Southwest Airlines lost US$3.1 billion last year, its first full-year loss since Richard Nixon was president and gasoline sold for about 36 cents a gallon in the US. 2020 was a disaster for airlines – some didn’t survive it – and the new year is off to a grim start.
Late last week, Southwest, American and JetBlue reported that they lost a combined $3.5 billion in the final three months of the year. The dismal revenue outlooks for the current quarter echoed similar pessimism from Delta, United and Alaska, which posted financial results earlier.
The airlines are looking past spring and hoping that they can salvage something from the peak summer vacation season.
But even that cautious optimism is threatened. And while the number of new reported cases of coronavirus in the US have eased in the last few weeks, they remain high. And now a halting rollout of vaccines threatens to further delay any recovery in travel and the travel industry.
US President Joe Biden reinstated COVID-19 travel restrictions on most non-US travellers from Brazil, the UK and South Africa. There is also a new US requirement that non-citizens provide proof of a negative test for COVID-19 before boarding a flight to the United States.
As airlines reported results, a new coronavirus variant identified in South Africa was found in the United States for the first time, with two cases diagnosed in South Carolina.
“Travel restrictions on international have resulted in a reduction in demand,” American Airlines CEO Doug Parker said. “We have seen that particularly on the short-haul international travel, things like Mexico and the Caribbean.”
Airlines are hoping that a rollout of vaccines against COVID-19 will lead to at least a partial recovery in travel this summer.
However, most of those people are likely to be leisure travellers who typically pay lower fares. Business and international travel, crucial to major airlines, are expected to recover more slowly.
With revenue likely to remain weak for several more months, airlines have slashed costs and jobs. Southwest CEO Gary Kelly thanked the 15,000 employees who took voluntary buyouts or extended leaves of absence, saving the company $565 million. Airlines have amassed billions from private borrowing and taxpayer-funded relief to help them get through the pandemic.
The focus is now on the rate of cash burn, a balancing act that is essential to riding out the global pandemic. Southwest expects to lose $10 million to $15 million a day in the first quarter after burning through about $15 million a day in the final three months of 2020.
Wall Street analysts expect the airlines will lose money again this year, although not as much, according to data compiled by FactSet.
American Airlines Group Inc. reported a loss of $2.2 billion in the fourth quarter and $8.9 billion for all of 2020 after earning nearly $1.7 billion the year before. Fourth-quarter revenue dropped more than 64%, to $4.03 billion, and the Fort Worth, Texas-based airline predicted a similar trend for the first quarter of 2021 – it expects revenue to lag year-ago numbers by 60% to 65%. American expects to burn about $30 million a day in the first quarter, roughly the same pace as the fourth quarter.
Meanwhile, Southwest posted a $908 million loss for the fourth quarter, compared with a profit of $514 million a year earlier, and said bookings have stalled in the face of high numbers of new reported cases of COVID-19. The Dallas airline predicted that January revenue will fall 65% to 70% compared with the same month last year, and February revenue will fall 65% to 75%.
Kelly said vaccine availability “should mark the beginning of the end of this pandemic” even if current passenger bookings aren’t showing it.
And JetBlue reported a loss of $381 million, after reporting a profit in the fourth quarter of 2019. For the year, JetBlue lost $1.36 billion.