Category Archives: Southwest Airlines

Southwest to keep middle seats open until at least September 30

Southwest Airlines has announced plans to keep middle seats open through at least September 30, reinforced its face mask policy and added another layer of confidence for travelers by requiring Customers to complete a Health Declaration prior to traveling.

The Southwest Promise outlines policies and protocols designed to further the comfort of Customers and Employees throughout their travel journeys. The carrier has bolstered communication of its round-the-clock cleaning efforts and distancing protocols through new videos that overview the travel journey of Southwest Customers through airports and onboard. Today, we are announcing additional enhancements to the Southwest Promise.

MIDDLE SEATS OPEN THROUGH AT LEAST SEPTEMBER 30

Employee and Customer Safety is, and always will be, the carrier’s top priority from check-in to deplaning the aircraft. Today, Southwest announced that middle seats will remain open through at least September 30, 2020, to provide Customers more personal space onboard and promote physical-distancing.

Customers may still pick their own seat, and Southwest will not block or direct seating. In the open seating environment, families or those traveling together may sit together.

SOUTHWEST HEALTH DECLARATION

Today, Southwest announced that middle seats will remain open through at least September 30, 2020, to provide Customers more personal space onboard and promote physical-distancing.

Southwest is announcing an additional element of the Southwest Promise by introducing a Customer Health Declaration which must be acknowledged during online check-in beginning on June 16. Customers will now be required to acknowledge an awareness of the carrier’s face covering policy and confirm they do not have symptoms of COVID-19 and have not been diagnosed with, or exposed, to COVID-19 in the 14 days prior to travel. They will also have to confirm they do not have a fever when they travel. The declaration will appear during the online check-in process via the Southwest app, Southwest.com, SWABIZ.com, and the carrier’s mobile website.

“The introduction of the Customer Health Declaration is an additional layer offered by our Southwest Promise. As part of this commitment, Southwest is performing enhanced cleanings and giving special attention to our airport locations and aircraft to support Customer and Employee well-being. Now, we ask that our Customers join us in these efforts by acknowledging their personal wellness prior to flying with us,” said Tony Roach, Managing Director, Southwest Customer Experience. “When Customers are ready to fly again, the Southwest Team is ready to welcome them with our ongoing commitment to safety and comfort, paired with our low fares.”

In addition to the Customer Health Declaration, Customers will notice these Southwest Promise highlights the next time they fly:

  • Boarding in groups of 10 to allow for distancing and queuing only on one side of boarding poles
  • Airport signage and floor markers encouraging distance throughout gate areas
  • Plexiglas® at ticketing and gate counters, and baggage service offices
  • If Customers forget a face covering, a mask will be provided
  • Hand sanitizer will be available in airport locations

REQUIREMENT FOR FACE COVERINGS OR MASKS

In May, Southwest began requiring Customers and Employees to wear face coverings or masks while in airports and onboard Southwest aircraft. During this pandemic, the airline asks that individuals comply with the policy out of respect for the well-being and comfort of fellow travelers and all those who are serving Southwest Customers. As part of this ongoing policy, Southwest will deny boarding to any Customer choosing not to wear a face covering or mask while traveling. Southwest’s Ground Operations Team and Flight Attendants will make announcements to remind Customers of this requirement throughout the travel journey and will have masks available, upon Customer request. Additionally, the carrier is notifying Customers of the policy in advance of travel dates and requiring acknowledgement of the policy via the new Customer Health Declaration Form.

Video:

Southwest Airlines aircraft photo gallery:

Southwest extends extends its schedule through January 4, 2021

Southwest Airlines today extended its published flight schedule—from October 31, 2020, through January 4, 2021—bringing travelers in key Southwest cities additional flights and new routes during a period that includes additional leisure travel for the autumn and winter holidays.

“We’re rounding out our plan for this unprecedented year with our business travelers in mind with a fourth quarter schedule that brings them new routes across the country. We’re also offering more flights for all of our Customers in places such as Denver, Las Vegas, Nashville, and Phoenix,” said Andrew Watterson, Southwest Airlines Executive Vice President & Chief Commercial Officer. “We anticipate business travelers will hit the road with a heightened focus on costs, so we’re pairing unmatched schedules with our value and Hospitality to welcome them back, whenever they’re ready to travel.”

New for the Fall and Winter
As Southwest looks toward the end of 2020, the carrier is adding a more robust schedule for business travelers with more frequencies and more nonstop flight options from Phoenix, Denver, Las Vegas, and Nashville.

More Reach from Long Beach
Effective Nov. 1, 2020, Southwest will add roundtrip service nonstop betweenLong Beach and Phoenix three times daily, as well as once daily nonstop service between Long Beach and Austin.

Music City to Orange County
Effective Nov. 2, 2020, Southwest will add new nonstop service once a day (except Sundays) between Nashvilleand Orange County/Santa Ana, Calif.

