By Tracy Rucinski and Sanjana Shivdas
(Reuters) - Shares in American Airlines Group Inc (O:AAL) surged as much as 60% in premarket trading after it was mentioned on Reddit's WallStreetBets forum and it posted a slimmer-than-expected quarterly loss on Thursday.
American joined rival Delta Air Lines (NYSE:DAL) in calling 2021 a year of recovery for an industry that has been ravaged by the coronavirus pandemic.
"As we look to the year ahead, 2021 will be a year of recovery. While we don’t know exactly when passenger demand will return, as vaccine distribution takes hold and travel restrictions are lifted, we will be ready," American Airlines Chief Executive Doug Parker said.
U.S. airline shares had gained ground since November's vaccine breakthroughs but came under renewed pressure earlier this week amid concern over new coronavirus variants and tighter restrictions.
American reported a net loss of $2.18 billion, or $3.81 per share, for the fourth quarter, compared with a profit of $414 million, or 95 cents per share, a year earlier.
On an adjusted basis, the company reported a loss of $3.86 per share. Analysts on average expected the company to lose $4.11 per share, according to Refinitiv data.
Total operating revenue fell to $4.03 billion from $11.31 billion but topped analysts' expectations of $3.88 billion.
The carrier reported an annual loss of $8.9 billion, its biggest on record.
Shares pared gains but were trading up 30% premarket even as the heavily-leveraged airline reported large losses and faces an uncertain industry outlook. Investors said the gains are likely fueled by a short squeeze. American is the most heavily-shorted airline stock, according to data from S3.
"The numbers clearly weren't something that would cause the stock to rise like that," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
"Troubled balance sheets and high short stock positions have become the immediate target of these squeezes and they fit right into that category."
Helane Becker, an analyst at Cowen, said the company could use the share spike to shed some debt.
"It's hard to say when the market will look at the company's fundamentals, but we believe American could take this opportunity to de-lever the balance sheet with an equity offering," she added.
Airlines are hoping that sentiment will improve this year as COVID-19 vaccines are more widely distributed. However, new strains of the virus have triggered tighter rules for international travel in countries including the United States.
American Airlines ended the fourth quarter with about $14.3 billion in available liquidity.