A Southwest Airlines jet leaves Midway Airport on in Chicago, Illinois.
Scott Olson | Getty Images
Southwest Airlines on Thursday posted its biggest loss ever after the coronavirus pandemic hurt the summer travel season, but the airline cut its cash burn.
Shares rose 4.3% in afternoon trading.
Later, American Airlines reported a $2.4 billion third-quarter loss. U.S. airlines have lost more than $10 billion in the third quarter and executives have warned it could take years for the business to fully recover.
Southwest’s dropped 68% to $1.79 billion from $5.6 billion a year earlier. The Dallas-based carrier lost $1.2 billion in the three months ended Sept. 30, compared with a $659 million profit a year earlier. Adjusting for one-time items, Southwest’s loss was $1.99 per share, better than analysts’ expectations for a $2.35 per share loss.
Here’s how Southwest performed compared with what Wall Street expected, based on average estimates compiled by Refinitiv:
- Adjusted EPS: a loss of $1.99 versus an expected loss of $2.35 a share.
- Revenue: $1.79 billion versus $1.7 billion, expected.
Bookings have improved in recent months, the carrier said, but it warned a recovery is still far off.
“We are encouraged by modest improvements in leisure passenger traffic trends since the slowdown in demand experienced in July,” CEO Gary Kelly said in an earnings release. “However, until we have widely-available vaccines and achieve herd immunity, we expect passenger traffic and booking trends to remain fragile.”
Southwest said it will soon stop blocking middle seats, a measure it had in place to calm travelers worried about traveling during the pandemic.
“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,” Southwest said. “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.”
Southwest trimmed its cash burn to an average of $16 million a day in the three months ended Sept. 30, from $23 million in the second quarter. Southwest said operating revenue would need to recover to 60% to 70% of 2019 levels, double the third quarter’s sales, to break even.