Southwest Airlines has announced a considerable loss of $94 million. The US carrier posted the loss for the first quarter primarily as a result of the ongoing crisis affecting the aviation industry. However, it is also still without its 737 MAX aircraft.
Despite the vast ramifications of the current global aviation crisis, as a mostly domestic carrier, Southwest has been soldiering on where it can. However, like almost all other airlines, the current crisis has meant a noticeable hit to cash flow. With fewer passengers flying, less money is coming in. As a result, the airline today announced a massive loss for the first quarter of the year.
$94 million loss
As we’re approaching the end of the fourth month of 2020, many companies are delivering their financial results for the first quarter of the year. So far, we’ve already seen losses from airlines such as Delta. However, today it was Southwest’s turn to announce its results.
The low-cost American carrier posted a loss of $94 million US for the first quarter of 2020. During the quarter, the airline clocked revenue of $4.2 billion. This was down by 17.8 percent from 2019’s figures.
The airline has explained that these figures are a result of the current global downturn in the aviation industry. According to the airline, the US economy has come to a standstill, while around the globe, demand has tanked. However, it doesn’t look as though things will improve any time soon.
Gary Kelly, the airline’s CEO, commented:
“This is an unprecedented time for our Nation and the airline industry. In late February, we began experiencing a precipitous drop in passenger demand and bookings due to the novel coronavirus COVID-19 pandemic, resulting in a first quarter 2020 net loss. The U.S. economy has been at a standstill, and the current outlook for second quarter 2020 indicates no material improvement in air travel trends.
Load factor decrease
In the figures released by the airline, we learned that for the first quarter of 2020, the airline’s load factor had decreased by some 13 percent. In 2019 this figure stood at 81%, meaning that 81% of seats on every flight were occupied.
However, this fell to 67.7% this year. Of course, the current crisis didn’t start to affect the US at the start of Q1, and in reality, the latest load factors are likely lower. Indeed, the airline estimated that its load factor for April would sit around the 6% mark.
MAX still grounded
The Boeing 737 MAX is still grounded. However, given the current lack of demand, this is likely the least of Southwest’s problems now. The airline is even looking at removing or temporarily retiring aircraft from its fleet.
Of the airline’s 742 aircraft, around half are in storage. This includes its 34 MAX aircraft that haven’t flown for over a year. Kelly commented that the carrier is now not expecting the 737 MAX to return to scheduled services until the end of October. He said,
“In light of the current environment, we are in the process of revising our aircraft order book with Boeing and will continue partnering with Boeing on a sensible delivery schedule.”
What do you make of Southwest’s results? Let us know your thoughts in the comments.