Southwest Airlines has become the latest carrier to take a profit hit from the grounding of 34 of its Boeing 737 MAX fleet, which has forced the group to cancel more than 10,000 flights.
The airline has estimated that the impact of the flight cancellations, following two fatal crashes, has seen its net income reduced by $150 million.
"Flight cancellations are expected to drive unit cost pressure for the duration of the MAX groundings," said Gary C. Kelly, chairman of the board and chief executive officer. "Currently, the timeline is uncertain for the MAX aircraft return to service. In the meantime, we have proactively adjusted our published flight schedules for the next several months and removed all MAX flights through August 5."
Southwest's first quarter 2019 total operating revenues increased 4.1%, year-over-year, to a first quarter record $5.1 billion. Meanwhile, total operating expenses increased 7.3%, year-over-year, to $4.6 billion.
The Company has access to a $1 billion unsecured revolving credit facility expiring in August 2022. The revolving credit agreement has an accordion feature that would allow the company, subject to, among other things, the procurement of incremental commitments, to increase the size of the facility to $1.5 billion.
Interest on the facility is based on the company's credit ratings at the time of borrowing. At the Company's current ratings, the interest cost would be LIBOR plus a spread of 100.0 basis points.
The facility contains a financial covenant requiring a minimum coverage ratio of adjusted pre-tax income to fixed obligations, as defined.