Category Archives: Southwest Airlines

Southwest Airlines service to Destin/Ft. Walton, Florida and Bozeman, Montana to begin in May 2021

Southwest Airlines announces late spring and summer travel to Destin–Fort Walton Beach Airport (VPS) in Florida and Bozeman Yellowstone International Airport (BZN) in Montana.

DESTIN/FT. WALTON BEACH, FLA., DAILY SERVICE BEGINS MAY 6, 2021

Beginning May 6, 2021, Southwest will commence service to an 11th airport in the Sunshine State, bringing a third option for beachcombers to access the Florida panhandle. Southwest Customers will be able to fly nonstop between Destin/Ft. Walton Beach and four destinations: Baltimore/Washington (BWI), Dallas (Love Field), and Nashville, bringing additional connecting or same-plane service to more than 50 cities, with added nonstop service to Chicago (Midway) beginning June 6, 2021.

Fly nonstop between

Destin/Ft. Walton Beach and:

Initial daily service:

One-way fares
as low as:

Baltimore/Washington (BWI)

1 flight each way

$79

Chicago (Midway)

(beginning June 6)

1 flight each way

$79

Dallas (Love Field)

1 flight each way

$69

Nashville

3 flights each way

$69

Dallas Love Field during the recent cold wave:

BOZEMAN, MONT., DAILY SERVICE BEGINS MAY 27, 2021

In its 50th year of service, Southwest Airlines adds another of the 50 states to its network, bringing low fares to the state of Montana on May 27, 2021. The addition of Bozeman will connect Customers with Big Sky country, bringing faster access to Yellowstone National Park, Big Sky Ski Resort, Custer Gallatin National Forest, and Montana State University. Southwest Customers may now book travel to fly nonstop between Bozeman and both Denver and Las Vegas, and reach southern Montana from more than 50 other Southwest cities on same-plane or connecting service.

Fly nonstop between

Bozeman and:

Initial daily service:

One-way fares
as low as:

Denver

2 flights each way

(increases to 4 flights

each way on June 6)

$39

Las Vegas

2 flights each way

$39

In 2020, Southwest added new service to Hilo, HawaiiCozumel, MexicoMiamiPalm Springs, Calif.Steamboat Springs; and Montrose (Telluride), Colo., to connect Customers with places and people they love.

In 2021, Southwest began service to both Chicago (O’Hare) and Sarasota/Bradenton on Feb. 14. The carrier will begin service to both Savannah/Hilton Head and Colorado Springs on March 11; both Houston (Bush) and Santa Barbara, Calif. on April 12; Fresno, Calif. on April 25; Destin/Ft. Walton Beach on May 6; Bozeman, Mont. on May 27; and Jackson, Miss. on June 6.

Southwest Airlines announces the Birthday Party Project

Southwest Airlines announced today The Birthday Party Project as the official community partner of the airline’s 50th Anniversary year. The Birthday Party Project is a Dallas-based organization that partners with more than 60 agencies across the country to bring joy through the magic of a birthday party to children experiencing homelessness. Southwest will support The Birthday Party Project through corporate initiatives and provide Customers and Employees opportunities to engage via donations, celebrations, and volunteer projects.

Those who would like to contribute to The Birthday Party Project can donate on their website, or shop their Amazon wish list. Beginning today, Southwest is launching an internal campaign in which Employees can send a virtual birthday card to a child. Each birthday card that is sent will count as an Act of Kindness towards Southwest’s goal of one million Acts of Kindness by year-end.

Later this year, Southwest will share other ways that Customers and Employees can support The Birthday Party Project and achieve the goal of one million Acts of Kindness.

“This year marks our 50th Anniversary, and in this momentous year, we are thrilled to partner with The Birthday Party Project to support their work of encouraging children to dream big and know that they matter,” said Laurie Barnett, Managing Director of Communications and Outreach at Southwest Airlines. “At Southwest, we believe community is more than a place—it’s at the Heart of what brings us together. We can’t think of a better way to celebrate our birthday than by sharing the gift of birthday magic with others. Through this partnership, we will help children feel loved, one birthday celebration at a time.”

Southwest also is donating $50,000 to The Birthday Party Project from the Southwest Airlines Foundation, a corporate-advised fund within the Silicon Valley Community Foundation. The Birthday Party Project will use the donation to expand its reach by supporting their growth to new markets and partnerships with new agencies.

