Southwest Airlines is looking ahead to next month as it plans for one of its best months in a year. After spending a year in a mostly depressed travel environment, with April and May of 2020 proving especially difficult, the airline is gearing up for a much-improved March 2021.
Southwest comes roaring back in March
In guidance published today, Southwest Airlines noted that, while it was still in a challenging environment, it was anticipating a March that would be much better than February and just about every month since March 2021.
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Expecting a sequential improvement in leisure travel from February to March, the airline has released some excellent guidance for the month.
As of writing, Southwest expects March operating revenues to be down 20 to 30% year-over-year, compared to March 2020. Compared to March 2019, Southwest expects revenue to be down 55 to 65%.
Year-over-year, the airline expects capacity in March 2021 to be down 15% compared to March 2020. Compared to March 2019, the airline only expects capacity to be down 30%.
Most impressive is that Southwest is estimating a load factor of 60 to 70% in March. This would place the airline at the highest load factor it has recorded in a year. Southwest is no longer blocking seats on its planes, leading to the higher load factor.
January and February 2021
In January, Southwest Airlines saw year-over-year operating revenues down 66% for the month with capacity down 40% year-over-year. Southwest noted a load factor of around 53% for the month.
In February, things remained largely similar. The airline expects the month’s revenue will be down about 65 to 70% year-over-year. The airline is still targeting capacity to be down about 46%, which is more than January but represents an overall weaker travel month for leisure passengers.
However, Southwest is displaying its agility when it comes to capacity management and planning. The carrier is expecting to see a load factor for February to be between 60 and 65%. This is up from its previous guidance of a load factor of 50 to 55% for the month.
Overall, in the first quarter, Southwest expects total capacity to be down 35% compared to the first quarter of 2020 and 38% lower than the first quarter of 2019.
Cash burn, however, remains a little high. The airline stated it was burning approximately $15 million per day. For the first quarter of 2021, the airline expects cash burn to be approximately $15 million per day, which is down slightly from $17 million per day previously estimated, as the airline’s operating revenue trends are on the uptick.
As trends can change based on the demand outlook and environment, Southwest is still estimating its average daily core cash burn for the first quarter could be as low as $10 million per day, assuming positive trends in the booking curves and confidence in air travel leads people to book a ticket.
Improvements in March operations
On March 11th, Southwest Airlines is expected to resume its Boeing 737 MAX operations. This fuel-efficient aircraft will allow the airline to retire some older 737-700s and reduce its costs while adding more capacity in key markets.
March, compared to January and February, is also a much stronger leisure travel month. Typically, with schools and colleges going on spring break holidays for a few days or a week, plenty of people book a flight to either head to visit family or else take a trip to a beach at home or abroad.
Spring break this year will look a little different. However, Southwest is still expecting a more substantial revenue and travel environment than February or January as people book close-in leisure travel and start looking out toward the summer.
This is evident as Southwest heads into April. Year-over-year, Southwest expects an 81% increase in capacity as April 2020 was the worst month for air travel in recent history. This is not necessarily surprising, but the number to watch out for is that Southwest expects a 25% reduction in capacity in April 2021 compared to April 2019.
Are you glad to see Southwest Airlines project confidence heading into March and April? Are you coming up with plans to fly Southwest in the next few months? Let us know in the comments!