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Company News

Southwest sees slower third-quarter cash burn as bookings improve, demand still choppy

FILE PHOTO: Air travelers wear face masks waiting to board a Southwest Airlines flight as the spread of coronavirus disease (COVID-19) continues, at Oakland International airport in Oakland, California, U.S., April 9, 2020. REUTERS/Shannon Stapleton

(Reuters) - Southwest Airlines LUV.N said on Wednesday it expects cash burn in the third quarter to slow as bookings improve modestly for August and September, even as demand remains choppy due to the coronavirus crisis, forcing the carrier to cut back its flight schedule.

An improvement in bookings had stalled in early July and they remained depressed throughout the month due to a rise in COVID-19 cases, Southwest added.

Shares of the U.S. budget carrier, rose more than 3% in premarket trade after the company forecast lower current-quarter cash burn of about $20 million per day, compared with its prior estimate of about $23 million per day.

Southwest, which has one of the strongest financial positions among U.S. airlines, said bit.ly/3271sa0 it has decided to not participate in a U.S. government secured loan program as it had taken actions to boost liquidity, and could secure additional financing at favorable terms, if needed.

The company said its third-quarter capacity would likely slump between 30% and 35%, compared with its prior expectation of a 20% to 30% drop, with October capacity expected to decrease in the 40% to 50% range, year over year.

Southwest, which has limited the number of seats sold on each flight allowing passengers more space through October, now expects August 2020 operating revenue to fall between 70% and 75% from a year earlier, compared with its earlier estimate of a decline of 70% to 80%.

The slide in revenue in September is expected to slow to between 65% and 75% from August, the airline said.

Reporting by Ankit Ajmera in Bengaluru and Tracy Rucinski in Chicago; Editing by Vinay Dwivedi

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