Southwest will extend middle seat blocking through October and
vowed not to lay off, furlough or impose pay or benefit cuts on any employees
through at least the end of the year.
Southwest had previously pledged to limit the number of seats
it sells on each flight to approximately two-thirds of each aircraft’s seat
count through September. Thursday’s announcement makes Southwest the first U.S.
airline to extend such a promise through October, though Delta CEO Ed Bastian
said last week that an extension on seat blocking beyond Sept. 30 is likely.
Speaking during the airline’s Q2 earnings call on Thursday, Southwest’s promise to avert layoffs and furloughs is in marked
contrast to its major U.S. competitors. In the past two weeks, United and
American have warned 36,000 and 25,000 employees, respectively, about potential
furloughs when federal Cares Act payroll funding expires at the end of
During the airline’s earnings call on Thursday, Southwest
executive director of corporate sales Bob Jordan explained that 7% of the
Southwest’s workforce have accepted a voluntary exit package. A total of 16,900
employees, which accounts for 27% of the airline’s workforce, have agreed to an
exit package or an extended leave.
On Thursday, Southwest reported a second-quarter net loss of
$915 million, the worst quarterly loss in its history. Losses were driven by an
82% drop in revenue as the Covid-19 virus ravaged air travel demand.
Still, Southwest ended the quarter with the strongest
liquidity/cash burn ratio of the four largest U.S. carriers. Southwest had
$15.5 billion of liquidity at the end of June and is estimating daily cash burn
in the third quarter at about $21 million, though that figure could drop with
anticipated schedule reductions. Daily cash burn in July was $16 million.
By comparison, Delta ended the quarter with $15.7 billion in
liquidity and an estimated $27 million in daily cash burn, while American had
liquidity of $13 billion with a cash burn rate of $30 million per day.
After closing a large financing deal in early July, United
had $15.2 billion in liquidity on July 22 and an estimated third-quarter daily
cash burn of $25 million.
Like other U.S. airlines, Southwest doesn’t anticipate breaking
even on daily operations until at least the end of this year, though CEO Gary
Kelly said early 2021 is more likely. Reaching that key threshold will only
happen when demand jumps substantially from current levels. Demand is currently
down about 75%.
“We are prepared for a prolonged war against this pandemic,”