Southwest Airlines Pulls Out Of US Treasury CARES Loan

Southwest Airlines today revealed that it wouldn’t participate in the United States Treasury’s secured loan program. The airline had signed a letter of intent for a $2.8 billion loan supported by the CARES act. However, this letter of intent was non-binding.

Southwest Airlines, US Treasury, CARES Loan
Southwest Airlines said that it wouldn’t take $2.8 billion of US Treasury secured loans. Photo: Southwest Airlines

The last half a year has been a challenging one for airlines in the United States and, indeed, across the globe. However, passenger traffic is slowly increasing, with over 800,000 passengers recorded by the TSA for two weeks in a row. It seems this recovery is starting to be noticed by the airlines, as has been shown by Southwest today.

No $2.8 billion CARES Act loan

In July, many airlines in the United States signed letters of intent regarding loans provided by the United States Treasury as part of the Coronavirus Aid, Relief, and Economic Security Act. Southwest Airlines was one of these airlines, agreeing through a non-binding letter of intent to take a total of $2.8 billion.

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However, Southwest Airlines no longer wishes to take this loan. The airline today revealed that this decision was made due to its liquidity being ‘bolstered’ as a result of significant actions. The airline pointed out that its current August 2020 estimations are more favorable than previous predictions.

Southwest Airlines, US Treasury, CARES Loan
The airline has recently seen its liquidity bolstered. Photo: Southwest Airlines

Simple Flying reached out to Southwest for comment regarding this story. It will be updated with any subsequent response received.

How are things going for Southwest?

All in all, it looks as though things aren’t too bad for Southwest. According to the airline’s preliminary results for July, its operating revenues were down by 70-75% compared to the same month last year. However, the airline’s capacity was only down by around 31%.

During the month, the load factor sat at around 43%. This meant that for each aircraft with 175 seats, approximately 75 were occupied, and 100 were vacant. Until October 31st, Southwest is ‘blocking’ middle seats, meaning that only 66% of seats will be sold on each flight. As the airline doesn’t have allocated seating, it is up to passengers to ensure that the middle seat is left free, but groups can still sit together.

Southwest Airlines, US Treasury, CARES Loan
Many changes have taken place as Southwest adapts to flying during COVID-19. Photo: Southwest Airlines

Coping with COVID-19

Like all airlines in the United States, Southwest has been taking steps to ensure that flying is as safe as can be. This, of course, includes mandatory masks, and as mentioned above, middle seats being left free.

However, a range of other procedures is also being followed to reduce the COVID-19 risk on the airline. This includes encouraging passengers to use mobile boarding passes, and suspending the onboard drink and snack service. The latter will surely save a small amount for the airline too.

Have you flown with Southwest since it began to implement COVID-19 related changes? Let us know how you found it in the comments!