The carrier also will offer nonstop service between Ontario, Calif.and Houston (Hobby) once a day (except Saturdays), beginning Nov. 1, 2020.

New Routes for Atlanta and Denver Customers
Effective Dec. 17, 2020, Southwest will add several new nonstop links between cities across the nation:

  • Phoenix and Memphis, Tenn. – Once daily
  • Denver and Birmingham, Ala. – Once daily
  • Denver and Wichita, Kan. – Once daily
  • Denver and Little Rock, Ark. – Once daily
  • Atlanta and Oklahoma City – Three roundtrips daily, reestablishing nonstop service previously offered in 2016
  • Atlanta and Omaha, Neb. – Three roundtrips daily
  • Atlanta and Louisville, Ky. – Three roundtrips daily, reestablishing nonstop service previously offered in 2014

International Schedule Update

Southwest continues to monitor conditions in 14 international destinations on the carrier’s network map and update operational plans. The carrier currently plans to resume service to Mexico and the Caribbean via Cancun, San Josedel Cabo/Los Cabos, Havana, Montego Bay, and Nassau on July 1, 2020, subject to change. Service to the carrier’s other international destinations will resume pending the easing of government restrictions.

Steamboat Springs Update
Southwest continues working to publish schedule details for the carrier’s intended service for Steamboat Springs, Colo., through Yampa Valley Regional Airport (HDN).

Southwest Airlines aircraft photo gallery:

Southwest sells and leases back 10 Boeing 737 MAX 8 aircraft from BOC Aviation

Southwest Airlines Boeing 737-8 MAX 8 N8708Q (msn 42566) LAX (Michael B. Ing). Image: 945961.

BOC Aviation has made this announcement:

BOC Aviation Limited has announced that it has signed a purchase-and-leaseback agreement with Southwest Airlines for 10 Boeing 737 MAX 8 aircraft. All 10 aircraft are powered by CFM LEAP-1B engines.

Robert Martin, Managing Director and Chief Executive Officer, BOC Aviation, said: “We are delighted to be working with Southwest Airlines once again, building on a long-term relationship that dates back to 2008. This is the sixth major aircraft investment that we have announced this year, which reflects our Company’s ability to provide innovative financing solutions for large-volume transactions and our commitment as a global partner to our airline customers.”

Top Copyright Photo: Southwest Airlines Boeing 737-8 MAX 8 N8708Q (msn 42566) LAX (Michael B. Ing). Image: 945961.

Southwest Airlines aircraft slide show:

Southwest Airlines seeks more business travelers through Travelport

Southwest Airlines has made this announcement:

Southwest Airlines Company has announced it now takes corporate travel bookings through industry-standard business travel booking systems. All of Southwest’s everyday low fares along with industry-standard booking, ticketing, and functionality with business relevant content are available in Travelport’s Apollo and Worldpsan Global Distribution Systems. In addition, Southwest will settle tickets booked via the new GDS processes through Airlines Reporting Corporation (ARC). Corporate Travel Buyers, Travel Management Companies, and business travel decision makers can conveniently book travel and modify reservations with just a few clicks.

“Our new GDS capabilities allow business travel managers the ability to book, modify, and cancel Southwest travel without having to pick up the phone, and they can better track and manage their organization’s travel,” said Andrew Watterson, Southwest’s Executive Vice President and Chief Commercial Officer. “I’m thrilled we delivered these in-demand industry-standard capabilities that our business Customers have desired on-time and on budget. While we weather the current business climate, today and every day, we’re working as hard as we can to be ready for a rebound and welcome travelers back to the skies with the warmth and hospitality they’ve come to know and love about Southwest.”

Previously, Corporate Travel Managers who preferred to manage their organization’s travel on Southwest through a GDS channel could only book or cancel a reservation. With this level of participation with Travelport, Corporate Travel Managers and business travel decision makers now have more access to Southwest’s everyday low fares. The new capabilities add a new level of service that Southwest has not been able to offer for its corporate travelers.

“Our Partnership with Southwest Airlines is one of the most exciting opportunities for us to deliver more value to our travel agencies, extend Southwest’s reach to new Customers, and together make managing travel easier as travel restrictions ease,” said Greg Webb, Travelport’s CEO. “This level of access offers Agents a single point of sale for shopping, pricing, booking, and after-sale support, providing for an unprecedented level of superior customer service.”

The carrier has additional plans to add similar capability to Amadeus’ GDS by the end of 2020.

Last year, Southwest announced several investments dedicated to growing its business travel reach. In addition to expanded content using GDS platforms, the carrier strengthened its direct-connect booking channel, SWABIZ; grew its Sales Team; and built a new Travel Management Company Relationship Team. These enhancements are designed to bring Southwest’s fares and flights into the booking channel of choice for the carrier’s corporate travel Customers.