“Southwest’s commitment to their People and community is unparalleled—and we are honored to partner with Southwest to celebrate their milestone anniversary,” said Paige Chenault, The Birthday Party Project’s Chief Birthday Enthusiast. “At The Birthday Party Project, our mission is to bring joy to children experiencing homelessness, and through this partnership Southwest will help us celebrate thousands of children, certainly doubling our efforts looking into 2021. It is a privilege to be the official community partner of Southwest Airlines’ 50th Anniversary and we look forward to spreading joy throughout the year!”

The Birthday Party Project joins the more than 450 community partners that Southwest invests in annually. Southwest will share additional opportunities to engage with and support The Birthday Party Project in the coming months on Southwest Airlines Community. To learn more about The Birthday Party Project, visit The Birthday Party Project’s website.

Southwest arrives at Sarasota/Bradenton and Chicago O’Hare

Southwest Airlines, as planned, initiated new service at both Sarasota-Bradenton International Airport (SRQ) (above) and Chicago O’Hare International Airport (ORD) (below) yesterday (February 14).

SRQ becomes the tenth destination in Florida.

WN now serves both airports in Chicago.

Southwest to restart Boeing 737 MAX 8 operations on March 11

Southwest Airlines will quietly restart Boeing 737-8 MAX 8 service on March 11, 2021 with a scheduled 7 a.m. departure from Denver (DEN) to Chicago Midway (MDW).

The company will keep the MAX 8 and 737NGs operations separate for the initial period. The airline expects full MAX 8 operations during April, 2021

Southwest Airlines reports fourth quarter and annual 2020 results

Southwest Airlines Company today reported its fourth quarter and annual 2020 financial results:

  • Fourth quarter net loss of $908 million, or $1.54 loss per diluted share
  • Excluding special items1, fourth quarter net loss of $761 million, or $1.29 loss per diluted share
  • Annual net loss of $3.1 billion, or $5.44 loss per diluted share
  • Excluding special items, annual net loss of $3.5 billion, or $6.22 loss per diluted share
  • Ended 2020 with liquidity2 of $14.3 billion, well in excess of debt outstanding

Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “The COVID-19 pandemic devastated the world, and our heart goes out to all those affected. The airline industry was hit especially hard in 2020, and we incurred our first annual net loss since 1972. Our annual 2020 operating revenues declined approximately 60 percent, year-over-year, and we experienced our largest monthly decline in operating revenues in April 2020, down 92 percent, year-over-year, when the pandemic spread and shelter-in-place orders and similar restrictions were implemented throughout the country. Travel and tourism industries face an ever-changing environment as the pandemic evolves. Nevertheless, our Employees have not wavered; rather, they have responded swiftly and with resolve. They adjusted our flight schedules numerous times; implemented new health and safety protocols for Employees and Customers; and developed and deployed remote work capabilities for back-office Employees and Call Center Representatives. On top of these notable accomplishments, our Employees delivered the U.S. airline industry’s best Customer Service3, as well as a superb operational performance including exceptional ontime performance and baggage handling. I am forever grateful for the heroic efforts and results by our People in the most challenging year since we began flying in 1971. Their hard work and adaptability last year did not go unnoticed, as Southwest was just named the #1 U.S. airline in the Wall Street Journal’s annual ranking for 2020, which ranks airlines on key operational performance metrics.

“We came into the year well-prepared with significant financial strength and started the year strong with an outstanding operational performance and solid net income growth, year-over-year, in January and February 2020, combined. In late February 2020, we began to experience a precipitous drop in passenger demand and bookings due to the pandemic. The situation escalated dramatically, and by mid-March 2020, trip cancellations began to exceed new bookings. We took swift action to address the unprecedented decline in passengers and revenue by significantly reducing available seat miles (ASMs, or capacity), costs, and cash spending. Annual 2020 capacity decreased approximately 34 percent, year-over-year, and we reduced annual 2020 cash outlays by approximately $8 billion, compared with original plans. We implemented voluntary separation and extended leave programs to better align staffing levels and overhead costs to reduced flight schedules. I sincerely appreciate the 15,000 Southwest Family Members who participated in those crucial programs to reduce our annual 2020 salaries, wages, and benefits expense by approximately $565 million. We also raised cash of $10.9 billion, net of repayments and excluding Payroll Support Program (PSP) proceeds, and ended 2020 with liquidity of $14.3 billion and approximately $12 billion in unencumbered assets4.

