Southwest: Capacity may fall 30% from 2019
Southwest Airlines expects flying capacity later this year to be down about 30 percent from 2019, potentially leaving the company overstaffed, CEO Gary Kelly said.
The Dallas-based carrier may be forced into the first involuntary furloughs in its 49-year history if travel demand doesn’t pick up more swiftly over the summer, Kelly said Friday in a video message to employees.
Like its rivals, Southwest has offered employee leave programs after industry passenger totals tumbled as much as 95 percent from last year amid the coronavirus pandemic.
“In April, we lost about $1 billion, not counting government support, which just isn’t sustainable,” Kelly said. “Things have to improve quickly over the summer, and if they don’t, we’ll have to radically restructure Southwest Airlines. If we do, you’ll see a radically restructured industry for that matter.”
U.S. carriers are barred from mass job cuts through Sept. 30 under the terms of $25 billion in federal payroll aid.
Kelly said he didn’t know how many excess employees Southwest may have after that. More than 10,000 of Southwest’s approximately 61,000 employees have taken voluntary time off, saving “millions of dollars,” he said. The company, which expects to cut flying capacity as much as 70 percent this month and about 50 percent in June, soon will offer voluntary separation and early retirement plans.
In addition to the federal assistance, Southwest has taken on debt and sold shares to build its cash reserves to $14 billion, Kelly said. Delta Air Lines warned this month that it could have 7,000 more pilots than it needs after retiring some of its oldest aircraft.
Southwest shares fell 2.47 percent to $28.87 in New York, in line with the decline of a Standard & Poor’s index of major U.S. airlines. The stock gauge had fallen 58 percent this year through Thursday, the third-biggest industry drop on the S&P 500 Index.