Southwest Airlines CEO Gary Kelly gave another grim assessment of the state of the airline industry Wednesday during an interview on CNBC, saying “there’s no reason to believe that things are going to improve anytime soon.”
Kelly, whose airline’s traffic is down 70% compared to last year, has been in Washington D.C. for the last few weeks pleading with White House staff and Congressional leaders to pass an extension of the $28 billion payroll support program that kept carriers afloat since August.
But the bill, which could prevent 17,500 furloughs at Fort Worth-based American Airlines, is mired in political deadlock in D.C. amid a larger fighter over a second federal stimulus to address economic pain from the COVID-19 pandemic. Still, Kelly said he is hopeful a bill including airline payroll aid will pass.
That same pandemic has decimated airline traffic and although corporate leaders hoped traffic would rebound by fall, the recovery has largely stalled.
“Is that disappointing?” Kelly said in the interview Wednesday morning with CNBC. “I think we’re all ready for this to be behind us, but realistically it’s not surprising.”
Kelly repeated his belief that the airline won’t see a substantial recovery until a vaccine or other significant COVID-19 treatment is developed.
Dallas-based Southwest has said it won’t furlough any employees on Oct. 1, but the longer-term outlook is more uncertain the longer the pandemic persists. Southwest only managed to avoid furloughs because 28% of its employees signed up for leave or early retirement.
Southwest is preparing to cut its flight schedule further in October and looking at a November and December holiday travel season where flying will be far below previous expectations. Southwest is wary of cutting traffic too much, Kelly said, because it can be difficult to rebuild back.
“There’s no easy path for any airline to go back to what amounts to 1970s levels of traffic,” Kelly said. “Believe it or not, that’s basically where the industry is domestically: 1970s.”
Airlines such as Southwest are only willing to cut capacity so much. Southwest is flying about 40% to 45% of its schedule compared to last year, even though only 30% as many passengers are flying.
“Because at a point if we cut our flights too much then we cut a lot of itineraries and the revenue loss accelerates much faster than the cost cuts,” he said.
Southwest hasn’t cut any destinations from its network and has actually added new routes to Palm Springs, Calif., and Miami.
Kelly said Southwest’s network is “radically changed” since the beginning of the pandemic, with fewer point to point flights and more connections.
“Absolutely we want to get back to that point where we are a specialist, we are a point-to-point network," he said. “We look forward to getting back to that point, but the traffic levels need to be sufficient to support adding a nonstop flight.”
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