Southwest Airlines aircraft photo gallery:

Southwest CEO Gary Kelly insists it’s safe to fly as future of air travel remains uncertain

Southwest Airlines CEO Gary Kelly appeared on CBS News “Face the Nation” on May 3, 2020 to discuss the future of his airline and air travel.

“I think we’ve seen the bottom here in April. Each week after the first week of April has gotten successively better. I think May will be better than April was,”

Kelly also said he doesn’t think the “risk on an airplane is any greater risk than anywhere else.”

Southwest details advanced procedures through its “Southwest Promise”

Southwest Airlines today shared a promise to Employees and Customers that Safety is, and always will be, the carrier’s top priority from check-in to deplaning the aircraft. The Southwest Promise encompasses additional cleaning practices across the fleet and throughout the day; implements modified procedures to support distancing and contact-free interaction; and it equips Employees with additional protection and policies to bolster their ability to safely transport Southwest Customers and each other.

“We feel extreme gratitude for those who are serving on the frontlines of this pandemic. And from our own frontlines to our back offices, we share an immense pride in the service we’re providing to Southwest Customers for whom travel is essential right now,” Gary Kelly, Southwest Chairman and CEO said. “Our sense of responsibility cannot be understated. In the future, we are committed to reconnecting our Customers to people and places they love. So, as we warmly await their return, we add the Southwest Promise to a nearly 50-year commitment of unmatched Hospitality and an unwavering focus on Safety.”

The Southwest Promise includes elements designed to further the well-being of Customers and Employees at various points throughout their travel journeys:

Personal Protection and Wellness

  • Employee Face Masks or Coverings: Beginning May 3, Southwest is requiring Customer-facing Employees to wear face masks or coverings when interacting with travelers, especially when distancing recommendations cannot be met. Of course, Employees will continue to comply with all local requirements for wearing masks under various circumstances.
  • Customer Face Masks or Coverings and Sanitizer: Southwest encourages Customers to bring their own face mask or covering, along with hand sanitizer, while traveling. Additionally, Customers will be required to wear face coverings or a mask starting May 11. If a Customer forgets their mask, Southwest will have one available for them.
  • Fit to Fly: Above all, Customers who feel ill or are experiencing symptoms of COVID-19 infection should remain home and cancel or change their trip utilizing the flexible policies Southwest affords all Customers.

Disinfection and Cleaning Around the Clock

  • In Airports: We are cleaning Southwest leased spaces in airports—ticket counters, gates, baggage claims—multiple times a day.
  • At Every Seat: Sanitizing wipes will be available onboard, upon request, for Customers who do not have their own and wish to touch up their personal space. The wipes will contain a solution proven safe and effective in aircraft settings.
  • Between Flights, Every Time: New procedures will introduce additional cleaning between flights to supplement the work of Flight Attendants who keep cabins tidy.
  • Overnight, Every Night: Teams will continue working nightly to clean all interior surfaces with broad-spectrum disinfectants and multi-purpose cleaners. They give additional attention to higher touchpoint areas from nose to tail, from the flight deck to galleys and lavatories, and at every tray table, armrest, seatbelt, window, air vent, and buttons.
  • In Hangars: In mid-April, Southwest began utilizing an electrostatic disinfectant and anti-microbial spray applied on every interior surface of the aircraft that kills viruses on contact and forms a protective shield for 30 days.
  • In the Air: Southwest will continue utilizing HEPA air filters to circulate air throughout the cabin on every flight while effectively introducing fresh air into the cabin at regular intervals. These HEPA air filters remove 99.97% of airborne particles—similar to technology found in hospitals.

Enhancing Distance

  • Limiting the Number of Passengers Onboard: Beginning May 2, to allow Customers to spread out in comfortable distances, the total number of passengers seated in the cabin will be reduced temporarily. Customers may still pick their own seat, and Southwest will not be blocking seats or directing seating. In our open seating environment, families or those traveling together may sit together.
  • Modified Boarding and Deplaning: Beginning May 2, smaller groups of 10 people at a time will be welcomed to board sequentially by boarding position. Flight Attendants also will provide guidance during deplaning to maintain distancing.
  • Suspended Inflight Beverage and Snack Service: Flight Attendants will continue to focus on every aspect of Safetywhile drink and snack service remains discontinued. Of course, Customers are welcome to bring snacks and non-alcoholic beverages to consume onboard.
  • Shields for Protection: Plexiglas® shields are being installed at ticket counters and gate podiums, and starting this month, we will be posting airport signage and floor markers to encourage distancing in gate areas.
  • Mobile Boarding Passes: Customers should download a mobile boarding pass before arriving at the airport via the Southwest mobile app to limit touchpoints.

Everything you need to know

We have added multiple layers of stringent cleaning and disinfecting:

  • An electrostatic disinfectant and anti-microbial spray is applied on every surface of the aircraft that kills viruses on contact and forms a protective shield for 30 days.
  • Sani-Cide EX3, a broad-spectrum disinfectant, will be used to clean commonly used areas (onboard lavatories, tray tables, armrests, seat belts, flight attendant call buttons, and overhead bin handles) before every flight. (Begins mid-May)
  • We also deep clean each plane from nose to tail for nearly 6-7 hours every night. (Began March 4)
  • Our gate areas, ticket counters, and baggage claim areas are cleaned multiple times a day.
  • Hand sanitizer will be available at the airport and wipes will be available onboard for Customers.
  • We use HEPA air filters onboard our aircraft, which remove 99.97% of airborne particles—similar to technology found in hospitals.
  • We have aligned these stringent cleaning policies and procedures with guidance from the Centers for Disease Control and Prevention.

We have added new physical-distancing practices:

  • We are limiting the number of people onboard each flight to provide Customers more personal space so there will be no need for the middle seat to be occupied (currently through June). But if you’re traveling together, you can still sit together.
  • Our boarding process is changing. We’re boarding in groups of 10 and only on one side of our boarding poles to help our Customers spread out.

Everything you need to do

  • It is highly encouraged to bring your own hand sanitizer and mask, and to wear your mask while traveling. Face coverings or masks will be required for Customers starting May 11. If you forget your mask at home, one will be available for you.
  • Download your mobile boarding pass prior to arrival to limit the amount of exchanges you make with others.
  • Arrive at the airport earlier to allow for new check-in and security processes.
  • Maintain physical spacing at the airport and onboard.
  • We are not serving snacks or beverages inflight to limit personal contact. We recommend eating before you travel.
  • Do not travel if you are sick or have COVID-19 symptoms. We never charge a fee to change* or cancel a flight**, and you can rebook your travel for a later date.

Cleaning around the clock

  • An electrostatic disinfectant and anti-microbial spray is applied on every surface of the aircraft that kills viruses on contact and forms a protective shield for 30 days.
  • Sani-Cide EX3, a broad-spectrum disinfectant, will be used to clean commonly used areas (onboard lavatories, tray tables, armrests, seat belts, flight attendant call buttons, and overhead bin handles) before every flight. (Begins mid-May)
  • We also deep clean each plane from nose to tail for nearly 6-7 hours every night. (Began March 4)
  • We use HEPA air filters onboard our aircraft, which remove 99.97% of airborne particles—similar to technology found in hospitals.
  • Hand sanitizer will be available at the airport and wipes will be available onboard for Customers.
  • We’re cleaning the ticket counters, gates, and baggage claim areas multiple times a day.

Helping everyone keep their distance

  • Plexiglas® is being installed at ticketing and gate counters, and baggage service offices. (Complete by early May)
  • Boarding
    • Boarding in groups of 10 to allow for physical-distancing on only one side of the boarding poles.
    • Family boarding is not changing, but we will encourage families to respect the personal space of others during boarding.
  • We are limiting the number of people onboard each flight to provide Customers more personal space to spread out and there will be no need for the middle seat to be occupied. (Currently through June)
    • Customers can pick their seat—if you’re traveling together, you’re welcome to sit together.
    • Seats will not be blocked, but the first two to three and last two to three rows will be blocked, and we will not direct Customers where to sit.
  • We have discontinued inflight beverage and snack service until further notice to limit close interactions—we recommend eating before you travel.
  • We’re posting airport signage and floor markers to encourage physical-distancing in gate areas. (Starting early May)

Here’s where you come in

  • It is highly encouraged to bring your own hand sanitizer and mask, and to wear your mask while traveling. Face coverings or masks will be required for Customers starting May 11. If you forget your mask at home, one will be available for you.
  • Download your mobile boarding pass prior to arrival to limit the amount of exchanges you make with others. We recommend using the Southwest® Airlines app. You can download the app here.
  • Arrive at the airport earlier to allow for new check-in and security processes.
  • Hand sanitizer is available at the check-in kiosks, ticket counters, and gates. Wipes will be available for Customers onboard.
  • Maintain physical spacing at the airport and onboard.
  • We are not serving snacks or beverages inflight to limit personal contact. We recommend eating before you travel.
  • Please stay home and do not fly if you feel sick or are experiencing COVID-19 symptoms. As always, you can change* or cancel** your flight without a fee.

Equipping Employees

  • Our Customer-facing Employees are required to wear masks.
  • We’re cleaning the ticket counters, gates, and baggage claim areas multiple times a day.

We’re onboard with the experts

We’re in contact with the following authorities and experts to align our policies and cleaning procedures with their guidance:

  • Centers for Disease Control and Prevention
  • World Health Organization
  • Government officials
  • Our own medical professionals and infectious disease experts that we’ve retained to advise us during this pandemic

* Fare difference may apply. ** Failure to cancel a reservation at least 10 minutes prior to scheduled departure may result in forfeited travel funds.

