Southwest Airlines lost $144 million before taxes during the first three months of the year as the elimination of non-essential travel aimed at slowing the spread of COVID-19 brought business to a grinding halt.
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The Dallas-based air carrier lost $94 million after a tax benefit, or 18 cents per diluted share, as revenue slid 18 percent to $4.2 billion. Wall Street analysts surveyed by Refinitiv were expecting a loss of 41 cents a share on revenue of $4.42 billion.
“This is an unprecedented time for our nation and the airline industry," CEO Gary Kelly said in a statement. "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.”
A sharp dropoff in air travel in March caused operating revenue per available seat mile to fall 11.8 percent to 11.98 cents. Southwest was flying planes that were about 47 percent full in March, down from 86 percent a year earlier.
While airlines typically try to maximize profit by filling as much of a plane's capacity as possible, the pandemic trimmed Southwest's ratio to just 20 percent in the second half of that month.
The carrier had $6.8 billion of cash on hand as of April 24, 2020, including the $3.3 billion it will receive through the Coronavirus Aid, Relief, and Economic Security Act.
That infusion consists of $2.3 billion of direct payroll support and $948 million through an unsecured 10-year loan. Southwest expects to issue warrants that allow the U.S. Treasury to buy up to 2.6 million shares of common stock.
Management has taken swift action to reduce the company's cash burn, including reducing executives' salaries, suspending pay increases; implementing voluntary time-off programs; canceling or deferring capital spending projects; modifying vendor and supplier payment terms; and cutting all non-essential spending.
Together, that should reduce 2020 operating costs by $2 billion and 2020 capital spending by $1 billion.
Looking ahead, Southwest estimates weak demand and bookings in April will cause operating revenue to fall 90 percent to 95 percent from the same period a year earlier. The carrier plans to trim flight capacity by 60 percent from the previous year and says aircraft will be about 6 percent full on average, a measure known as load factor.
For May, Southwest sees operating revenue lower by 90 percent to 95 percent. It expects capacity reductions of as much 70 percent and says load factor will be 5 percent to 10 percent.
Southwest says it cannot reasonably forecast revenue beyond May 2020.
The airline, which flies only Boeing 737s, has 350 aircraft in long-term storage or temporary parking in addition to the 34 MAX aircraft that were grounded in compliance with Federal Aviation Administration directives.
Southwest shares fell 46 percent this year through Monday, a worse decline than the 11 percent drop on the S&P 500.