Southwest sees rough months looming for early 2021

However, the carrier's top boss Gary Kelly expects the company to lose less money in Q4 than its $1.2bn deficit in the Q3

Grounded Southwest Airlines' Boeing 737 Max 8 aircraft parked at Victorville Airport in California. Reuters

Southwest Airlines expects depressed travel amid the nationwide surge in coronavirus cases and typically weak seasonal demand to combine for a difficult start to 2021 for the industry.

“January and February are bound to be really rough months - winter time, high case loads - and they are seasonally soft anyway,” chief executive Gary Kelly said in an interview with the Wings Club of New York.

“We can get started on the vaccine process and get started on recovery, but we’ve got a long way to go.”

Mr Kelly’s grim outlook added to recent warnings from other airlines that a bookings slowdown that started before Thanksgiving has persisted this month. The industry has struggled to stimulate demand that’s been impacted by the pandemic.

Domestic travel remains only about one-third of last year’s levels, and international demand has lingered at about 15 per cent amid quarantines and travel restrictions.

While Mr Kelly expects Southwest to lose less money in the fourth quarter than its $1.2 billion deficit in the third, “the revenue environment is still depressed”.

Delta Air Lines warned last week that it will burn more cash this quarter than initial projections because of the weaker bookings, while American Airlines Group said its cash consumption would be at the high end of its forecast.

This week, carriers also dropped fees to change tickets for many overseas trips to lure passengers back on planes, and Delta urged workers to consider extending voluntary unpaid leaves into 2021.

“You have to be grounded in the reality that this is really difficult, it’s not a quick fix,” Mr Kelly said. “No one knows exactly how this will play out and when.”

Southwest will add more cities to its network beyond the 10 it had already announced for this year and next, Mr Kelly said. By using idled workers and planes parked during low demand, the airline can enter the destinations at relatively low cost, he said.