Southwest reports a first quarter net loss of $94 million

Southwest Airlines Company today reported its first quarter 2020 results:

  • First quarter net loss of $94 million and $.18 net loss per diluted share
  • Excluding special items1, net loss of $77 million and $.15 net loss per diluted share
  • First quarter operating revenues of $4.2 billion, down 17.8 percent year-over-year
  • Capital returns of $639 million to Shareholders through share repurchases and dividends during first quarter; dividends and share repurchase programs suspended until further notice
  • Return on invested capital (ROIC)1 pre-tax of 18.1 percent for the 12 months ended March 31, 2020, or 14.3 percent on an after-tax basis
  • In April 2020, reached an agreement in principle with the U.S. Department of Treasury (the “U.S. Treasury”) for proceeds of approximately $3.3 billion under the Payroll Support Program (“PSP”) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act); consists of $2.3 billion in direct payroll support and $948 million in the form of an unsecured 10-year term loan; the Company is expected to issue warrants that enable the U.S. Treasury to purchase up to an aggregate of approximately 2.6 million shares of the Company’s common stock
  • Since the beginning of 2020, bolstered cash on hand by $6.8 billion as of April 24, 2020, including $1.6 billion of PSP proceeds, or 50 percent; remaining $1.6 billion of PSP proceeds expected to be received by July 2020

Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “This is an unprecedented time for our Nation and the airline industry. In late February, we began experiencing a precipitous drop in passenger demand and bookings due to the novel coronavirus COVID-19 pandemic, resulting in a first quarter 2020 net loss. The U.S. economy has been at a standstill, and the current outlook for second quarter 2020 indicates no material improvement in air travel trends. Trip cancellations remain at unprecedented levels, though they have receded from their peak in March. As such, we have significantly reduced our published flight schedules through July 2020. In addition, we have taken swift action to significantly reduce cash burn. We have reduced named executive officer salaries and Board of Director cash retainer fees by 20 percent; suspended all hiring and non-contract salary increases; implemented voluntary time-off programs; canceled or deferred hundreds of capital spending projects; modified vendor and supplier payment terms; and cut all non-essential spending. These combined efforts, along with capacity reductions, are expected to result in more than $2 billion in reduced annual 2020 operating costs as well as more than $1 billion in reduced annual 2020 capital spending, compared with original plans. We will continue evaluating the need for further flight schedule adjustments, while planning to maintain service to all points in our domestic network through at least September 30, 2020.

“We applaud the work of our federal leaders, President Trump, Secretaries Mnuchin and Chao, and the entire United States Congress for recognizing the unprecedented health and economic crisis that our Nation is currently facing due to the pandemic, as well as the importance of airlines to the U.S. economy. The PSP under the CARES Act allows us to protect the jobs of the more than 60,000 Southwest Employees through September 30, 2020.

“We came into this year with significant financial strength and a fortress balance sheet, ending 2019 with cash and short-term investments of $4.1 billion and adjusted debt2 to average invested capital (leverage) of only 24 percent. We have quickly accessed capital to bolster our liquidity as we manage through the effects of the pandemic. Since the beginning of 2020, we have raised approximately $6.8 billion through $5.2 billion in debt financings and $1.6 billion in proceeds received from the PSP, thus far. As of April 24, 2020, we had cash and short-term investments of $9.3 billion, with leverage of 47 percent. We are currently the only U.S. airline with an investment-grade rating by all three rating agencies and remain focused on maintaining a strong balance sheet. Following recent debt transactions, we have unencumbered assets worth nearly $8 billion, including more than $6 billion in aircraft. We expect to receive the remainder of PSP proceeds, approximately $1.6 billion, over the next three months.

“I am extremely grateful to our People for their continued dedication to serve our Customers through an ever-changing environment. Since March 2019, our Employees have been doing a heroic job managing the challenges related to the grounding of the Boeing 737 MAX (MAX) aircraft. Based on The Boeing Company’s recent communication on the MAX return to service date, we currently expect the MAX to be removed through the end of our published flight schedule date of October 30, 2020. In light of the current environment, we are in the process of revising our aircraft order book with Boeing and will continue partnering with Boeing on a sensible delivery schedule.

Copyright Photo: Rainer Besten. MAX 8s in storage.

“Our Employees are taking great care of each other and our Customers. We have implemented enhanced aircraft cleaning procedures, and we are continuing to explore options to further protect the health and safety of our Employees and Customers. Our People have risen to the occasion, once again, approaching current challenges with Teamwork, bravery, and resolve. And, our magnificent, dedicated, and fearless health care professionals also deserve our deepest appreciation; as do essential personnel from first responders to truck drivers, from grocery store workers to frontline communication workers. We are proud of them all, and we remain committed to serving their communities and providing much-needed air travel to transport personnel and supplies.

“We entered this crisis prepared with the U.S. airline industry’s strongest balance sheet and most successful business model. While the impact of the pandemic is unprecedented, we believe demand for air travel will rebound. And, we intend to emerge with ample liquidity and an unwavering focus on our enduring Purpose—to connect People to what is important in their lives through friendly, reliable, and low-cost air travel.”

