Southwest looking at first annual loss since 1972
Southwest Airlines Co. is heading for its first annual loss in 48 years because of the coronavirus pandemic, the carrier’s top executive said.
“As long as case counts are high, we have to expect that travel will be relatively modest,” Southwest Chief Executive Officer Gary Kelly said in an online interview Wednesday with the Texas Tribune. “We’re going to see traffic and revenue down 75 percent versus a year ago today. To think that would recover to the point we’d be profitable is unrealistic.”
A full-year loss in 2020 would be the first for Southwest since 1972, a year after the Dallas-based discounter began flights.
The company still is burning about $20 million in cash each day, Kelly said. That’s after Southwest has reduced its flight schedule and persuaded 17,000 employees — 28 percent of the workforce — to leave the company temporarily or permanently.
Kelly’s acknowledgment that Southwest is headed for a yearly loss is consistent with Wall Street expectations. The company is expected to post an adjusted loss of $5.93 a share, based on the average of analyst estimates compiled by Bloomberg.
Southwest fell less than 1 percent to $35.01 at 2:27 p.m. in New York. The shares dropped 35 percent this year through Tuesday, the best performance among large U.S. airlines.
The spread of the virus and resurgence of cases in some parts of the U.S. gutted demand during the airline industry’s normally busy summer travel season. Many carriers have reduced flights further in their schedules after August as schools resume and demand traditionally slows.
The industry is facing a “brutal low fare environment” as carriers cut ticket prices to try to lure travelers back on board, Kelly said.
“Business travel has been crushed and will be very modest for a long time,” he said, adding it could take as long as 10 years for a recovery to 2019 levels.
It’s “absolutely” possible for the Trump administration and Congress to end a stalemate and approve a six-month extension of federal aid to help cover airline payroll costs, Kelly said. Another $25 billion would extend a prohibition against involuntary job cuts through March of 2021 at airlines accepting aid.
Nearly 150,000 workers at the four largest U.S. carriers already have agreed to take temporary leave or accept early-exit offers.