Southwest Airlines says travel picked up in August, but still expects a tough fall
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Americans still want to get in that last trip of summer before settling in for what could be a fall “twindemic” of both the coronavirus pandemic and a severe flu season.
Southwest Airlines has seen an uptick in bookings for August travel after a plateau in July, the Dallas-based carrier told investors on Wednesday. The increase is enough to shave $3 million off its daily losses, with third quarter cash burn now set to come in at $20 million a day.
But all that glitters is not gold. Southwest does not anticipate the increased bookings to continue into the fall. After flying roughly 73% of what it flew a year ago in August, the airline forecasts flying around just 60% in September and as little as half in October.
“Year-over-year revenue declines remain significant, and passenger demand and booking trends remain inconsistent,” Southwest told investors.
Southwest’s guidance is the latest evidence that the “autumn of discontent” could hit airlines hard. Since June, Wall Street analysts have warned that the industry faces a tough situation after Labor Day, when the leisure travelers that have so far driven the travel recovery since May traditionally fly less and business travelers pick up the slack. But in 2020, most corporate flyers remain grounded due to the continuing pandemic and are not expected to return in significant numbers until next year.
Other airlines are also gearing up for a rough ride. Spirit Airlines plans to fly just 65% of its 2019 schedule in September compared to about 82% in July. And American Airlines is considering axing up to 30 smaller cities as it retrenches to save money.
While Southwest plans to fly less this fall, it does not plan to drop any cities from its map. What is disappearing are many longer nonstop flights. The carrier is cutting a number of those in favor of connections over some of its larger bases, such as Baltimore/Washington (BWI), Denver (DEN) and Nashville (BNA).
“While we have fewer flights, we do still have itineraries,” Southwest CEO Gary Kelly told The Texas Tribune on Aug. 12. “We’re trying to maintain the integrity of our network. So when you’re ready to fly, there’s a way to get to Portland [Oregon] or a way to get to Boston.”
The carrier has even added some routes, including new seasonal service to Steamboat Springs, Colorado (HDN), in an effort to fly where travelers want to go. Still, the number of suspended routes far outweighs the number added.
In July, Kelly said Southwest expected to fly about a quarter less in December than what it flew at the end of 2019. Traveler appetite to fly this fall will determine how close to reality that forecast is.
Southwest’s pessimistic outlook for the fall is not enough for it to take another round of government aid. The airline has declined a $2.8 billion loan under the federal coroanvirus aid package, or CARES Act, that was passed in March. The loan would have come from a separate pot of $25 billion allocated to airlines than the $25 billion earmarked specifically for employee salaries.
At the same time, the airline backs the push by labor unions for an extension of the payroll support program through March 2021. The extension could be included in the proposed new stimulus package that is currently stalled in Congress.
Featured image by FREDERIC J. BROWN/AFP via Getty Images.
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