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Southwest Airlines Posts Worst Quarterly Loss in Company History

Southwest Airlines Posts Worst Quarterly Loss in Company History
Joe Cortez

The pandemic continues to ravage Southwest Airlines, which turned in its worst loss in the company’s 53-year history. For the third quarter of 2020, the airline posted a net loss of $1.2 billion, leading them to take several steps to begin rebuilding their revenue streams in the near future.

The hurt continues for Southwest Airlines, as the company reported a $1.2 billion loss over the third quarter of 2020, directly attributed to the continued effects of the COVID-19 pandemic. The airline announced their results on Thursday, Oct. 22, 2020.

Airline Will Stop Blocking Middle Seats on Dec. 1, Hopeful to Encourage Full Flights

Throughout the three-month period ending Sept. 30, 2020, the airline continued to experience significant cuts into their operating revenue. Compared to 2019, the airline’s revenue was down between 64.8 percent and 70.6 percent throughout the quarter. While the airline is betting on more leisure travelers booking flights as the holiday months come, their optimism is tepid, at best, until a COVID-19 vaccine is available for widespread use.

“We are encouraged by modest improvements in leisure passenger traffic trends since the slowdown in demand experienced in July,” airline chief executive Gary Kelly said in a statement. “However, until we have widely-available vaccines and achieve herd immunity, we expect passenger traffic and booking trends to remain fragile.”

A summary of Southwest Airlines’ third quarter results, as shown in their quarterly earnings report. Image courtesy: Southwest Airlines

As part of their plan to make more seats available in the upcoming holiday season, Southwest is becoming the latest carrier to stop blocking middle seats. Starting on Dec. 1, 2020, the Dallas-based carrier will fully book their flights, without an option for flyers to purchase an additional seat to maintain social distancing. Working in partnership with two university hospitals, the airline says they will make the change focused on the safety of passengers and crewmembers first.

“This practice of effectively keeping middle seats open bridged us from the early days of the pandemic, when we had little knowledge about the behavior of the virus, to now,” Kelly said in the press release. “Today, aligned with science-based findings from trusted medical and aviation organizations, we will resume selling all available seats for travel beginning December 1, 2020.”

While Southwest’s current plan is to avoid furloughs until early 2021, executives and management are feeling the squeeze. Prior to the announcement, Kelly announced he would not take a salary until the end of the year, while board members and company leaders would all take a pay cut. As they continue to find ways to keep their employees on the payroll, the CEO urged Washington to continue discussions on a phase four bill which would include additional airline Payroll Support Program funds.

“Based on the lack of stimulus, we have communicated temporary pay rate reductions to our non-contract Employees and have begun negotiations with our Union Leaders to reach agreement on reasonable, temporary concessions return for no layoffs or furloughs through the end of 2021,” Kelly said in the press release. “If the federal government extends the much-needed PSP for the airline industry, we intend to discontinue or reverse these efforts through 2021.”

Returning Boeing 737 MAX Continues to Be a Priority

Holding the largest fleet of grounded Boeing 737 MAX aircraft of any U.S.-based carrier, the re-introduction of the troubled aircraft remains a priority for Southwest. Although they plan on working with Boeing and the Federal Aviation Administration on the timing of flying the aircraft once again, the airline does not anticipate it will happen until the second quarter of 2021.

“It will take the Company several months to comply with applicable FAA requirements, including all necessary Pilot simulator training,” Kelly said in a statement. “The MAX will likely remain out of the Company’s published flight schedules until at least second quarter 2021.”

The move is in conflict with American Airlines’ timeline, which estimates the MAX could return for one daily flight by the very end of 2020.

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