Southwest Airlines CEO grim on airline recovery prospects
Southwest Airlines CEO Gary Kelly gave another grim assessment of the state of the airline industry Wednesday during an interview on CNBC, saying “there’s no reason to believe that things are going to improve anytime soon.”
Kelly, whose airline’s traffic is down 70 percent compared with last year, has been inwashington, D.C., for the last few weeks pleading with White House staff and Congressional leaders to pass an extension of the $28 billion payroll support program that kept carriers afloat since August.
But the bill, which could prevent 17,500 furloughs at Fort Worth-based American Airlines, is mired in political deadlock in D.C. amid a larger fighter over a second federal stimulus to address economic pain from the COVID-19 pandemic. Still, Kelly said he is hopeful a bill including airline payroll aid will pass.
That same pandemic has decimated airline traffic and although corporate leaders hoped traffic would rebound by fall, the recovery has largely stalled.
“Is that disappointing?” Kelly said in the interview Wednesday morningwithcnbc. “I thinkwe’re all ready for this to be behind us, but realistically it’s not surprising.”
Kelly repeated his belief that airlineswon’t see a substantial recovery until a vaccine or significant COVID-19 treatment is developed.
Dallas-based Southwest has said it won’t furlough any employees Oct. 1, but the longer-term outlook is more uncertain. Southwest only managed to avoid furloughs because 28 percent of its employees signed up for leave or early retirement.
Southwest is preparing to cut its flight schedule further in October and is looking at a November and December holiday travel season when flying will be far belowprevious expectations. Southwest is wary of cutting traffic too much, Kelly said, because it can be difficult to rebuild back.
“There’s no easy path for any airline to go back towhat amounts to1970s levels of traffic,” Kelly said. “Believe it or not, that’s basically where the industry is domestically: 1970s.”
Airlines such as Southwest are only willing to cut capacity so much. Southwest is flying about 40 percent to 45 percent of its schedule compared to last year, even though only 30 percent as many passengers are flying.
“Because at a point ifwe cut our flights too much then we cut a lot of itineraries and the revenue loss accelerates much faster than the cost cuts,” he said.
Southwest hasn’t cut any destinations and has added new routes to Palm Springs, Calif., andmiami.
Kelly said Southwest’s network is “radically changed” since the beginning of the pandemic, with fewer point-to-point flights and more connections.
“Absolutelywe want to get back to that point where we are a specialist, we are a point-to-point network,” he said. “We look forward to getting back to that point, but the traffic levels need to be sufficient to support adding a nonstop flight.”