Southwest posts $915 million loss, warns travel demand will remain weak without coronavirus vaccine

Key Points
  • Southwest and its competitors have worked to reduce cash burn.
  • Southwest and other airlines have urged employees to take buyouts, early retirement and other packages to avoid involuntary job cuts.
  • Airlines are prohibited from cutting jobs until Oct. 1 under terms of a $25 billion federal aid package.

In this article

Southwest warns travel demand will remain weak without Covid-19 vaccine
Southwest warns travel demand will remain weak without Covid-19 vaccine

Southwest Airlines said Thursday it lost $915 million in the second quarter compared with $741 million in net income a year earlier and warned that travel demand will likely remain depressed until there's a vaccine or treatment for the coronavirus.

The airline said demand has softened in recent weeks, echoing comments from other airline executives who have said a spike in Covid-19 cases coupled with travel restrictions in states like New York have hurt ticket sales that began recovering in late spring.

Southwest estimated its third-quarter capacity to decrease between 20% and 30% over last year.

Revenue dropped nearly 83% to a little over a $1 billion from $5.9 billion last year, though sales in the quarter were higher than analysts' estimates.

"We were encouraged by improvements in May and June leisure passenger traffic trends, compared with March and April; however, the improving trends in revenue and bookings have recently stalled in July with the rise in COVID-19 cases," CEO Gary Kelly said in an earnings release. "We expect air travel demand to remain depressed until a vaccine or therapeutics are available to combat the infection and spread of COVID-19."

Kelly said Southwest will "aggressively and frequently" adjust its flight schedule in "this volatile demand environment."

Southwest said workers will escape involuntary job cuts this year. The airline does "not intend to pursue furloughs and layoffs, or pay and benefits cuts" until the end of the year, adding: "we will continue to plan for multiple weak scenarios and maintain our preparedness."

Close to 17,000 Southwest employees, more than a quarter of its workforce, have signed up for buyouts and temporary leaves of absence to help avoid job cuts. 

Southwest posted a per-share loss of $2.67 on an adjusted basis, roughly in line with analysts' forecasts.

The airline's shares were up 2% in afternoon trading.

Also Thursday, American Airlines posted a net loss of $2.1 billion in the second quarter.

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