“Average core cash burn5 was approximately $12 million per day in fourth quarter 2020, and we expect average core cash burn of approximately $17 million per day in first quarter 2021, as a result of continued softness in demand and a seasonally weaker travel period in January and February 2021, as well as rising fuel prices. Including certain changes in working capital, we expect average core cash burn in first quarter 2021 to be in the range of $10 million to $15 million per day, compared with approximately $15 million per day in fourth quarter 2020. While vaccine availability should mark the beginning of the end of this pandemic, current passenger booking trends do not indicate significant improvement through March 2021. In response to current trends, our capacity plans remain conservative through, at least, March 2021, and we will continue to monitor bookings and adjust flight activity, accordingly. While we hope to achieve cash burn break even in 2021, it is wholly dependent upon a substantial rebound in passenger traffic and revenue; and, it is difficult to predict the timing of such a rebound, especially with respect to business travel. In order to achieve cash burn break even, we continue to estimate operating revenues will need to recover to a range of 60 to 70 percent of 2019 levels, which is roughly double current levels.

“We are tremendously grateful, once again, for the work of our federal leaders to extend payroll support (the PSP Extension) under the Consolidated Appropriations Act, 2021, to support the airline industry and the communities it serves. Given this much-needed PSP Extension stimulus, we intend to avoid involuntary furloughs and pay cuts through 2021—preserving our unprecedented 50-year history of providing job security to Employees.

“Since the Federal Aviation Administration (FAA) issued official requirements in November 2020 that enable airlines to return the Boeing 737 MAX (MAX) to service, we have been working to meet the FAA’s requirements by modifying certain operating procedures, implementing enhanced Pilot training requirements, installing FAA-approved flight control software updates, and completing other required maintenance tasks specific to the MAX aircraft. I recently had the opportunity to fly on one of our MAX operational readiness flights, which only reaffirmed my supreme confidence in Southwest’s ability to operate the MAX safely. I am very proud of our many Teams who are working diligently to prepare us for returning the MAX to revenue service on March 11, 2021, once all FAA requirements are met and all active Pilots have received updated, MAX-related training.

“Preparedness has always been a strength of Southwest Airlines. We came into 2020 well-prepared with the U.S. airline industry’s strongest balance sheet and most successful business model—with low costs that enabled low fares across a robust network of point-to-point service with a strong presence in top leisure and business markets. Even with our preparedness and swift response to the pandemic in 2020, we are not standing still. We are aggressively pursuing new revenue streams by adding new airports to our route network and launching participation in global distribution systems (GDS) to grow our share of corporate travelers. We remain steadfast in managing costs and cash spending, and we are focused on maintaining significant liquidity. Our primary financial goals for 2021 are to preserve the strength of our balance sheet and investment-grade credit rating; arrest cash operating losses; and achieve and sustain break even, or better, cash flow and earnings as the airline business recovers. The pandemic persists and travel demand remains depressed, but we celebrate our 50th year of service in 2021 with renewed hope and optimism about the future of Southwest Airlines.”

Notable 2020 announcements and accomplishments include:

  • Launched service to six new destinations:
    • Hilo International Airport – January 19, 2020
    • Cozumel International Airport – March 7, 2020
    • Miami International Airport and Palm Springs International Airport – November 15, 2020
    • Montrose Regional Airport (Telluride and Crested Butte) and Yampa Valley Regional Airport (Steamboat Springs) – December 19, 2020
  • Announced intention to commence new service to eight additional airports:
    • Chicago O’Hare International Airport and Sarasota Bradenton International Airport – February 14, 2021
    • Colorado Springs Municipal Airport and Savannah/Hilton Head International Airport – March 11, 2021
    • Houston’s George Bush Intercontinental Airport and Santa Barbara Airport – April 12, 2021
    • Fresno Yosemite International Airport – April 25, 2021
    • Jackson-Medgar Wiley Evers International Airport in Mississippi – June 6, 2021
  • Launched GDS industry-standard participation for the first time, now live with Amadeus and Travelport’s GDS platforms: Apollo, Worldspan, and Galileo; reached agreement with Sabre in December 2020, and expect to launch full-participation in Sabre GDS in second half 2021
  • Received numerous awards and recognitions, including:
    • Named to FORTUNE’s list of World’s Most Admired Companies for 2020; ranked #11
    • #1 Marketing Carrier in Customer Satisfaction per the U.S. Department of Transportation (DOT) data3
    • Named the highest ranking carrier for customer satisfaction in the J.D. Power 2020 North America Satisfaction StudySM
    • Recognized by The Points Guy for the Best U.S. Airline Loyalty Program and Best Airline Cobranded Credit Card
    • Named Best Airline-North America, Best Airline-United States, Best Economy-North America, and Best Low Cost Airline-North America in the 2020 TripAdvisor Travelers’ Choice™ Awards
    • Named Loyalty Program of the Year for Rapid Rewards® Program and recognized for providing the Best Loyalty Credit Card and the Best Airline Redemption Ability for the eighth consecutive year by the Freddie Awards; Received the Freddie Awards title of Best Customer Service for the fifth consecutive year
    • Named the Most Trusted Airline in America by Reader’s Digest Magazine
    • Named a Top 100 Company by BetterInvesting Magazine
    • Named to Glassdoor’s Best Places to Work list for the 11th consecutive year
    • Named as one of MilitaryTimes Best for Vets: Employers 2020
    • Recognized as a Top 50 Employer by Equal Opportunity Magazine
    • Scored a top score (100) on Disability:IN’s benchmarking tool for disability inclusion: the 2020 Disability Equality Index
    • Named as A Best Place to Work for LGBTQ Equality in 2020 from the Human Rights Campaign Foundation

