Gary Kelly, the CEO of Southwest Airlines, said Sunday he thinks the first week of April was the worst period for his company of the coronavirus pandemic, and business should pick up from here.
“I think we’ve seen the bottom here in April. Each week after the first week of April has gotten successively better. I think May will be better than April was,” Kelly said, in an interview on CBS News’ “Face the Nation.”
“ ‘I don’t think June will be a good month, but hopefully it will be a bit better than May.’ ”
“I don’t think June will be a good month, but hopefully it will be a bit better than May,” Kelly added.
There are bookings in place but those could easily be canceled, he noted
Iconic investor Warren Buffet said Saturday that he recently sold all of his holdings of Southwest and three other major U.S. airlines. painting a grim picture of the industry.
“I was wrong about that business,” Buffett said, adding that he has been told not to fly and may not fly commercial going forward. Buffett was Southwest’s second-largest shareholder, with 51.3 million shares of 9.9% as of April 2, according to public filings covered by MarketWatch.
Read:Buffett says he dumped entire state in airline-sector stocks
Kelly wasn’t asked about Buffett’s remarks from Saturday, but the Southwest LUV, -6.46% CEO insisted it was safe to fly.
“We’re doing everything we can to make it as safe as humanly possible,” Kelly said, noting that the airline taking necessary steps to protect passengers: requiring everyone on the plane to wear masks; doing deep cleaning; and not selling every seat on planes.
“I don’t think a risk on an airplane is any greater risk than anywhere else,” he said. “It is as safe an environment as you’re going to find,” Kelly explained.
The Southwest CEO said the airline “was going to have to fight our way through this.” There are close to 400 planes that have been parked.
He said the company was well prepared for a rebound in travel. “We’ve got a strong balance sheet, we’ve got a lot of cash, and we’ve got a great business model and a low cost structure.” The company was able to raise $6 billion last week, he said.
Kelly said that he believes Southwest has what it needs to see its way through this crisis. The company has until September to decide if it needs another government loan. The airline carrier earlier in April said it expected more than $3.2 billion in government aid under the CARES Act in exchange for giving the government a 0.5% stake.
The key going forward is how consumers feel about flying. If consumer demand doesn’t pick up, Southwest may have to downsize, Kelly said.
“We’ve never had a furlough in our history. We’ve never had a pay cut in our history. We certainly don’t want to break that record,” Kelly said.
Still, the airline business may have a long road ahead of it.
Southwest shares were down by about 46% thus far in 2020, as of Friday’s close. And an exchange-traded fund that tracks the airline industry, U.S. Global Jets ETF JETS, -7.24%, was down by more than 55% in the year to date.
By comparison, the Dow Jones Industrial Average DJIA, -2.55% was off 17% so far this year, after recovering much of its March decline in April. The S&P 500 SPX, -2.80% was looking at a year-to-date loss of 12.4%, while the Nasdaq Composite Index COMP, -3.20% was down 4.1% so far in 2020.
Add Comment