Southwest Airlines posts first annual loss in 48 years

Southwest Airlines finished the most challenging year since its launch with a $3.1 billion loss, even after taking billions in government grants and deeply cutting expenses to take on the devastating COVID-19 pandemic.

Gary Kelly, CEO of the Dallas-based carrier, said Southwest is still losing $17 million a day and that revenue will need to double from current levels to hit break-even.

“While we hope to achieve cash burn break even in 2021, it is wholly dependent upon a substantial rebound in passenger traffic and revenue; and, it is difficult to predict the timing of such a rebound, especially with respect to business travel,” Kelly said in a statement.

Southwest is still clearly in belt-tightening mode, even after getting another $1.7 billion in government stimulus aid this month. Southwest said Tuesday that it would offer another round of partial pay, voluntary leave to employees as the company continues to be overstaffed.

It appears that the early parts of 2021 aren’t providing any relief to the financially battered airline industry. Southwest said its core cash burn will be about $5 million a day higher than the $12 million it burned in the fourth quarter because of “softness in demand and a seasonally weaker travel period.”

“While vaccine availability should mark the beginning of the end of this pandemic, current passenger booking trends do not indicate significant improvement through March 2021,” Kelly said in a statement.”

Overall, Southwest’s revenues were down 64.9% in 2020, falling to just $7.7 billion. The recovery from the COVID-19 pandemic remained up and down to finish the year, with gains in October countered by a drop in demand in November and December

“due to the spike in COVID-19 cases and hospitalizations, as well as quarantine requirements, travel restrictions, and related government orders,” the company said.

Competitor American Airlines, based in Fort Worth, reported Thursday that it lost $8.9 billion for the year, including a $2.2 billion loss in the fourth quarter. Revenue was down 69% in the fourth quarter and 65% for the year.

At Southwest, cancellations spiked in November and December and planes were less than 60% full in each of those months, even though Southwest lifted its capacity caps that required planes less than twothirds full for most of 2020.