Revenue Results and Outlook

The Company’s first quarter 2020 total operating revenues decreased 17.8 percent, year-over-year, to $4.2 billion, due primarily to the sharp decline in passenger demand and bookings beginning in late February, combined with an unprecedented level of close-in trip cancellations in March 2020, due to the pandemic. First quarter 2020 operating revenue per available seat mile (RASM, or unit revenues) was 11.98 cents, and decreased 11.8 percent, driven primarily by a load factor decrease of 13.3 points, offset slightly by a passenger revenue yield increase of 4.0 percent, all year-over-year. January and February 2020 unit revenues were in line with original expectations for first quarter year-over-year RASM growth in the range of 3.5 to 5.5 percent. With the sudden and severe drop-off in passenger demand caused by COVID-19 concerns, the load factor for March 2020 was only 46.6 percent, compared with 85.7 percent in March 2019, with a load factor of approximately 20 percent for the second half of March 2020.

The Company has continued to experience weak passenger demand and bookings in April 2020, and operating revenues are currently estimated to decrease, year-over-year, in the range of 90 to 95 percent; available seat miles (ASMs, or capacity) are estimated to decrease approximately 60 percent, year-over-year; and load factor is estimated to be approximately 6 percent. For May 2020, operating revenues are also currently estimated to decrease, year-over-year, in the range of 90 to 95 percent; capacity is estimated to decrease in the range of 60 to 70 percent, year-over-year; and load factor is estimated to be in the range of 5 to 10 percent. The revenue environment remains uncertain, and the Company is unable to reasonably estimate trends beyond May 2020.

Cost Performance and Outlook

First quarter 2020 total operating expenses decreased 6.5 percent, year-over-year, to $4.3 billion. Total operating expenses per available seat mile (CASM, or unit costs) increased 0.2 percent, compared with first quarter 2019.

First quarter 2020 economic fuel costs1 were $1.90 per gallon and included $24 million, or $.05 per gallon, in premium expense and no cash settlements from fuel derivative contracts, compared with $2.05 per gallon in first quarter 2019, which included $28 million, or $.06 per gallon, in premium expense and $.03 per gallon in favorable cash settlements from fuel derivative contracts. The recent market decline in fuel prices reduced the Company’s first quarter 2020 fuel and oil expense by approximately $80 million compared with original projections in January 2020. The ongoing groundings of the Company’s most fuel-efficient MAX aircraft continued to have a negative year-over-year impact on ASMs per gallon (fuel efficiency) in first quarter 2020. However, this negative impact on fuel efficiency was more than offset by flight cancellations and load factor decline in March 2020, due to the pandemic. The Company operated fewer of its oldest, least fuel-efficient 737-700 aircraft due to reduced capacity and, as a result, consumed fewer gallons per ASM in first quarter 2020. These factors, combined, resulted in a slight year-over-year improvement of 0.8 percent in fuel efficiency in first quarter 2020.

Based on the Company’s existing fuel derivative contracts and market prices as of April 22, 2020, second quarter 2020 economic fuel costs are estimated to be in the range of $1.00 to $1.10 per gallon3, including $24 million, or $.12 per gallon, in premium expense and no cash settlements from fuel derivative contracts, compared with $2.13 per gallon in second quarter 2019, which included $28 million, or $.05 per gallon, in premium expense and $.06 per gallon in favorable cash settlements from fuel derivative contracts. As of April 22, 2020, the fair market value of the Company’s fuel derivative contracts for the remainder of 2020 was an asset of approximately $3 million, and the fair market value of the fuel hedge portfolio settling in 2021 and beyond was an asset of approximately $81 million. Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

Excluding fuel and oil expense, first quarter 2020 operating expenses decreased 4.3 percent, compared with first quarter 2019. No profitsharing expense was accrued in first quarter 2020 due to the Company’s net loss, compared with a profitsharing accrual of $88 million in first quarter 2019. Excluding fuel and oil expense and profitsharing expense, first quarter 2020 operating expenses decreased 1.9 percent, and increased 5.1 percent on a unit basis, year-over-year. The majority of the year-over-year unit cost increase in first quarter 2020 was driven by lower capacity as a result of the ongoing MAX groundings. Additionally, the Company experienced year-over-year unit cost pressure in first quarter 2020 driven by capacity reductions in March 2020 due to the pandemic; however, the Company’s proactive measures to reduce spending, combined with the decrease in its variable, flight-driven expenses, substantially offset the incremental unit cost pressure.

The Company expects continued year-over-year unit cost pressure in second quarter 2020, primarily due to its proactive capacity reductions due to the pandemic, as well as the ongoing MAX groundings. The Company is continuing its cost mitigation actions in second quarter 2020.

