Southwest expects lower cash burn as vaccines drive leisure travel rebound

FILE PHOTO: Southwest Airlines Boeing 737 plane is seen at LAX in Los Angeles
FILE PHOTO: A Southwest Airlines Boeing 737-800 plane is seen at Los Angeles International Airport (LAX) in the Greater Los Angeles Area, California, U.S., April 10, 2017. REUTERS/Lucy Nicholson

April 22, 2021

(Reuters) – Southwest Airlines Co on Thursday posted a smaller-than-expected quarterly adjusted loss and forecast lower cash burn in the second quarter as rising vaccination rates and pent-up demand for leisure travel signal an “optimistic summer”.

U.S. airlines are preparing for a rebound in summer bookings after nearly a year in the doldrums due to the COVID-19 pandemic and accompanying travel restrictions.

“Vaccinations are on the rise, and COVID-19 hospitalizations in the United States are down significantly from their peak in January 2021,” said Chief Executive Officer Gary Kelly.

“As a result, we are experiencing steady weekly improvements in domestic leisure bookings.”

The company said it was adding flights and expects second-quarter capacity to rise about 90% from a year earlier, but about 15% below 2019 levels, when air travel was not hit by the COVID-19 crisis.

Second-quarter average core cash burn is expected to be between $2 million and $4 million per day, Southwest said, compared with about $13 million per day in the previous three months.

Southwest said it expects to achieve break-even average core cash flow or better by June.

Excluding items, the Dallas-based company reported a net loss of $1.02 billion, or $1.72 per share, in the first quarter ended March 31, compared with a net loss of $77 million, or 15 cents per share, a year earlier.

Total operating revenue fell 51.5% to $2.05 billion.

Analysts on average had expected Southwest to report a loss of $1.85 per share and revenue $2.07 billion, according to IBES data from Refinitiv.

(Reporting by Sanjana Shivdas and Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila)