Southwest Airlines CEO calls idea of profit this year ‘unrealistic’

Southwest Airlines Co (LUV.N) Chief Executive Gary Kelly said on Wednesday he does not expect the airline will be profitable in 2020 amid the coronavirus pandemic, snapping a 47-year streak of posting consecutive full-year profits.

“As long as the case counts are high, I think that we have to expect that travel will be relatively modest,” Kelly said at a Texas Tribune event. “We’re continuing to see traffic and revenues down 75% versus a year ago today and to think that would recover to the point we would be profitable I just think is unrealistic.”

The company last month posted a $915 million loss for the second quarter. Kelly said it is still burning through about $20 million a day.

“We’re still losing cash every single day,” he said. “We’ve got a long way to go before we can feel like we are out of intensive care.”

Southwest’s has cut its scheduled flights by about 35% to 40%, Kelly added. “The airlines are less full,” Kelly said, noting the airline was not booking middle seats.

Nearly 17,000 Southwest employees have agreed to voluntary long-term leaves or exit packages.

“The solution here is to get our passengers back — not to try to shrink the airline so radically that we’re prepared for a very, very modest travel environment,” Kelly said.

Southwest shares Wednesday closed largely unchanged.

Earlier, Southwest, Ryanair Holdings Plc (RYA.I) and EasyJet Plc (EZJ.L) were the only three airlines whose bonds are still rated investment grade, S&P Global Ratings said, while estimating a drop of up to 70% in global air passenger traffic for 2020.

Carriers operating long-haul international flights including American Airlines (AAL.O), United Airlines (UAL.O) and Delta Air Lines (DAL.N) have been among the worst hit due to the pandemic.

S&P’s forecast for 2020 global passenger traffic has worsened to a drop of between 60% and 70% from between 50% and 55% estimated in May.