Other expenses in first quarter 2020 increased by $33 million, year-over-year, primarily due to a $24 million mark-to-market unrealized loss from interest rate swap agreements, which is excluded from the Company’s non-GAAP results as a special item. Excluding special items, other expenses in first quarter 2020 increased by $7 million, year-over-year, due primarily to lower interest income as a result of lower interest rates and a decrease in capitalized interest associated with Boeing’s halt of production of the Company’s undelivered MAX aircraft.

Liquidity and Capital Deployment

As of March 31, 2020, the Company had approximately $5.5 billion in cash and short-term investments, including proceeds of $500 million of unsecured notes due 2030, issued February 10, 2020; $1.0 billion from a 364-day secured term loan, entered into March 12, 2020; and $1.0 billion drawn from the Company’s revolving credit facility on March 16, 2020, which was subsequently secured. On March 30, 2020, the Company renegotiated its $1.0 billion 364-day term loan to add additional funds of approximately $2.3 billion, which were received on April 1, 2020. On April 24, 2020, the Company received another $350 million in funds pursuant to its approximately $417 million accordion provision as part of the 364-day term loan agreement. Since the beginning of 2020, the Company has bolstered cash on hand by $6.8 billion as of April 24, 2020, including $1.6 billion of PSP proceeds, with the remaining $1.6 billion of PSP proceeds expected to be received by July 2020.

Net cash used in operations during first quarter 2020 was $377 million and capital expenditures were $224 million, offset by $300 million of supplier proceeds. The Company has received an additional $128 million of supplier proceeds in April 2020. The majority of capital investment projects originally planned for this year have been canceled or deferred, and thus far, the Company has reduced its annual 2020 capital spending by more than $1 billion compared with original plans. The Company is in the process of working with Boeing to develop delivery and payment schedules for 2020 and 2021. The Company repaid approximately $78 million in debt and finance lease obligations during first quarter 2020, and expects to repay approximately $741 million in debt and finance lease obligations in the remainder of 2020. The Company currently estimates its average daily cash burn4 to be in the range of $30 million to $35 million in second quarter 2020, compared with its original expectations, prior to the pandemic, in the range of $60 million to $65 million. The Company is evaluating additional measures to further improve its cash burn.

During first quarter 2020, the Company returned $639 million to its Shareholders through the repurchase of $451 million of common stock and the payment of $188 million in dividends. In first quarter 2020, the Company launched a new accelerated share repurchase (“ASR”) program by advancing $500 million to a third party financial institution in a privately negotiated transaction (the “first quarter 2020 ASR program”). The Company received 6.4 million shares of common stock pursuant to the first quarter 2020 ASR program, representing 75 percent of the shares originally expected to be repurchased under that ASR program. The third party financial institution exercised its early termination option for the first quarter 2020 ASR program on March 19, 2020, and the Company received $134 million in cash from the third party financial institution as a result of the termination. The Company also received an additional 0.9 million shares of common stock during February 2020 in final settlement of its $550 million fourth quarter 2019 ASR program, launched during fourth quarter 2019 and completed in February 2020. Additionally, the Company repurchased approximately 1.9 million shares during first quarter 2020 through $85 million in open market transactions. The Company has suspended dividends and share repurchase programs until further notice. The Company had $899 million remaining under its May 2019 $2.0 billion share repurchase authorization at the time of the program’s suspension.

In April 2020, the Company reached an agreement in principle with the U.S. Treasury for proceeds of approximately $3.3 billion under the PSP as part of the CARES Act for which the Company expects to provide the U.S. Treasury consideration in the form of a promissory note representing a $948 million unsecured, low-interest, 10-year term loan (the “unsecured loan”) and warrants to purchase up to an aggregate of 2.6 million shares of the Company’s common stock, subject to adjustment by the U.S. Treasury in each case. Approximately $1.6 billion of expected proceeds, or 50 percent, have been received thus far, for which the Company provided consideration of a promissory note representing a $459 million unsecured loan. 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 5, 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 1.3 million shares of the Company’s common stock to the U.S. Treasury and is expected to issue warrants to purchase approximately 1.3 million additional shares of the Company’s common stock to the U.S. Treasury in conjunction with the balance of the PSP proceeds. The warrants have a 5-year term and an exercise price of $36.47 based on the Company’s closing price on April 9, 2020. The warrants can be settled with the U.S. Treasury on a net basis, either in shares or cash at the Company’s discretion.

Pursuant to a separate secured loan program established under the CARES Act, the Company intends to apply for a secured loan with the U.S.Treasury in the estimated principal amount of approximately $2.8 billion. The Company has not yet determined if it will ultimately participate in the secured loan program and is actively pursuing other options for additional liquidity.