Revenue Results and Outlook
The Company’s fourth quarter 2020 total operating revenues decreased 64.9 percent, year-over-year, to $2.0 billion, as a result of continued negative impacts to passenger demand and bookings due to the pandemic. Fourth quarter 2020 operating revenue per ASM (RASM, or unit revenues) was 8.48 cents, a decrease of 40.8 percent, primarily driven by a load factor decline of 29.3 points and a passenger revenue yield decrease of 18.7 percent, all year-over-year.

Following a modest sequential improvement in passenger traffic trends in October 2020, the Company began to experience a deceleration in improving revenue trends in November 2020 that continued through the remainder of 2020, due to the spike in COVID-19 cases and hospitalizations, as well as renewed quarantine requirements, travel restrictions, and related government orders. The Company also experienced an increase in trip cancellations in November and December 2020, although leisure passenger demand was more resilient for the holiday travel periods compared with non-holiday weeks. The following table presents selected monthly revenue and load factor results for fourth quarter 2020:

October 2020

November 2020

December 2020

Operating revenues year-over-year

Down 64.1%

Down 62.8%

Down 67.3%

Previous estimation

Down ~65%

Down ~63%

Down 65% to 75%

Load factor

54.6%

47.8%

59.6%

Previous estimation

~55%

~48%

60% to 65%

Due to Thanksgiving holiday travel dates falling completely in November 2020 compared with both November and December 2019, November 2020 year-over-year operating revenues benefited by one to two points, and December 2020 year-over-year operating revenues were negatively impacted by six to seven points, with the greater impact in December 2020 due to higher passenger and revenue volumes in December 2019. Adjusting for these timing impacts on a year-over-year basis, December 2020 year-over-year operating revenues improved sequentially by an estimated four points, compared with November 2020 year-over-year operating revenues, primarily due to resuming the availability of all seats for travel beginning December 1, 2020.

Thus far, the Company is experiencing stalled demand in January and bookings for February 2021, primarily driven by the high level of COVID-19 cases and hospitalizations, as well as a seasonally weaker time period for leisure travel demand following the holidays. However, trip cancellations have stabilized and January 2021 operating revenues are expected to improve slightly compared with the Company’s previous estimations for January 2021 operating revenues provided in mid-December 2020, primarily due to stronger leisure passenger demand in the January holiday return travel period and a slight improvement in load factor. The following table presents selected monthly estimates of operating revenues and load factor for January and February 2021:

Estimated

January 2021

Estimated

February 2021

Operating revenues year-over-year

Down 65% to 70%

Down 65% to 75%

Previous estimation

Down 65% to 75%

(a)

As compared with 2019

Down 65% to 70%

Down 65% to 75%

Load factor

50% to 55%

50% to 55%

Previous estimation

45% to 55%

(a)

(a) No previous estimation provided.

Annual 2020 total operating revenues decreased 59.7 percent, year-over-year, to $9.0 billion. Annual 2020 RASM was 8.75 cents, a decrease of 38.6 percent, primarily driven by a load factor decrease of 31.1 points and a passenger revenue yield decrease of 10.6 percent, all year-over-year.

The Company achieved its goal of launching GDS access for corporate travelers in 2020, now at industry-standard participation, including Airline Reporting Corporation (ARC) ticketing and settlement, with Amadeus’s GDS platform and Travelport’s multiple GDS platforms: Apollo, Worldspan, and Galileo. In December 2020, the Company reached a full-participation GDS agreement with Sabre, planned to launch in second half 2021. The Company’s enhancement of its GDS channel strategy complements its expansion of direct connect via Airline Tariff Publishing Company’s (ATPCO) New Distribution Capability (NDC) Exchange and existing SWABIZ® options, with the goal of distributing its everyday low fares to more corporate travelers through their preferred channel.

