlier to end 2019.
CNN noted that it’s a matter of “liquidity,” and the airlines have it.

“The liquidity is at record levels,” Philip Baggaley, chief credit analyst for the airline industry at Standard & Poor’s, told the network. “That’s good, and it’s one of the few strong points they have at this point.”

According to Investopedia.com, financial liquidity refers to how easily assets can be converted into cash. Assets like stocks and bonds are very liquid since they can be converted to cash within days. However, large assets such as property – say, an airplane – are not as easily converted to cash.

The airlines have been helped by two government relief packages, one in March of 2020 and one in December just before the year ended. They are still seeking $15 billion more for payroll protection.

The airlines have sold bonds, borrowed money, mortgaged their planes, frequent flyer programs and other assets, CNN noted, and even sold additional shares of stock, a highly unusual move for an industry in this position.

The borrowing has added about $40 billion in long-term debt to the balance sheets of the nation’s airlines.

“I think the general feeling is they’re wounded but they’re going to make it,” said Baggaley.

“Our industry still has a long path to recovery ahead,” said American CEO Doug Parker on a recent conference call with investors. He said the accumulation of cash, combined with cost-cutting, “gives us confidence that we are well-positioned for the year ahead and the long term.”

Baggaley believes airlines “are past the worst of it,” he said. None of them have filed for bankruptcy, and he believes the odds are that they won’t.

But ….

“It’s a reasonable concern that they are going to emerge from this with a lot more debt,” he said.