In an update, Southwest Airlines has reported that July 2021 operating revenues performed in line with expectations, driven primarily by strong leisure passenger traffic and fares which were both above July 2019 levels.
Southwest’s July 2021 managed business revenues also performed in line with expectations and decreased approximately 63% compared with July 2019.
However, the airline has reported that it has recently experienced a “deceleration in close-in bookings and an increase in close-in trip cancellations in August 2021, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant”. Based on the assumption that COVID-19 cases remain elevated in the near-term and current revenue trends in August continue into September, Southwest’s current outlook for third quarter 2021 operating revenues has worsened by an estimated three to four points from its previous outlook three weeks ago, compared with third quarter 2019. Southwest’s operating revenue outlook for August 2021 is impacted by less holiday travel, an estimated one to two point headwind, compared with August 2019, as the Labor Day holiday weekend falls in September 2021, whereas it was split between August and September in 2019. The airline notes that travel demand for the Labor Day holiday weekend “remains healthy, thus far”.
Although the airline reports that it was profitable again in July 2021, the company believes the recent negative effects of the pandemic on August and September revenue trends will “make it difficult for the Company to be profitable in third quarter 2021, without taking into account the benefit of temporary salaries and wages cost relief provided by payroll support program proceeds. The Company will continue to monitor demand and booking trends and adjust capacity, as needed”.
As of August 9, 2021, Southwest had cash and short-term investments of approximately $16.9 billion, well in excess of debt outstanding. The Company's adjusted debt-to-invested capital (leverage) is currently 56%, and it remains the only U.S. airline with an investment-grade rating by all three rating agencies.
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Southwest Airlines