Cost Performance and Outlook
Fourth quarter 2020 operating expenses decreased 37.2 percent, year-over-year, to $3.2 billion. Excluding special items, fourth quarter 2020 operating expenses were also $3.2 billion, a decrease of 36.7 percent, year-over-year. Fourth quarter 2020 operating expenses per ASM (CASM, or unit costs) were 13.40 cents, an increase of 5.8 percent, year-over-year. Excluding special items, fourth quarter 2020 CASM increased 6.6 percent, year-over-year.

The following table presents economic fuel costs per gallon1, including the impact of fuel hedging premium expense and fuel derivative contracts, for fourth quarter and annual 2020 and prior year periods:

Fourth Quarter

Full Year

2020

2019

2020

2019

Economic fuel costs per gallon

$1.25

$2.09

$1.49

$2.09

Fuel hedging premium expense

$24 million

$20 million

$98 million

$95 million

Fuel hedging premium expense per gallon

$0.08

$0.04

$0.08

$0.05

Fuel hedging cash settlement gains per gallon

$(0.02)

The Company continued to operate fewer of its oldest, least fuel-efficient 737-700 aircraft as a result of capacity reductions due to the pandemic, which, combined with lower load factors, resulted in an improvement of 8.4 percent in ASMs per gallon (fuel efficiency) in fourth quarter 2020, and an annual 2020 fuel efficiency improvement of 7.4 percent, both year-over-year. The Company currently estimates first quarter 2021 fuel efficiency to improve in the range of five to six percent, year-over-year, primarily driven by a continuation of lower utilization of its 737-700 aircraft and the Company’s continued efforts to reduce its fuel consumption through fleet modernization with the anticipated benefits of the reintroduction of the MAX aircraft.

Based on the Company’s existing fuel derivative contracts and market prices as of January 21, 2021, the following table presents estimates of economic fuel costs per gallon6, including the estimated impact of fuel hedging premium expense and fuel derivative contracts, for first quarter and annual 2021 and prior year periods:

First Quarter

Full Year

2021

2020

2021

2020

Economic fuel costs per gallon

$1.60 to $1.70

$1.90

$1.65 to $1.75

$1.49

Fuel hedging premium expense

$25 million

$24 million

$100 million

$98 million

Fuel hedging premium expense per gallon

$0.09

$0.05

(a)

$0.08

Fuel hedging cash settlement gains per gallon

(a) Due to continued uncertainty regarding available seat mile plans for 2021, the Company cannot reasonably provide an estimate for its full year 2021 fuel hedging premium expense per gallon.

As of January 21, 2021, the fair market value of the Company’s fuel derivative contracts settling in first quarter 2021 was immaterial, and an asset of approximately $13 million for those settling over the remainder of 2021. In addition, the fair market value of fuel derivative contracts settling in 2022 and beyond was an asset of approximately $117 million. Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

Excluding fuel and oil expense and special items, fourth quarter 2020 operating expenses decreased 28.2 percent, compared with fourth quarter 2019. No profitsharing expense was accrued in fourth quarter 2020 due to the Company’s net loss, compared with a profitsharing accrual of $264 million in fourth quarter 2019. Excluding fuel and oil expense, special items, and prior year profitsharing expense, fourth quarter 2020 operating expenses decreased 23.1 percent, year-over-year, in line with the Company’s guidance. The significant year-over-year decrease was driven primarily by the decrease in variable, flight-driven expenses, such as salaries, wages, and benefits; maintenance expense; and landing fees; combined with the Company’s focus on managing costs and cash burn. Additionally, the Company realized approximately $425 million of cost savings in fourth quarter 2020 from voluntary separation and extended leave programs. On a unit basis, fourth quarter 2020 operating expenses, excluding fuel and oil expense, special items, and prior year profitsharing expense, increased 29.4 percent, year-over-year, primarily driven by the significant reduction in capacity.

Excluding fuel and oil expense and special items, first quarter 2021 operating expenses are expected to decrease in the range of 15 to 20 percent, year-over-year, primarily due to lower capacity, year-over-year, as well as an estimated $400 million of cost savings from voluntary separation and extended leave programs7. The Company remains diligent in managing its operating costs and maintaining focus on efficiency and productivity.

