Dallas-based Southwest Airlines is optimistic about summer travel after recording a 79% load factor during April. The all-Boeing 737 airline says flights are fuller and that bookings for summer 2021 resemble pre-pandemic levels. Southwest cites its latest load factors and increased booking as evidence that the airline industry in the United States is poised to make a comeback.
Fueling a rise in bookings are flights to summer leisure destinations, and with people fed up with COVID-19 restrictions, summer vacations are on everyone’s mind. While commenting on Southwest Airlines April load factor, the Associated Press (AP) said that the low-cost carrier is now predicting flights in June will be 85% full.
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Southwest is optimistic about summer
Southwest says the current situation reflects “fairly typical” booking patterns. The carrier said it had already sold 55% of the seats it expected to sell for June and 35% of seats for flights in July.
While this is good news for Southwest and other American carriers, a disappointing fact was that business travel has failed to return. Southwest said they had seen a modest uptick in the number of people traveling for business, but that it was still 80% down compared to 2019 figures.
April revenue down 42% compared to 2019
Regarding operating revenue during April, Southwest said it was down 42% when compared to April 2019. Operating revenue is expected to improve in June and could narrow to between 20% and 25%.
Regarding its daily cash burn, Southwest said that its core cash burn rate in April was six million dollars a day, but it expects this to recede to somewhere between one and three million a day during the second quarter.
This amount is a million dollars better than the airline’s previous forecast. Excluding payments for servicing its debt, capital spending, and other costs, Southwest Airlines says it expects to reach break-even levels sometime in June.
Now that finally people are getting back out there and traveling again, it may be good news for the airline industry but perhaps not so good for the consumer. With limited capacity on many flights and most international destinations not yet open to American visitors, airline analysts predict an increase in fares as airlines look to claw back their COVID-19 losses.
Fares will go up
When speaking on CNBC’s “Squawk Box” yesterday, airline analyst at Cowen Investment Bank Helane Becker said that traders were calling the airline increased bookings a summer “jailbreak” as people look to go on vacation. Between the traditional American summer vacation time that runs from Memorial Day to Labor Day, Becker says she expects to see between 1.4 million and 1.8 million daily travelers.
Becker was keen to point out that, unlike the low-costs, the big three airlines, American, United, and Delta, have all relied on business travelers and those traveling overseas for the vast majority of their revenue. Unfortunately for the three major carriers, they hope that Zoom meetings will not become de rigueur and that people will miss personal interaction.
Becker predicts that business travel will pick up in the fourth quarter but will still be down as we get back to the life we had before COVID-19.
If you plan on flying anywhere domestically in the United States this summer, you might want to book your tickets now before they go up in price. Internationally there have been some signs of hope, but it may be better to hold off from pulling the trigger for another few weeks.
What do you think about Southwest Airlines’ improved capacity? Please tell us what you think in the comments.