Southwest Sees Demand Rise As 1/5 Of Fleet Remains Grounded

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Southwest is slowly seeing demand rise as the aviation industry passes the low-point of the pandemic crisis. The US low-cost carrier revealed the news yesterday in an 8-K filing. The airline additionally said that only around 20% of its fleet is currently grounded, including its 737 MAX aircraft.

Southwest Airlines, Demand Increases, Grounded Fleet
Southwest Airlines sees demand begin to increase. Photo: Southwest Airlines

Things are looking up for most of the aviation industry. We’ve seen airlines in Europe reactivating services and rising from flight suspensions. Meanwhile, in the US, figures from the TSA have shown a consistent increase in the number of passengers passing security checkpoints. Southwest Airlines is no exception with the airline returning to net-positive bookings in May.

Southwest’s demand is rising

As part of its 8-K filing, America’s largest low-cost carrier revealed that it had seen demand on the rise. This increase in demand has primarily equated to leisure bookings. This is no surprise as Virgin Atlantic previously said that business travel would be the last to return.

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As a result of the latest figures, Southwest currently believes that revenues year over year will decrease by around 70-75%. However, both the capacity and load factor haven’t dropped so much. Both are expected to sit at 40-50% of last June’s figures.

Southwest 737 MAX Parked
Around 1/5 of the airline’s aircraft are currently grounded. Photo: Getty Images

The numbers will be a boon for Southwest, who was predicting much worse. Indeed, the airline expected revenue to be down 80-85%, capacity to be down by 45-55%. However, the load factor was slightly worse than the 35-45% decrease expected by Southwest.

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1/5 of the fleet is still grounded

Southwest also released figures regarding its fleet, and what proportion is currently grounded. According to the airline, 140 of its planes are now in long-term storage or temporary parking. This is made up of 34 grounded 737 MAXs, and 106 non-MAX 737s.

According to Planespotters, Southwest has 737 planes. This is a fantastic number, considering the airline only operates the Boeing 737. As such, 19% of the airline’s fleet is currently grounded. Once demand returns, the next-gen 737s will be reactivated as needed.

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Southwest Airlines, Demand Increases, Grounded Fleet
The airline says that it has enough liquidity for 24 months. Photo: Southwest Airlines

However, the airline’s Boeing 737 MAX aircraft will remain grounded until the aircraft type is recertified by the FAA. These aircraft have been grounded for over 15 months since March 13th, 2019. However, it remains unclear exactly when the plane will be recertified.

Daily spending exceeds $30 million

Further into the filing, Southwest revealed that its daily spending is currently in the range of $30 million to $35 million. However, when expected revenue is included, this drops to $20 million to $25 million.

The airline believes that it is currently in a position where it has 24 months of liquidity. This estimate is based on its cash and short term investments worth $13.9 billion, PSP proceeds wroth $978 million, and a daily cash burn of $20 million. Finally, Southwest pointed out that it is currently the only United States airline that has an investment-grade rating from all three rating agencies.

Have you flown with Southwest since the pandemic started? Are you looking to return to the skies with the airline soon? Let us know what you think and why in the comments!

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