• Joe Breitfeller

Southwest Airlines Announces First Quarter Net Loss of $94 Million on Revenues of $4.2 Billion

Southwest Airlines announced on Tuesday a first quarter net loss of $94 million or ($.018) per diluted share. First quarter operating revenues declined 17.8 percent to $4.2 billion year-over-year, while operating expenses declined 6.5 percent to $4.3 billion.

Southwest Reports First Quarter 2020 Financial Results - Courtesy Southwest Airlines

Today, Southwest Airlines announced a first quarter net loss of $94 million or ($0.18) per diluted share on a 17.8 percent decline in operating revenues to $4.2 billion year-over year. During the quarter, the carrier returned $639 million to shareholders through share repurchases and dividends, which have now been suspended until further notice. In April, the company reached an agreement with the U.S. Treasury under the U.S. CARES Act Payroll Support Program (PSP) for approximately $3.3 billion in aid including a $2.3 billion grant and a low interest 10-year loan of $948 million. In return, Southwest has granted warrants to the U.S. Treasury to purchase around 2.6 million shares of the company’s stock at a pre-determined strike price. Since the beginning of the year, Southwest has bolstered their cash on hand by $6.8 billion, including receipt of $1.6 billion in PSP funds. The airline expects to receive an additional $1.6 billion from the U.S. Treasury by July. In Tuesday’s announcement, Southwest Airlines Chairman and CEO, Gary C. Kelly said in part,

“This is an unprecedented time for our Nation and the airline industry. In late February, we began experiencing a precipitous drop in passenger demand and bookings due to the novel coronavirus COVID-19 pandemic, resulting in a first quarter 2020 net loss. The U.S. economy has been at a standstill, and the current outlook for the second quarter 2020 indicates no material improvement in air travel trends. Trip cancellations remain at unprecedented levels, though they have receded from their peak in March. As such, we have significantly reduced our published flight schedules through July 2020. In addition, we have taken swift action to significantly reduce cash burn. We have reduced named executive officer salaries and Board of Director cash retainer fees by 20 percent; suspended all hiring and non-contract salary increases; implemented voluntary time-off programs; cancelled or deferred hundreds of capital spending projects; modified vendor and supplier payment terms; and cut all non-essential spending. These combined efforts, along with capacity reductions, are expected to result in more than $2 billion in reduced 2020 operating costs as well as more than $1 billion in reduced annual capital 2020 capital spending, compared with original plans. We will continue evaluating the need for further flight schedule adjustments, while planning to maintain service to all points in our domestic network through at least September 30, 2020.”

As of April 24, 2020, Southwest had cash and short-term investments of $9.3 billion and unencumbered assets of $8 billion, including over $6 billion in aircraft. The carrier is the only U.S. airline with an investment-grade rating from all three ratings agencies. During the first quarter, operating revenues per available seat mile (RASM) declined 11.8 percent to 11.98 cents on a load factor decrease of 13.3 percent, slightly offset by a passenger revenue yield increase of 4 percent. Cost per available seat mile (CASM) increased 0.2 percent year-over-year during the first quarter. Southwest expects a daily cash burn of around of between $30 million to $35 million during the second quarter, around half of the projected pre-pandemic burn rate.

The carrier ended the first quarter with 742 aircraft, including around 350 aircraft which are in long-term storage or temporary parking, not including the airline’s 34 Boeing 737 MAX aircraft which have been grounded since March 13, 2019. Southwest has also arranged with Boeing to defer some MAX deliveries and will receive no more than 48 aircraft through December 31, 2021. In trading Tuesday morning, shares in Southwest Airlines, Inc. (NYSE: LUV) were down 0.57% at $28.93/share (10:46 AM EDT).

Source: Southwest Airlines

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