A Southwest Airlines jet leaves Midway Airport on in Chicago, Illinois.
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Their competitors over the past week have also reported an improvement in travel demand since March spring breaks as more people are vaccinated and tourist attractions reopen, a welcome trend for the U.S. airline industry that collectively lost more than $35 billion last year.
American shares were down 1% in midday trading, while Southwest’s were up 1.3%.
“Thank goodness people are getting vaccinated and thank goodness people are ready to get back to their lives and move about the country” Southwest CEO Gary Kelly said in an interview with CNBC’s “Squawk on the Street.”
Southwest reported a $116 million profit, boosted by more than $1 billion in federal payroll aid and said it expects its core cash flow to break even “or better” by June. On average, it expects its core cash burn to come in at between $2 million to $4 million a day in the second quarter, down from $13 million in the first three months of the year.
The Dallas-based airline plans to restore much of its flying capacity in the second quarter to about 85% of pre-pandemic levels.
Southwest’s much larger neighbor, American, said it is planning to operate second-quarter capacity that’s 20% to 25% less compared with the same quarter of 2019.
Forth Worth, Texas-based American lost $1.25 billion in the first quarter, it’s fifth quarterly loss in a row but a sum that is narrowing as bookings pick up. Like its large-carrier rivals Delta and United, has been forced to do without much of the business and international travel revenue those carriers have long relied on. American CEO Doug Parker said business travel demand is starting to show some improvement but is still far below pre-pandemic levels.
American’s first-quarter revenue came in at just over $4 billion, down nearly 53% from the more than $8.5 billion it posted a year earlier and below analysts’ expectations. Better demand is helping both carriers trim their cash burn. American had an average daily cash burn of $27 million in the first quarter, which fell to $4 million in March. Adjusting for one-time items, American lost $4.32 a share, a penny more than analysts’ estimates.
“The pandemic is far from over. We have to continue to fight like never before and ensure that when the green flag drops, American is out in front,” Parker and President Robert Isom said in a note to employees. “But as our world makes daily strides in COVID-19 vaccination efforts, customers are returning to travel and there is no doubt the pace of the recovery is accelerating.”
American is planning to ramp up flying more than its big network competitors compared with their 2019 capacity.
“While we are more conservative about the near term. Being accurate means we burn less cash, which means we have more resources to invest in the recovery,” United’s CEO Scott Kirby said on the airline’s quarterly call earlier this week.
Southwest’s revenue fell to $2.05 billion, down more than 51% from last year and slightly below the $2.07 billion Wall Street analysts were expecting. Southwest posted an adjusted per-share loss of $1.72, less than the $1.85 a share analysts forecast.
More than half of U.S. adults have received at least one Covid-19 vaccine dose and airline executives hope that the trend will spur more travel, and eventually, more trips abroad and for work, than over the last dismal year.
Some airlines, including American, United, Spirit and JetBlue Airways have resumed or plan to resume pilot hiring this year, while carriers have also had to ramp up pilot training in recent months as demand rebounded.