Southwest Airlines reports first annual loss since 1972

Dallas-based Southwest Airlines, one of the leading contributors to Las Vegas airlift, on Thursday reported its first annual loss since 1972.

The return of domestic air capacity tends to be listed high up on the list of priorities necessary for a recovery from the pandemic, usually right behind widespread distribution of COVID-19 vaccine.

But softness in the U.S. travel market is expected to continue to affect Southwest operations in Las Vegas and across its system.

“Average core cash burn was approximately $12 million per day in fourth quarter 2020, and we expect average core cash burn of approximately $17 million per day in first quarter 2021, as a result of continued softness in demand and a seasonally weaker travel period in January and February 2021, as well as rising fuel prices,” Southwest Chairman and CEO Gary Kelly said in a statement released ahead of an earnings call.

“Including certain changes in working capital, we expect average core cash burn in first quarter 2021 to be in the range of $10 million to $15 million per day, compared with approximately $15 million per day in fourth-quarter 2020. While vaccine availability should mark the beginning of the end of this pandemic, current passenger booking trends do not indicate significant improvement through March 2021. In response to current trends, our capacity plans remain conservative through, at least, March 2021, and we will continue to monitor bookings and adjust flight activity accordingly,” Kelly said.

“While we hope to achieve cash burn break even in 2021, it is wholly dependent upon a substantial rebound in passenger traffic and revenue; and, it is difficult to predict the timing of such a rebound, especially with respect to business travel. In order to achieve cash burn break even, we continue to estimate operating revenues will need to recover to a range of 60 to 70 percent of 2019 levels, which is roughly double current levels,” he said.

Southwest reported a $908 million loss, $1.54 a share, on revenue of $2.013 billion for the quarter that ended Dec. 31. A year earlier, Southwest reported net income of $514 million, 98 cents a share, on revenue of $5.729 billion in the fourth quarter of 2019.

Southwest, the busiest commercial air carrier at McCarran International Airport for years, reported serving 586,134 passengers in November, a 53.2 percent decline from November 2019.

According to McCarran, Southwest provides 931,297 seats on flights to and from Las Vegas daily, 45.9 percent fewer than it did in January 2020.

The airline has adopted a philosophy of “win more customers and stop the bleeding,” Kelly said.

While Southwest has been balancing capacity cuts with a flurry of new aircraft deliveries and the launching of new Boeing 737 Max jets in March, it has the ability to move quickly based on market demand.

Based on an agreement with Boeing, the company expects to receive 35 737 Max 8 deliveries, including 16 leased aircraft, seven of which were delivered in December, through the end of 2021.

Southwest has generated additional revenue with a flurry of new cities on its route map. Over the next five months, Southwest will expand to eight new airports, most of which will have nonstop service to and from Las Vegas.

Upcoming new destinations will include:

■ Chicago’s O’Hare International Airport and Sarasota Bradenton International Airport in Florida beginning Feb. 14

■ Colorado Springs Municipal Airport and Savannah-Hilton Head International Airport in South Carolina beginning March 11

■ Houston’s George Bush Intercontinental Airport and Santa Barbara Airport in California beginning April 12

■ Fresno Yosemite International Airport in California beginning April 25

■ Jackson-Medgar Wiley Evers International Airport in Mississippi beginning June 6.

Kelly also was asked during the earnings call about a proposal to require COVID-19 testing prior to domestic flights, similar to the enactment of testing prior to international trips.

“I really don’t think you want this being done by airport, by airline, by city, by state,” Kelly said. “I think, as we say in Texas, that could be a real goat rodeo. It would be a really challenging thing for customers to navigate all that if it’s not consistent across the country.”

Southwest shares, traded on the New York Stock Exchange, closed up 45 cents, 1 percent, on heavy volume trading Thursday. After hours, shares continued to climb by 20 cents, 0.45 percent, to end the day at $44.80 a share.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.