Southwest Airlines backtracks on a full schedule by year-end as recovery stalls

It was less than two months ago when Southwest Airlines unveiled plans to fly a nearly full schedule by December in an effort to grow out of the coronavirus pandemic as it has past recessions.

Now, those plans are fizzling like a dying sparkler on the Fourth of July.

Dallas-based Southwest plans to fly about 25% less than it flew at the end of 2019 by December, CEO Gary Kelly said during the airline's second quarter earnings call on Thursday. The flight reductions are still in the works and will be loaded in its schedule over the coming weeks.

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“And, if demand is like it is today, that won’t be enough," Kelly added in a dour note on the outlook. "We’ll have to be smaller.”

The recovery in air travel has unequivocally stalled. Every carrier from Delta Air Lines to United Airlines — and now Southwest — have acknowledged that when the resurgence of COVID-19 was leading the news cycle around the July 4 holiday, Americans stopped buying tickets to travel.

Data from trade group Airlines for America (A4A) shows net passenger bookings — new reservations minus cancellations — for U.S. domestic travel have held steady at down roughly 80% year-over-year since the beginning of July.

Related: Southwest Airlines adds 11 new routes, plans to resume a full schedule by year’s end

Southwest posted a rare quarterly loss during the three months ending in June. The airline lost $1.5 billion before special items during the period — a number that was better than the losses at some of its larger competitors — but was a fraction of its usual size, flying just 45% of what it flew a year ago.

The carrier will be a little bigger during the three months ending in September. Southwest president Tom Nealon said Thursday that it plans to fly about 70% to 80% of what it flew last year during the same period, but he noted that they "have more work to bring it down further."

Despite having to delay plans to resume a full schedule, Southwest plans to continue serving all of the U.S. cities on its route map. This includes Hawaii, where it continues to serve five cities — though its only connection to the U.S. mainland is between Honolulu (HNL) and Oakland (OAK).

Related: Why the U.S. needs a federal mandate on masks now more than ever

Passenger and crew safety from COVID-19 remains a top priority for Southwest. The airline will implement stricter rules on wearing masks onboard its Boeing jets next week in response to what Nealon said were "too many exceptions to the policy."

Southwest has also extended caps on the number of seats it will sell on any given flight by a month to the end of October. The caps are designed to allow for a semblance of social distancing onboard.

In addition, Kelly said the nearly 17,000 staff that took voluntary early departure packages or extended unpaid leave are enough to allow it to avoid pay cuts or furloughs through the end of the year.

Related: Southwest staff love the carrier so much, more than 25% are willing to leave to help it survive

But Southwest's leadership team is not under any impression that they — or the airline industry — is out of the coronavirus woods yet.

"We know enough now that we’ve got a long, long way to go," said Kelly calling the recovery a "long, saw-toothed slog."

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