LONDON – Southwest Airlines (WN) has witnessed stronger revenue and capacity outlooks as the worst of the COVID-19 pandemic in the United States is coming to a slow conclusion.
Whilst June revenues are going to be lower compared to last year, it expects the decrease will be around 70-75% compared to its previous projections of 80-85%.
The carrier noted that this decrease in losses is attributed to primarily leisure-driven demand, which seems to be news in the right direction.
Enough cash in the bank
On top of this, WN revealed that it has around US$13.9bn in cash and short-term investments, meaning the airline has enough to operate for the next two years in current conditions.
This has enabled the airline to implement a level of changes to its flights whilst this pandemic is ongoing such as keeping middle seats empty until September 30 2020 as part of the Center for Disease Control (CDC) guidelines around social distancing.
Other safety guidelines include customers being required to sign a declaration form that they do not have the virus as well as being made aware of wearing face coverings. The airline will also be boarding in groups of 10 to allow such social distancing.
It is understood that the airline is burning around US$20m per day but again, thanks to money saved up, there are also other ways the airline can raise cash and remain in business even longer if need be.
For example, 2020 has seen WN raise around US$16.7bn through new debt, selling aircraft and equity, in addition to receiving government assistance via the CARES Act.
U.S. Government bailout
The U.S. Government is currently in the process of handing bailouts over to a list of airlines. It is understood the following are receiving such bailouts:
- American Airlines
- Southwest Airlines
- Alaska Airlines
- SkyWest Airlines
American Airlines (AA) is understood to receive around US$5.8bn in such assistance under the CARES Act, with WN receiving US$3.2bn and Delta Air Lines (DL) receiving US$5.4bn also.
Even in the worst case that those levels of funds have been used up, WN has around US$12bn in assets that it could borrow against as collateral.
Two crises and still strong
The carrier currently has around 140 aircraft parked up, of which 38 are Boeing 737MAX that remain grounded by the Federal Aviation Administration (FAA).
Even with the 737MAX causing financial cost to WN, it appears that it won’t phase the carrier that much either.
It is clear that WN remains in a significant position, even in the wake of dealing with two crises: COVID-19 and its grounded Boeing 737 MAX fleet.
Time will tell how much money WN will use over the next few years in order to stay afloat, especially as chances of recovery are not expected for the next couple of years.