Southwest Airlines struggles through pandemic; Q2 revenue down 82.9%

Southwest Airlines, McCarran International Airport’s busiest commercial air carrier, continues to struggle through the coronavirus pandemic, posting second-quarter losses and an 82.9 percent decline in revenue.

The Dallas-based airline on Thursday reported an unprecedented $915 million net loss and revenue of $1.008 billion as jittery passengers continued to stay away from air travel. A year ago for the quarter that ended June 30, Southwest posted revenue of $5.909 billion and net income of $741 million.

Southwest, which has one of the strongest balance sheets in the aviation industry, cut flights to many destinations, including Las Vegas, and took internal measures to trim a daily cash burn rate of $30 million a day in April to $16 million a day in June.

Southern Nevada’s resort industry is greatly dependent on fly-in traffic, and Southwest, as the busiest carrier, is important in bringing visitors to Las Vegas from the 54 cities the airline serves with nonstop flights.

At McCarran, Southwest carried 229,622 passengers in May, an 85.5 percent decline from the 1.6 million it had a year earlier. Southwest also has trimmed its Las Vegas flight schedule to provide 1.3 million seats to the market in July, down 27.9 percent from a year ago. Based on the company’s published schedules, McCarran is expecting Southwest’s flight capacity to be down 19 percent in August, but nearly the same as it was a year ago in September.

But that could change.

Southwest Chairman and CEO Gary Kelly, in a release announcing earnings, said the company would “continue to plan for multiple weak scenarios and maintain our preparedness.”

Southwest is one of two major airlines that have pledged to fly with reduced capacity as a means of preserving in-flight social distancing.

“During second quarter 2020, we restructured our route network and launched the Southwest Promise — added additional cleaning practices throughout our operation; modified procedures to support physical-distancing; required passengers and customer-facing employees to wear face masks or face coverings; and implemented additional policies and procedures for our employees to protect themselves and safely transport our customers,” Kelly said.

The airline will continue to limit seats sold on each flight through “at least October,” he said.

“As part of our promise, we are limiting seats sold on each flight through at least October 2020 to allow for middle seats to remain open to allow for physical distancing onboard our aircraft. Customer feedback has been very positive.”

Southwest took advantage of the federal government’s Payroll Support Program and instituted voluntary extended emergency time off and separation programs to bolster liquidity. Kelly said 16,900 employees — 27 percent of the company’s workforce — volunteered for the programs. Among them, 2,300 pilots took voluntary reductions.

“Based on the strong take rates from these voluntary programs, currently, we do not intend to pursue furloughs and layoffs, or pay and benefits cuts, through yearend,” Kelly said.

He added that the words of company founder Herb Kelleher inspired him during the outbreak.

“Our founder, Herb Kelleher, always reminded us: We manage, in good times, so that all of us will be protected from bad times; that is why keeping costs low and spirits high, at all times, is so very important,” Kelly said. “By living Herb’s basic credo, we entered this crisis prepared with the U.S. airline industry’s strongest balance sheet and most successful business model. While the impact of this pandemic is unprecedented, we believe that demand for air travel will rebound, and we fully intend to be ready and well-positioned when it does.”

Southwest Airlines shares, traded on the New York Stock Exchange, fell 51 cents, 1.5 percent, in slightly below average volume, to $32.79 a share. Shares were unchanged after hours.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.