Southwest Airlines has reported a profit of $116 million for Q1 2021, despite other U.S carriers, including Alaska Airlines and American Airlines, reporting losses. However, with the scale of losses narrowing across the industry, many claim the worst of the pandemic is behind us.

Southwest posts a profit for Q1 2021

With demand for leisure travel steadily picking up since February, Southwest Airlines has posted total revenues of $2.05 billion and profits of $116 million for the first quarter of 2021. Southwest is the first major U.S carrier to post a profit since the beginning of the pandemic, after recording its first-ever annual loss in 2020.

Chairman and CEO Gary Kelly said in a statement,

“While the pandemic is not over, we believe the worst is behind us, in terms of the severity of the negative impact on travel demand.”

While other U.S carriers rely heavily on business and international long-haul travel, Southwest has banked on leisure travel to get back on its feet. While business and international long-haul travel are still at a fraction of their pre-pandemic levels, leisure travel has rebounded much better. Even still, airports across the country are currently operating at around 40% less capacity than in 2019.

Southwest revealed that it has about 35% of expected bookings in place for June and 20% for July so far. The airline, which notes "a sequential improvement from March to April 2021, and again from April to May 2021, based on improving bookings," believes travel demand will pick up significantly for the summer. CEO Kelly added,

"We believe there is significant pent-up demand for leisure travel and are optimistic about summer 2021. In response, we are in the process of adding flights in June 2021, and we currently expect June's available seat miles (ASMs, or capacity) to be only slightly less than June 2019 pre-pandemic levels."

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Federal aid spares heavy losses for Southwest

Despite the positive income, Southwest would have reported large losses of up to $1 billion for the quarter without federal financial assistance. The airline industry has received around $54 billion in grants to pay workers and a further $25 billion in low-interest loans since the onset of the pandemic.

Chairman and CEO Gary Kelly said in a statement,

"Excluding the benefit of PSP (Payroll Support Program) Extension proceeds and other special items, our first quarter 2021 net loss was $1.0 billion... We remain grateful for this much-needed federal payroll support on the heels of substantial losses in 2020."

Other U.S carriers still lost billions

American Airlines posted losses of $1.25 billion, joining Delta Air Lines and United Airlines in the billion-dollar quarterly losses club. However, there is cause for optimism as airlines receive more bookings and demand appears to be recovering. The stock market was in agreement, with shares in airlines rising by 2-3% before the opening bell this morning.

Doug Parker, American Airlines' chief executive, said,

“With the momentum underway from the first quarter, we see signs of continued recovery in demand.”

Alaska Airlines also posted losses for the first quarter of $131 million, although they were narrower than analysts expected. Excluding aid received under the Payroll Support Program, Alaska would have lost $436 million.

Do you think the air travel industry will permanently recover in the summer, or further travel restrictions and COVID cases will cause another slump? Let us know your thoughts in the comments.