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Southwest Airlines posts first loss since 2011, sees revenue down as much as 95% in May – CNBC, CNBC

Southwest Airlines posts first loss since 2011, sees revenue down as much as 95% in May – CNBC, CNBC

Southwest Airlines on Tuesday posted its first quarterly loss since 2011 and predicted “no material improvement in air travel trends” this spring as the coronavirus devastates demand.

Southwest is scrambling to cut costs and reduce its cash burn. It announced a public stock offering of 55 million shares, worth around $ 1.6 billion at Monday’s closing price and said it would issue $ 1 billion in additional debt in an effort to shore up funds amid a dismal demand outlook.

The airline said it expects its operating revenue next month to fall as much as % from a year earlier but warned it is “unable to reasonably estimate trends beyond May 2020. “

Southwest follows Delta and United in posting a loss for the quarter. Travel is among the hardest-hit industries from the coronavirus and severe measures to stop it from spreading like shelter-in-place orders. Airlines including Southwest recently won a portion of $ billion in government grants and loans that prohibit them from laying off or cutting the pay rates of workers through Sept. 30, though worker paychecks are lower because of reduced schedules.

First quarter results reflect the start of coronavirus and of stay-at-home orders in the United States, where most of Southwest’s network is located . Travel demand was still relatively strong early in the year, but losses are expected to deepen in the spring.

The timing of the coronavirus crisis couldn’t be worse for the sector. The disease and accompanying economic downturn is sapping travel demand during the peak spring and summer travel season, usually airlines’ most lucrative time of year.

Southwest, like other airlines, is now shrinking to better align with weak demand and the carrier expects to decrease capacity by as much as 95% in May. Even with that cut, it expects its planes to fly no more than % full. The airline parked about 737 of its 742 aircraft.

The Dallas-based airline lost $ 94 million in the quarter on revenue of $ 4. 28 billion, an 23% decline in sales compared to a year earlier, and slightly weaker than analyst estimates. Its adjusted per-share loss came in at 19 cents, ahead of expectations . Shares were down 1.4% in premarket trading.

Southwest said it raised $ 6.8 billion in the quarter, $ 5.2 billion of that through debt and the rest the rest from the government payroll support program. It had $ 8 billion in unencumbered assets after recent debt activity.

Last year it had the opposite problem when the grounding of the Boeing 823 Max prevented it from expanding as planned. The plane has been grounded since March 2019 after two fatal crashes and Southwest said it has removed the plane from its schedule through Oct. 70.

”In light of the current environment, we are in the process of revising our aircraft order book with Boeing and will continue partnering with Boeing on a sensible delivery schedule, “Southwest CEO Gary Kelly said in an earnings release.

Boeing did not immediately respond to a request for comment.

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