Annual 2020 operating expenses decreased 33.9 percent to $12.9 billion, and increased 0.4 percent on a unit basis, both year-over-year. Excluding fuel and oil expense, special items, and prior year profitsharing expense, annual 2020 operating expenses decreased 15.8 percent, and increased 28.1 percent on a unit basis, both year-over-year. The Company realized approximately $565 million of annual 2020 cost savings from voluntary separation and extended leave programs, and expects an incremental $600 million of annual 2021 cost savings, for a total reduction in salaries, wages, and benefits of approximately $1.2 billion compared with annual 2019.

The Company’s annual 2020 effective tax rate was 27.8 percent, higher than the federal statutory tax rate primarily due to the Company’s annual net operating loss (NOL), which under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) can be applied to prior tax years beginning with 2015, when the Company was subject to a higher federal statutory tax rate. The Company’s estimated tax refund from its annual 2020 NOL carryback is approximately $470 million. The Company estimates its first quarter 2021 effective tax rate to be in the range of 21 to 22 percent, lower than the annual 2020 tax rate as the NOL carryback provisions available under the CARES Act are not applicable to years beyond 2020.

Liquidity and Capital Deployment
As of December 31, 2020, the Company had approximately $13.3 billion in cash and short-term investments and a fully available revolving credit line of $1.0 billion. During 2020, the Company raised a total of approximately $18.9 billion, net of transaction fees, including $13.4 billion in debt issuances and sale-leaseback transactions, $2.2 billion through a common stock offering, and $3.4 billion of PSP proceeds under the CARES Act. Net of debt repayments, and excluding PSP proceeds, the Company raised $10.9 billion in 2020. As of January 27, 2021, the Company had cash and short-term investments of approximately $13.9 billion.

Annual 2020 cash used in operations was $1.1 billion, driven primarily by the Company’s net loss due to the negative effects of the pandemic. Annual 2020 capital expenditures were $515 million. The Company received cash proceeds in 2020 of $815 million from sale-leaseback transactions and $428 million in supplier proceeds. When factoring in these cash inflows, minimal aircraft deliveries, and the cancellation or deferral of the majority of its originally planned capital investment projects, the Company more than offset its originally planned annual 2020 capital spending of approximately $1.4 billion to $1.5 billion.

As previously disclosed, the Company and The Boeing Company (Boeing) reached a confidential agreement (Boeing Agreement) in December 2020, which included the settlement of 2020 estimated damages relating to the grounding of the Company’s 737 MAX 8 aircraft. As a result of certain delivery credits provided in the Boeing Agreement, as well as progress payments made to date on undelivered aircraft, the Company currently estimates an immaterial amount of aircraft capital expenditures in 2021. Therefore, the Company currently estimates its annual 2021 capital expenditures to be no more than $500 million, driven primarily by technology, facilities, and operational investments. The Company has reduced its combined 2020 and 2021 capital spending by approximately $5.5 billion, compared with planning projections prior to the pandemic.

As of December 31, 2020, the Company had current and noncurrent debt obligations of $10.3 billion. In addition to the full repayment in second quarter 2020 of $3.7 billion borrowed under a 364-day term loan, and $1.0 billion drawn under its revolving credit facility, the Company repaid $839 million in debt and finance lease obligations during 2020, including a $500 million bullet maturity payment in October. The Company expects to repay approximately $220 million in debt and finance lease obligations in 2021, of which $67 million is expected to be repaid in first quarter 2021. Based on current debt outstanding and current market interest rates, the Company expects first quarter 2021 interest expense to be approximately $113 million. As of December 31, 2020, the Company was in a net cash position8 of $3.0 billion, and its adjusted debt9 to invested capital (leverage) was 56 percent.

In January 2021, the Company reached an agreement with the U.S. Department of Treasury (Treasury) for proceeds of approximately $1.7 billion under the PSP Extension, for which the Company expects to provide the Treasury consideration in the form of a promissory note representing a $488 million unsecured, low-interest, 10-year term loan (the “unsecured loan”) and warrants to purchase up to an aggregate of approximately 1.1 million shares of the Company’s common stock, subject to adjustment by the Treasury in each case. Approximately $864 million of expected proceeds, or 50 percent, have been received thus far, for which the Company provided consideration of a promissory note representing a $229 million unsecured loan. The remaining proceeds are expected to be disbursed to the Company in first quarter 2021. The unsecured loan may be repaid at any time prior to maturity, at par, and has an interest rate of 1.0 percent through year five, and a rate consisting of the Secured Overnight Financing Rate plus 2.0 percent, thereafter. The Company also provided consideration of warrants to purchase up to 495 thousand shares of the Company’s common stock to the Treasury in conjunction with the initial proceeds, and is expected to issue warrants to purchase additional shares of the Company’s common stock to the Treasury in conjunction with the balance of the PSP Extension proceeds. The warrants have a five-year term and a strike price of $46.28, based on the Company’s closing price on December 24, 2020. The warrants can be settled with the Treasury on a net basis, either in shares or cash at the Company’s discretion.

