Southwest Airlines CEO Gary Kelly discusses the company’s earnings and how it’s dealing with the coronavirus pandemic.
Southwest Airlines on Tuesday posted its first quarterly loss since 2011 and predicted “no material improvement in air travel trends” this spring as the coronavirus devastates demand.
Southwest is scrambling to cut costs and reduce its daily cash burn, which it estimates will average $30 million to $35 million in the second quarter. It announced a public stock offering of 55 million shares, worth around $1.6 billion at Monday’s closing price and said it would issue $1 billion in additional debt in an effort to shore up its finances amid a dismal demand outlook.
The airline said it expects that its operating revenue next month to fall as much as 95% from a year earlier but warned that it is “unable to reasonably estimate trends beyond May 2020.”
Southwest follows Delta and United in posting a loss for the quarter. Travel is among the hardest-hit industries from the coronavirus and severe measures to stop it from spreading like shelter-in-place orders. Airlines including Southwest recently won a portion of $25 billion in government grants and loans that prohibit them from laying off or cutting the pay rates of workers through Sept. 30, though worker paychecks are lower because of reduced schedules.
CEO Gary Kelly told CNBC that if demand doesn’t come back by that time the airline will have no choice but to downsize.
First-quarter results reflect the start of coronavirus and of stay-at-home orders in the United States, where most of Southwest’s network is located. Travel demand was still relatively strong early in the year, but losses are expected to deepen in the spring.
The timing of the coronavirus crisis couldn’t be worse for the sector. The disease and accompanying economic downturn is sapping travel demand during the peak spring and summer travel season, usually airlines’ most lucrative time of year.
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