Southwest Airlines CEO Gary Kelly has recently commented on the carrier's dire situation, and how despite its efforts to cut costs and maintain a profitable enterprise, the company was still racking up millions of dollars in losses due to operating expenses and other costs.
Southwest Airlines Boeing 737-700. Photo by Cole McAndrew | AeroNewsX
“As long as case counts are high, we have to expect that travel will be relatively modest,” Kelly said in an online interview Wednesday. “We’re going to see traffic and revenue down 75% versus a year ago today. To think that would recover to the point [that] we’d be profitable is unrealistic.” Southwest (LUV) stock is on track to see a $6-decline in value.
The resurgence in coronavirus case counts has even further ruled out the possibility a busy summer travel season, as airlines in the United States continue to see less and less leisure bookings with business travel at a standstill. Most carriers have also reduced the number of flights for the month of August as pessimistic outlooks on the rest of the month heading into September take hold as the summer season comes to a close.
According to Kelly, the airline industry is in crisis, not least because of a significant reduction in travel demand but also as competitors continue to lower fares in desperate attempts to lure any considering travelers to fly on their airline. However, this technique has some pretty serious repercussions along with it as well, with making flights cheaper, while operating costs continuing to remain the same, airlines could soon be losing more and more money.
Kelly adds that the consistent premium-paying business travel demand had been “crushed” since companies would have no reason to send non-essential employees for business purposes in the midst of the pandemic. He sees the outlook for business travel being “very modest for a long time,” touting up to an entire decade for demand to be able to recover to pre-COVID levels.
The CEO also urged the U.S. government to approve of an additional six-month extension of Federal payroll support funding for airlines to allow workers in the industry to avoid being furloughed if conditions don’t improve. So far, close to 150,000 employees from air carriers registered in the U.S. have volunteered to take voluntary unpaid leaves of absences, or early-retirement packages in hopes of weathering the potential furlough storm when the intial aid-relief package from the CARES act ends on October 1st.
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