Southwest Airlines needs ‘business to double in order to break even,’ CEO says

  • In this Thursday, Oct. 8, 2015, file photo, Southwest Airlines CEO Gary Kelly speaks during a preview of the new international concourse at Houston Hobby Airport in Houston. Two major unions at Southwest Airlines are demanding that the carrier replace Kelly because of the technology outage that caused the airline to cancel or delay thousands of flights in July. The unions representing pilots and mechanics said Monday, Aug. 1, 2016, that Southwest is spending too much on buying back shares and not enough on updating its technology. (AP Photo/Pat Sullivan, File)

  • A sign reminds travelers to take safety measures against COVID-19 as they arrive for flights out of Love Field in Dallas, Wednesday, June 24, 2020. New York, Connecticut and New Jersey asked Wednesday for travelers from states with high coronavirus infection rates to go into quarantine for 14 days in a bid to preserve hard-fought gains as caseloads rise elsewhere in the country. (AP Photo/Tony Gutierrez)

  • In this June 24, 2020, file photo, Southwest Airlines employee Oscar Gonzalez, right, assists a passenger at the ticket counter at Love Field in Dallas. Airlines are trying to convince a frightened public that measures like mandatory face masks and hospital-grade air filters make sitting in a plane safer than many other indoor settings during the coronavirus pandemic, but it isn’t working. (AP Photo/Tony Gutierrez, File)

DALLAS — Southwest Airlines CEO Gary Kelly said despite some modest improvements in late July and August “passenger demand remains inconsistent and difficult to forecast and still at very depressed levels.”

More than five months into the pandemic, Kelly said planes will still be less than half full on average in September and that there still isn’t much demand from business travelers as the summer travel season transitions into fall.

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“The bottom line result is terrible,” Kelly said. “We’ve got to find a way to eliminate these huge cash losses, and just get to the other side of this pandemic.”

Kelly shared the message in a video to employees made public Friday morning. Kelly and other airline executives continue to paint a bleak picture for the industry as fall approaches, a season when many expected traffic to be taking back off again after the COVID-19 pandemic handed the industry the worst financial crisis in commercial aviation history.

U.S. industry passenger traffic is still down more than two-thirds from a year ago and competing airlines are warning of furloughs and layoffs to come in a month without more government aid. Only 540,000 passengers went through TSA checkpoints Wednesday, down more than 75% from a year ago.

Kelly said there has been a recent uptick in traffic, but that may have been due to school starts being pushed back and more students in virtual schooling program.

“Historically, September is a heavier business travel month after Labor Day,” Kelly said. “And we still haven’t seen much activity from our business travelers, of course.”

Dallas-based Southwest was seemingly better positioned than other airlines with less debt and more domestic traffic, but the length and depth of the COVID-19 downturn is taking its toll. Kelly said the company recently cut schedules for August, September and October.

Southwest’s October capacity is expected to be down 40 to 50%, Kelly said. The company recently reduced its October flight schedule by 36%, or about 35,000 flights.

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Still, Southwest is burning through $17 million of cash a day and expects to burn through $20 million a day during the third quarter. However, the carrier has about $15 billion in cash and short-term investments.

Southwest has said it won’t need to issue furloughs through the end of 2020, but the future depends on the continued recovery of the industry, which has slowed considerably during the last six weeks. About 28% of Southwest employees are taking voluntary leave or early retirement, the company previously reported.

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