Southwest CEO Pledges No Layoffs Or Furloughs In Upcoming Months

July 27, 2020


Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “As our Nation continues to battle the COVID-19 pandemic, demand for air travel remains weak, which was the driver of our second quarter net loss of approximately $1.5 billion, excluding special items. We were encouraged by improvements in May and June leisure passenger traffic trends, compared with March and April; however, the improving trends in revenue and bookings have recently stalled in July with the rise in COVID-19 cases. We expect air travel demand to remain depressed until a vaccine or therapeutics are available to combat the infection and spread of COVID-19. We will adjust our flight schedule aggressively and frequently in response to this volatile demand environment. I am incredibly proud of our Employees for their superb planning and cost management, swift actions to bolster liquidity, quick adaptation of our route network, and outstanding Customer Service. Our top priority is the safety and health of our People and our Customers.

“During second quarter 2020, we restructured our route network and launched the Southwest Promise—added additional cleaning practices throughout our operation; modified procedures to support physical-distancing; required Passengers and Customer-facing Employees to wear face masks or face coverings; and implemented additional policies and procedures for our Employees to protect themselves and safely transport our Customers. As part of our Promise, we are limiting seats sold on each flight through at least October 2020 to allow for middle seats to remain open to allow for physical-distancing onboard our aircraft. Customer feedback has been very positive.

“We have strong liquidity, with cash and short-term investments of $14.5 billion as of June 30, 2020; the only investment-grade credit rating in the U.S. airline industry by all three agencies; and unencumbered assets of $12 billion, including $10 billion in aircraft. We remain diligent in meticulously managing our cash burn. Since March, we have reduced annual 2020 spending by more than $7 billion compared with original plans. Average core cash burn2 decreased by nearly half during second quarter 2020, from approximately $900 million in April, or $30 million per day, to approximately $500 million in June, or $16 million per day, resulting in second quarter 2020 average core cash burn of $23 million per day, primarily due to strengthening revenue trends. Our average core cash burn in July 2020 is currently estimated to be approximately $18 million per day, higher than June as a result of weakening revenue trends. Due to the reversal in trends, we are re-evaluating our August and September 2020 capacity plans in an effort to improve our third quarter 2020 average daily core cash burn, which is currently estimated to be in line with second quarter 2020 of $23 million per day. We are laser-focused on returning to break-even cash flow, and we will continue exploring opportunities for further cost efficiencies.

“We are grateful for the Payroll Support Program (PSP) proceeds we received from the U.S. Treasury under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which has helped to protect jobs for our more than 60,000 Southwest Employees. During second quarter 2020, we introduced voluntary extended emergency time off and separation programs with the goal of aligning staffing to reduced flight schedules to avoid involuntary furloughs and layoffs. Employees had until July 15th to elect to participate in these voluntary programs, and I am proud to share that, combined, approximately 16,900 Employees volunteered for these programs, representing nearly 27 percent of our workforce. The benefits of these programs are expected to result in more than $400 million in lower salaries, wages, and benefits costs in fourth quarter 2020, alone. In addition, the emergency time off element provides the Company flexibility to adjust to increased demand. For those Employees that elected these programs, I am immensely grateful for their outstanding support of and service to our great Company. Based on the strong take rates from these voluntary programs, currently, we do not intend to pursue furloughs and layoffs, or pay and benefits cuts, through yearend; however, we will continue to plan for multiple weak scenarios and maintain our preparedness.

“In a time where much is uncertain, I am even more grateful for the position of strength that Southwest Employees have built over the last five decades. Our founder, Herb Kelleher, always reminded us: we manage, in good times, so that all of us will be protected from bad times; that is why keeping costs low and spirits high, at all times, is so very important. By living Herb’s basic credo, we entered this crisis prepared with the U.S. airline industry’s strongest balance sheet and most successful business model. While the impact of this pandemic is unprecedented, we believe that demand for air travel will rebound, and we fully intend to be ready and well-positioned when it does.”



Back To Top