Southwest Airlines said gradual improvements in the air travel recovery during the last three months have stalled in recent weeks and it’s unclear if a surge in COVID-19 cases nationwide has passengers nervous about flying again.
Dallas-based Southwest noted the uneven recovery in an update to investors Thursday morning, saying that it has reduced its daily cash burn to $10 million a day and that it still has $13.8 billion in cash in the bank.
After passenger willingness to buy tickets again between August and October led to signs of hope at Southwest, “the company has experienced a deceleration in improving revenue trends for November and December 2020 in recent weeks."
“While the Company expected the election to impact trends, it is unclear whether the softness in booking trends is also a direct result of the recent rise in COVID-19 cases,” Southwest said in the update.
The update comes as Southwest continues to try to broaden its customer bases, adding new destinations sometimes in competition with other airports it flies to. On Thursday, Southwest announced it would start flying to Sarasota Bradenton International Airport in Florida in the first quarter of 2021, only a few miles from Tampa.
The carrier still said that revenue will be down 60 to 65% in November and December compared to a year ago, while its capacity will be down about 40%. Southwest has about $13.6 billion in cash left on hand including short-term investments. However, nearly all of its cash comes from $13.4 billion it’s raised in debt, aircraft leaseback deals, stock offerings and the $3.4 billion in government stimulus it received.
Southwest’s report on Thursday is just another indicator of how uneven the air travel recovery has been since the pandemic started in mid-March. A new report from Skift Research said that only 38% of American’s traveled in October and only 6% flew on an airplane. October also marked the smallest monthly increase in travel since the pandemic’s low point in April.
Airport passenger tracking data from TSA shows that traveler number is still down more than 60% compared to a year ago and travel during the middle of the week is often far worse.
“Passenger demand and booking trends remain primarily leisure-oriented and inconsistent by region, and the company continues to plan for multiple scenarios for its fleet and capacity plans,” Southwest said.
Airlines have gotten some positive signs for a travel recovery with news of a possible vaccine in development and a report last week from Harvard University researchers showing that the chances for COVID-19 transmission on airplanes are low.
The report also comes amid tense negotiations with union employees with the company asking for a 10% wage cut. While the company asked for a deal by the end of October, union members have been hesitant to accept salary reductions and negotiations continue. Last week, Southwest said it was issuing furlough warnings for 42 material specialists.
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