Southwest sees ‘modest’ improvement in demand but cuts back on flights

Southwest Airlines on Wednesday reported “modest” improvements in passenger demand this month, with vacationers booking last-minute trips despite the coronavirus pandemic.

The company is also refusing a $ 2.8 billion government loan, saying it can get financing elsewhere. Last month, Southwest and other airlines reached deals for part of the $ 25 billion in loans given to troubled U.S. airlines under the CARES Act in March. Southwest raised $ 15.4 billion – $ 13.2 billion in debt and $ 2.2 billion in a stock sale – and received $ 3.3 billion in government payroll support.

The Dallas-based carrier expects revenue to decline 70% to 75% from August 2019, a slight improvement from its previous forecast of sales down 80% from last year . He said the planes were flying 40-45% full this month, better than the 30-40% previously predicted.

Cash consumption for the third quarter is likely to improve slightly to $ 20 million per day, from a forecast of $ 23 million

Shares rose 2.3% in pre-market trading.

Still, booking trends are “inconsistent,” Southwest warned. After an increase in demand in May and June, improvements in bookings stagnated with the increase in coronavirus cases in the United States, he said.

Bookings increased slightly for September, a positive sign for the carrier which, like all airlines, is preparing for the traditional post-summer slowdown in addition to the devastating impact of the pandemic on demand. The airline, however, is bracing for deeper cuts to its schedule.

He said its September capacity would be about 40% lower than last year, down from a previous estimate of a drop of up to 25% per year. For the third quarter, he now expects a capacity drop of 30% to 35%, worse than the 20% to 30% southwest previously forecast. Southwest said it estimates its October capacity will be around 40 to 50 percent of last year’s.