Fleet and Capacity

The Company ended first quarter 2020 with 742 aircraft in its fleet. In response to capacity reductions due to the effects of the pandemic, the Company currently has approximately 350 aircraft in long-term storage or temporary parking. This is in addition to the Company’s 34 MAX aircraft that were grounded as of March 13, 2019, to comply with the Federal Aviation Administration (“FAA”) emergency order issued for all U.S. airlines to ground all MAX aircraft. The Company has not received any MAX aircraft deliveries since February 2019, and Boeing is not currently manufacturing or delivering new MAX aircraft. In light of the current environment, Boeing agreed to an arrangement allowing the Company to take delivery of no more than 48 aircraft through December 31, 2021. The Company is currently planning to take delivery of less than the 27 MAX aircraft previously expected from Boeing in 2020, and is evaluating the need to temporarily remove or retire additional aircraft from its fleet. Additional information regarding the Company’s aircraft delivery schedule can be found in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020.

Upon a rescission of the FAA order to ground the MAX fleet, the Company will work closely with Boeing and the FAA to safely reintroduce the 34 MAX 8 aircraft currently in its fleet and estimates it will take the Company several months to comply with applicable FAA directives, including all necessary Pilot simulator training. Regulatory approval of MAX return to service is subject to Boeing’s ongoing work with the FAA, who will determine the timing of MAX return to service. The Company offers no assurances that current estimations and timelines are correct. Any changes to current estimations could result in additional flight schedule adjustments and reductions beyond October 30, 2020, further delays in MAX aircraft deliveries, and additional financial damages. The Company continues to plan for multiple scenarios for its fleet and capacity plans.

The Company’s first quarter 2020 ASMs decreased 6.7 percent, year-over-year, due primarily to the year-over-year capacity reduction of 17.1 percent in March 2020 related to the pandemic, as well as the MAX groundings. Due to the impact of the pandemic on passenger travel demand, the Company has significantly reduced capacity through July 2020, thus far, and currently estimates second quarter 2020 capacity to decrease at least 60 percent, year-over-year. The Company will continue to evaluate the need for further schedule adjustments.

Forward-Looking Guidance

Based on significant capacity reductions and shelter-in-place restrictions, the Company currently expects the effects of the pandemic to impact its second quarter 2020 financial performance much more significantly than in first quarter 2020. However, due to the uncertain severity and duration of the pandemic, including the impact on the economy, the Company is currently unable to reasonably estimate the future impact on specific operational and financial trends.

Southwest Airlines aircraft photo gallery:

Southwest CEO Gary Kelly discusses on-going business impact of COVID-19

Southwest Airlines Chairman and CEO continues to provide updates and share his thoughts regarding the COVID-19 pandemic. In this edition of Ask Gary, Gary provides an update on our business, the CARES Act, and more.

 

Forbes: Wizz Air is now Europe’s largest airline, Southwest world’s biggest amid coronavirus disruption

From Forbes: By Cathy Buyck.

“Who would have thought three months ago that Wizz Air would overtake Ryanair or Lufthansa as Europe’s largest passenger airline? Or that Southwest Airlines would overtake American Airlines, or that Indonesian budget airline Lion Air would rank in the top of world’s 10 largest airlines based on the number of seats offered. But what was unimaginable in January is reality today, data from OAG reveals.”

Read the full story.

Southwest Airlines reaches agreement in principle on the Payroll Support Program under The CARES Act

Southwest Airlines Company today announced it has reached an agreement in principle with the United States Department of Treasury about the general terms expected on the Payroll Support Program (“program”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Under the agreement in principle, Southwest will receive the funding support necessary to protect the jobs of its more than 60,000 Employees through at least September 30, 2020, with the fundamental goal to maintain the carrier’s unprecedented 49-year history absent a single involuntary furlough.

“We are extremely appreciative of the work of our federal leaders. President Trump, Secretaries Mnuchin and Chao, and the entire United States Congress recognize the unprecedented health and economic crisis that our nation is currently facing due to COVID-19, as well as the importance of airlines to our overall national economy, the supply chain, and the nation’s future recovery after this crisis subsides,” said Southwest Chairman and CEO Gary Kelly. “As we are now in the implementation phase of the CARES Act, we applaud the quick action by the U.S. Department of Treasury to infuse liquidity into the economy and try to keep businesses open and people on the job—and that certainly includes the airlines and our Employees. So, on behalf of Southwest Airlines, my sincere thanks to Secretary Mnuchin and his entire team, who have been working so incredibly hard over the past few weeks to implement the core elements of the CARES Act.”

The Company’s expected disbursements under the program total more than $3.2 billion, consisting of more than $2.3 billion in direct payroll support and a nearly $1 billion unsecured term loan (“loan”). The loan is expected to have a 10-year term with low interest rates and may be repaid at any time prior to maturity at par. The loan is expected to include approximately 2.6 million warrants issued to the U.S. Department of Treasury. The program includes certain conditions, such as: prohibitions against involuntary furloughs and reductions in employee pay rates and benefits through September 30, 2020; the elimination of share repurchases and dividends until September 30, 2021; and limits on executive compensation until March 24, 2022.

The general terms described above are subject to the negotiation and execution of final documents between the Company and the U.S. Department of Treasury.

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