The Company estimates its first quarter 2021 weighted average diluted shares outstanding to be approximately 591 million.

Fleet and Capacity
In November 2020, the FAA issued official requirements to enable airlines to return the MAX aircraft to service. The Company is currently working to meet the FAA’s requirements by modifying certain operating procedures, implementing enhanced Pilot training requirements, installing FAA-approved flight control software updates, and completing other required maintenance tasks specific to the MAX aircraft. The Company has scheduled the MAX return to revenue service on March 11, 2021, after the Company is expected to have met all FAA requirements and all active Pilots are expected to have received updated, MAX-related training.

Southwest Airlines Boeing 737 MAX 8
(Ashlee D. Smith/Southwest Airlines)

The Company ended 2020 with 718 aircraft, including 41 737 MAX 8 aircraft. During 2020, the Company returned 12 leased 737-700 aircraft and retired 24 owned 737-700 aircraft. In addition, the Company took delivery of 7 leased 737 MAX 8 aircraft in December 2020. In response to capacity reductions due to the effects of the pandemic, the Company had 60 737-700 aircraft in temporary storage as of December 31, 2020. The Company continues to manage its fleet based on passenger demand trends and has flexibility to adjust, as needed.

Based on the Boeing Agreement, the Company expects to receive 35 737 MAX 8 deliveries, including 16 leased aircraft, 7 of which were delivered in December 2020, through the end of 2021. Based on current delivery and retirement plans, the Company currently expects its fleet in 2021 to decrease from its fleet of 747 aircraft as of December 31, 2019. The Company continues to evaluate its longer-term fleet needs and continues discussions with Boeing to restructure its order book beyond 2021. Prior to any potential future revisions to its Boeing order book beyond 2021, in addition to the expected MAX deliveries this year, the Company currently has 230 firm orders and 115 options for MAX aircraft remaining in its contractual order book beyond 2021. Additional information regarding the Company’s contractual aircraft order book is available in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2020, and will be available in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The Company’s fourth quarter 2020 capacity decreased 40.6 percent, year-over-year, and its annual 2020 capacity decreased 34.2 percent, year-over-year, due to the effects of the pandemic. The following table presents monthly capacity results for fourth quarter 2020:

October 2020

November 2020

December 2020

ASMs year-over-year

Down 44.0%

Down 34.6%

Down 43.1%

Previous estimation

Down ~44%

Down ~35%

Down 40% to 45%

The Company currently estimates its first quarter 2021 capacity to decrease approximately 35 percent, year-over-year, primarily driven by the continued negative effects of the pandemic. The following table presents monthly capacity estimates for first quarter 2021:

Estimated

January 2021

Estimated

February 2021

Estimated

March 2021

ASMs year-over-year

Down ~41%

Down ~46%

Down ~16%

Previous estimation

Down 40% to 45%

Down 40% to 45%

(a)

As compared with 2019

Down ~43%

Down ~45%

Down ~31%

(a) No previous estimation provided.

Passenger demand and booking trends remain primarily leisure-oriented and inconsistent by region. The Company remains cautious in this uncertain demand environment and continues to plan for multiple scenarios for its fleet and capacity plans. The Company will continue to monitor demand and booking trends and adjust capacity, as deemed necessary, on an ongoing basis. As such, the Company’s actual flown capacity may differ materially from currently published flight schedules or current estimations.

Southwest Airlines aircraft slide show:

Southwest Airlines service in Fresno and Santa Barbara to begin in April 2021

Southwest Airlines today published initial flight schedules for the carrier’s next two airports to be served in California, Fresno Yosemite International Airport (FAT) and Santa Barbara Airport (SBA), with service beginning in April 2021.

SANTA BARBARA, CALIF., SERVICE BEGINS APRIL 12, 2021
Starting April 12, 2021, Southwest Customers will be able to fly between Santa Barbara, Calif. and more than 50 airports with three destinations offered nonstop: DenverLas Vegas, and Oakland.

