In updated guidance, Southwest Airlines has announced that the airline continues to experience significant year-over-year negative impacts to passenger demand and bookings due to the COVID-19 pandemic. Southwest has indicated that leisure passenger demand and operating revenues performed in-line with expectations in January 2021 and that bookings for February were an improvement compared with previous estimations. Southwest expects a sequential improvement in year-over-year operating revenues from February to March 2021, as compared with February and March 2019, with leisure passenger demand expected to modestly improve from a seasonally weaker time period in February 2021 to a seasonally stronger time period in March 2021. Business travel demand and bookings remain depressed, however.
Southwest continues to expect its first quarter 2021 capacity to decrease approximately 35% compared with first quarter 2020, and decrease approximately 38% compared with first quarter 2019. The airline will soon be adjusting its published flight schedule in April 2021, and currently expects April 2021 capacity to increase approximately 81%, year-over-year, and decrease approximately 25% compared with April 2019.
On the return of the 737 MAX to full service, Southwest stated that it fleet is expected to revenue service on March 11, 2021, which is after the airline is expected to have met all FAA requirements and all active pilots are expected to have received updated, MAX-related training.
Southwest continues to estimate its first quarter 2021 economic fuel costs to be in the range of $1.60 to $1.70 per gallon, with non-fuel costs expected to decrease in the range of 15 to 20 percent, year-over-year.
Southwest’s average core cash burn was approximately $15 million per day in January 2021. The airline expects its average core cash burn to be approximately $15 million per day in first quarter 2021, compared with its previous guidance of approximately $17 million per day, primarily due to improving operating revenue trends in first quarter 2021. Including certain changes in working capital, the company continues to expect average core cash burn in first quarter 2021 to be in the range of $10 million to $15 million per day.
As of February 12, 2021, Southwest had cash and short-term investments of approximately $13.7 billion, well in excess of debt outstanding. The company continues to expect to receive the remaining extended payroll support proceeds of approximately $864 million by the end of first quarter 2021.
Southwest’s remaining unencumbered assets have an estimated value of approximately $12 billion, including approximately $10 billion in aircraft and approximately $2 billion in non-aircraft assets such as spare engines, ground equipment, and real estate. The airline also noted the value of its Rapid Rewards loyalty program, which could be leveraged if required. The adjusted debt-to-invested capital (leverage) is currently 58%, and Southwest remains the only US airline with an investment-grade rating by all three rating agencies.