• Joe Breitfeller

Southwest Airlines Reports Second Quarter Net Loss of $915 Million or $1.63 per Share

Southwest Airlines announced on Thursday a second quarter net loss of $915 million or $(1.63) per diluted share. When special items are excluded, the second quarter net loss was reported as $1.5 billion or $(2.67) per diluted share.

Southwest Airlines Boeing 737 MAX 8 - Courtesy Southwest Airlines

On Thursday (July 23, 2020), Southwest Airlines announced a second quarter net loss of $915 million or $(1.63) per diluted share. Excluding special items, the net quarterly loss was reported as $1.5 billion or $(2.67) per share. The company’s second quarter revenue declined 82.9 percent year-over-year to $1.0 billion. Southwest Airlines ended the second quarter with a total liquidity of $15.5 billion (including a $1.0 billion untapped revolving credit facility), far in excess of the company’s outstanding debt. The carrier’s revenue per available seat mile (RASM) declined 61.9 percent to 5.63 cents, driven by a year-over year load factor decrease of 55 percent, while passenger revenue yield declined 21.1 percent. In Thursday’s announcement, Southwest Airlines’ Chairman of the Board and Chief Executive Officer, Gary C. Kelly, said in part,

“As our nation continues to battle the COVID-19 pandemic, demand for air travel remains weak, which was the driver of our second quarter net loss of approximately $1.5 billion, excluding special items. We were encouraged by improvements in May and June passenger traffic trends, compared with March and April; however, the improving trends in revenue and booking trends have recently stalled in July with the rise in COVID-19 cases. We expect air travel to remain depressed until vaccine or therapeutics are available to combat the infection and spread of COVID-19. We will adjust our flight schedule aggressively and frequently in response to this volatile demand environment. I am incredibly proud of our Employees for their superb planning and cost management, swift actions to bolster liquidity, quick adaptation of our route network, and outstanding Customer Service. Our top priority is the safety and health of our People and Customers…

“…We have strong liquidity, with cash and short-term investments of $14.5 billion as of June 30, 2020; the only investment-grade credit rating in the U.S. airline industry by all three agencies; and unencumbered assets of $12 billion, including $10 billion in aircraft. We remain diligent in meticulously managing our cash burn. Since March, we have reduced annual 2020 spending by more than $7 billion compared with original plans. Average core cash burn decreased by nearly half during the second quarter 2020, from approximately $900 million, or $30 million per day, to approximately $500 million in June, or $16 million per day, resulting in second quarter 2020 average core cash burn of $23 million per day, primarily due to strengthening revenue trends. Our average core cash burn in July 2020 is currently estimated to be approximately $18 million per day, higher than June as a result of weakening trends. Due to the reversal in trends, we are re-evaluating our August and September 2020 capacity plans in an effort to improve our third quarter 2020 average daily core cash burn, which is currently estimated to be in line with second quarter 2020 of $23 million per day. We are laser focused on returning to break-even cash flow, and we will continue exploring opportunities for further cost efficiencies…”

During July, Southwest reported that bookings have softened for all months, trip cancellations have increased modestly, and sequential monthly improvement trends have slowed. The carrier expects a year-over-year July revenue decline of between 70-75 percent on a capacity decrease of around 30 percent. Southwest expects a July load factor in the range of 40-45 percent versus last year. For August, the Airline is expecting a revenue decrease of 70-80 percent compared to 2019, on a capacity decrease of 20 percent with a load factor of around 30-40 percent.

Southwest Airlines returned five leased Boeing 737-700s during the second quarter, ending with a fleet of 737 aircraft. In the company’s latest agreement with Boeing, Southwest will take delivery of no more than 48 737 MAX aircraft through December 31, 2021. The carrier has an additional 217 firm orders and 115 options for MAX aircraft through 2026. Due to the COVID-19 pandemic, Southwest Airlines parked around 400 aircraft in April, including the company’s 34 MAX aircraft, which have been grounded since March 2019. Currently, only around 100 aircraft (including the MAX) remain grounded.

In trading Thursday afternoon (July 23, 2020), shares in Southwest Airlines Co. (NYSE: LUV) were up 0.15 percent at $33.34/share (12:09 PM EDT).

Source: Southwest Airlines


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