Fly nonstop between

Santa Barbara and:

Initial daily service:

One-way fares
as low as:

Denver

1 flight each way

$69

Las Vegas

3 flights each way

$39

Oakland

1 flight each way

$39

The number of seats, days, and markets for these fares are limited. 

FRESNO, CALIF., SERVICE BEGINS APRIL 25, 2021
Starting April 25, 2021, Southwest Customers will be able to fly between Fresno, Calif. and more than 50 airports with two destinations offered nonstop: Denver and Las Vegas.

Fly nonstop between

Fresnoand:

Initial daily service:

One-way fares
as low as:

Denver

1 flight each way

$69

Las Vegas

3 flights each way

$39

The number of seats, days, and markets for these fares are limited. 

Southwest Airlines expands Sabre GDS agreement

Southwest Airlines and Sabre Corporation have come to terms on a new full participation distribution agreement that enables the two companies to continue offering business Customers access to the carrier’s low fares and legendary Customer service in 2021 and beyond. Under the agreement, Sabre will continue to distribute Southwest’s content through traditional connectivity to corporations, government agencies, and TMCs through its global distribution system (GDS).

Southwest Airlines logo. (PRNewsFoto/SOUTHWEST AIRLINES)

“Providing our content in Sabre GDS with industry-standard capabilities has continued to be a top priority of our Customers. While we’ve been in discussions with Sabre for well over two years, we had not made much progress until recently on an agreement that balances the health of all our channels. We are thrilled to come to terms that are mutually beneficial for our Customers and continue our long-standing partnership with Sabre,” said Southwest Airlines Executive Vice President and Chief Commercial Officer Andrew Watterson. “Southwest set out with a maverick spirit to democratize the skies five decades ago with a vision to introduce a whole new way to travel. As we embark on our 50th anniversary in 2021, that vision is alive and well as we set a path to emerge from this pandemic.”

Under the agreement, Sabre will distribute Southwest Airlines flights and services through its travel marketplace, providing Sabre connected-agencies and other travel buyers with uninterrupted access to Southwest Airlines content. This agreement reflects a broader relationship between the two companies and will deliver richer capabilities to travel buyers, including improved schedule and inventory accuracy; last seat availability; and real-time booking functionality and the ability to modify Southwest bookings within Sabre. Implementation teams will work swiftly to bring Southwest online at full-participation in 2021.

 

U.S. Senate Committee on Commerce, Science, and Transportation report concerning Southwest Airlines and the FAA

 

From the Washington Post:

“The Federal Aviation Administration allowed Southwest Airlines to put millions of passengers at risk by letting the airline operate planes that did not meet U.S. aviation standards and by failing to provide its own inspectors with the training needed to ensure the highest degree of safety, according to a report released Tuesday by the Department of Transportation’s inspector general.

The strongly worded report called the FAA’s oversight of Southwest’s safety management system “ineffective” and said the agency improperly relied on Southwest’s own conclusion that repeated problems represented a “low risk, rather than requiring the airline to comply with its regulatory requirements.”

The inspector general said the “FAA cannot provide assurances that the carrier operates at the highest degree of safety in the public’s interest as required by law.”

 

Read the full report.

Southwest slows the deliveries of new Boeing 737 MAX aircraft

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Southwest Airlines has announced an updated delivery agreement with Boeing to slow down deliveries of new Boeing 737 MAX aircraft.

Southwest Airlines Boeing 737 MAX 8
(Ashlee D. Smith/Southwest Airlines)

The company will now receive only 35 Boeing 737 MAX 8s through the end of 2021.

The new plan will level out the fleet count. The first seven of those deliveries is expected this month, with the remainder arriving in 2021.

13 aircraft will be deferred to a later date.

Video:

Southwest Airlines aircraft slide show:

Southwest Airlines intends to serve Fresno and Santa Barbara

Southwest Airlines today shared its intention to bring service to Santa Barbara Airport and Fresno Yosemite International Airport in the second quarter of 2021.

Along with Palm Springs, which received its first Southwest flight on Nov. 19, 2020, the addition of Fresno and Santa Barbara will position Southwest Airlines as an option in 13 California airports before summer 2021, further deepening the carrier’s commitment to the Golden State. Southwest long has carried more air travelers to, from, and within California than any other carrier, a legacy sustained in the most recent reporting of U.S. Department of Transportation data on airline passengers traveling nonstop.

Southwest Airlines aircraft photo gallery (new livery):

Southwest Airlines aircraft slide show: