Southwest Airlines could cut cities without additional coronavirus aid
Southwest Airlines CEO Gary Kelly has lined up with his peers at American Airlines and United Airlines threatening possible cuts to its route map if losses continue and there's no additional federal coronavirus relief.
"If we continue to face quarterly losses like we would have had without the payroll support, then we’ll have to be creative to mitigate those losses — and that could include cutting service," Kelly told CNBC on Wednesday.
Southwest stands apart from its competitors having not cut any U.S. domestic cities from its map since the pandemic began. However, if airlines do not receive additional payroll assistance from Congress by Oct. 1, Kelly's comments suggested that the Dallas-based carrier could join its peers in cutting service in order to regain its financial footing.
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U.S. airlines, labor unions and trade group Airlines for America (A4A) are in the midst of an 11th-hour push for as much as $28 billion in additional aid for staff. The funds would be used exclusively for employee payroll and would bar carriers from the tens of thousands of furloughs that loom over the industry if protections under the first federal aid package, or CARES Act, expire as scheduled on Sept. 30.
In addition to barring furloughs, rules governing the relief would also extend a mandate that airlines continue to fly to most of the cities that they flew prior to the pandemic through March. This would keep flights intact for many small communities potentially facing a looming loss of commercial flights as few travelers take to the air.
Air travel remains down significantly compared to last year. The latest data from A4A shows U.S. domestic passenger volumes down 66% during the week ending Sept. 20 compared to 2019.
Related: American, United say flights to small cities are at risk unless Congress extends payroll program
Exclusive TPG Q&A: Southwest CEO Gary Kelly chats about his legacy, new cities and change fees
Airlines have cut schedules commensurately while maintaining flights to nearly all domestic destinations. Southwest is scheduled to fly about 55% of what it flew a year ago in October, according to Cirium data.
"Believe it or not, that’s where the industry is domestically: 1970s levels of traffic," said Kelly.
One thing holding Southwest back from making further cuts is connectivity. The airline has already pruned many nonstop flights from its schedule, leaving every U.S. city served. But some are now served only via eight key bases across the country, including Baltimore/Washington (BWI), Denver (DEN) and Phoenix (PHX).
Further cuts could jeopardize this connectivity, Kelly said.
Related: Southwest CEO says Miami push part of long-term strategy, not ‘pandemic play’
Still, with the specter of Southwest's first annual loss since 1972 looming, anything to improve the financial outlook is on the table. The airline's priority is to stem daily losses that amount to roughly $17 million a day in the third quarter — something it hopes to achieve by the end of the year or early 2021.
In an effort to capture additional travel dollars, Southwest is adding three new cities to its map by year-end: Miami (MIA), Palm Springs (PSP) and Steamboat Springs, Colorado (HDN). Kelly has said these cities are part of the airline's long-term growth strategy and not "pandemic plays," with COVID-19 an opening to add them sooner rather than later with idled jets.
Still, neither Kelly nor anyone in the industry knows when flyers will return in significant numbers. And they must return before airlines can get out of crisis mode and return to profitability.
"There's no reason things are going to improve anytime soon," Kelly said.
Related: Southwest is using the coronavirus to solidify its dominance in California
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- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
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| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
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Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.