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Southwest Airlines CEO calls idea of profit this year ‘unrealistic’

imageStock Markets8 hours ago (Aug 12, 2020 05:36PM ET)

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(C) Reuters. FILE PHOTO: A number of grounded Southwest Airlines Boeing 737 MAX 8 aircraft are shown parked at Victorville Airport in Victorville, California

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By David Shepardson

(Reuters) – Southwest Airlines Co (N:LUV) Chief Executive Gary Kelly said on Wednesday he does not expect the airline will be profitable in 2020 amid the coronavirus pandemic, snapping a 47-year streak of posting consecutive full-year profits.

“As long as the case counts are high, I think that we have to expect that travel will be relatively modest,” Kelly said at a Texas Tribune event. “We’re continuing to see traffic and revenues down 75% versus a year ago today and to think that would recover to the point we would be profitable I just think is unrealistic.”

The company last month posted a $915 million loss for the second quarter. Kelly said it is still burning through about $20 million a day.

“We’re still losing cash every single day,” he said. “We’ve got a long way to go before we can feel like we are out of intensive care.”

Southwest’s has cut its scheduled flights by about 35% to 40%, Kelly added. “The airlines are less full,” Kelly said, noting the airline was not booking middle seats.

Nearly 17,000 Southwest employees have agreed to voluntary long-term leaves or exit packages.

“The solution here is to get our passengers back — not to try to shrink the airline so radically that we’re prepared for a very, very modest travel environment,” Kelly said.

Southwest shares Wednesday closed largely unchanged.

Earlier, Southwest, Ryanair Holdings Plc (I:RYA) and EasyJet Plc (L:EZJ) were the only three airlines whose bonds are still rated investment grade, S&P Global Ratings said, while estimating a drop of up to 70% in global air passenger traffic for 2020.

Carriers operating long-haul international flights including American Airlines (O:AAL), United Airlines (O:UAL) and Delta Air Lines (N:DAL) have been among the worst hit due to the pandemic.

S&P’s forecast for 2020 global passenger traffic has worsened to a drop of between 60% and 70% from between 50% and 55% estimated in May.

Southwest Airlines CEO calls idea of profit this year ‘unrealistic’

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