A return to normalcy? Southwest to add flights
DALLAS — Southwest Airlines is adding more flights in June and says it expects passengers to start coming back after more than two months of the COVID-19 pandemic decimating the aviation industry.
Even though planes will still on average be less than half full, Dallas-based Southwest said in a regulatory filing last week that for the first time in months, more customers are buying flights than canceling.
Southwest, with its network focused mostly on domestic travel, could be making a move to take market share from competitors in American Airlines, Delta and United. Southwest is making major increases in seat capacity for June and July, even while competitors are cutting.
It also has the lowest debt load among major airlines and is burning through less cash than competitors.
Southwest is scheduling about 2.1 million seats a week in June, up from 1.5 million in the middle of May, according to Bloomberg Intelligence.
Meanwhile, United and Delta are still cutting. American Airlines is planning for modest increase in seats in June, according to Dallas-based Airline Data Inc.
“Our view on Southwest is that they are building a war chest to get through this pandemic,” said Helane Becker, senior airline analyst with investment and research firm Cowen. “The schedule helps them to attract passengers and then of course, they’ll adjust about a week out whether or not they’ll actually fly the schedule.”
Southwest’s network is mostly in the U.S. and its 15 foreign destinations are all within North America.
Southwest’s planes were just 8% full in April and that’s risen to 25% to 30% in May, the company said in the filing. Some of that came from Southwest cutting flights in April, but the company is looking to make more flights available as June and the summer travel season starts.
Nationwide, airline traffic has more than doubled from the lows it hit in the middle of April when fewer than 88,000 passengers boarded planes on one day, according to the Transportation Security Administration.
The number of new bookings is positive for Southwest, which is leaning on its domestic flying schedule while international travel is still stifled by the pandemic and accompanying travel restrictions in many countries.
Airlines are also reducing the practice of scheduling flights only to cancel and consolidate on the day of takeoff, said Jeff Pelletier, managing director at Airline Data Inc.
“Southwest day-of cancellations, while still happening, are a lot less prevalent then they were when this all started happening,” Pelletier said. “It is very much a trickle-down effect with them when they cancel a flight.”
For airlines, the strategy is about preserving cash. Southwest Airlines said it has about $13 billion in cash and short-term investments. Southwest said it expects it to be burning through about $20 million of cash a day by the end of June, a number that it will need to continue to decrease to get back to profitability.