What happened

Shares of American Airlines Group (AAL -3.45%) fell 5% at the open on Tuesday after the company previewed its first-quarter earnings report. The pandemic continues to take its toll, and that is putting pressure on the stock.

So what

American and other airlines had a difficult run in 2020 as the pandemic wiped out demand for air travel, causing the industry to scramble to raise cash and ride out the crisis. We've seen some signs of normalization so far in 2021 as the vaccine rollout progresses, with American shares up as much as 60% year to date in mid-March.

An American Airlines tail lit up at night.

Image source: American Airlines.

But in recent weeks that optimism has been weighed down by the realities of a still-difficult operating environment. On Tuesday, American in a regulatory filing said it expects first-quarter revenue to be down 62% compared to the first quarter of 2019.

American expects to lose between $1.2 billion and $1.3 billion for the quarter, or $2.7 billion to $2.8 billion if you back out the impact of special credits relating to financial payroll assistance provided by the U.S. government. That works out to a loss of between $4.29 and $4.41 per share, excluding credits, a bit worse than the $3.93-per-share loss analysts are expecting.

The update was released on a day when the entire airline sector is under pressure, likely due to uncertainty surrounding the Johnson & Johnson vaccine.

Now what

Despite the losses, American continues to have the financial wherewithal to be a survivor. The airline expects to end the first quarter with $17.3 billion in total available liquidity, and it said its daily burn rate during the quarter was about $27 million, better than the guidance of $30 million per day.

Cash flow is also trending in the right direction. For March, American's estimated average daily cash burn rate was about $4 million. And if you back out about $8 million per day in debt principal and cash severance payments, cash flow actually turned positive last month.

The bottom line is that American is moving toward its destination but will likely take a long time to get there. And stocks, arguably, have recovered quicker than the business fundamentals. Expect continued turbulence during this recovery journey.