Southwest Airlines CEO: We’re parking more planes and cutting spending as COVID-19 challenge grows

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Southwest Airlines is parking more planes and considering early retirement packages for employees as the airline tries to further cut expenses to make up for a staggering drop in passengers caused by the COVID-19 pandemic, CEO Gary Kelly said Monday.

In a video message to employees, Kelly said the company needs to be focused on “conserving cash and making good financial decisions” to help navigate the sudden economic difficulties resulting from the downturn brought on by the virus and global attempts to stymie its spread.

“In the end, you got to have cash, you know, otherwise, none of us have jobs,” Kelly said.

Dallas-based Southwest has already suspended about 1,500 daily flights, about 40% of its schedule. But like other airlines, it’s failing to keep up with how fast customers are abandoning flying. It’s also frozen hiring, suspended share repurchases and trimmed Kelly’s salary by 10%.

Southwest has about 62,000 employees, including more than 10,000 in Dallas.

But as the United States became the global leader in the number of confirmed COVID-19 cases, travel and social gathering restrictions have become more intense, including a 14-day quarantine on anyone traveling to Texas from states such as New York, California, Washington and Louisiana.

On Sunday, the number of passengers getting on planes at airports dropped by more than 92% compared with a year earlier, according to data from the Transportation Security Administration.

As of Monday, Southwest has parked 50 of its 737-700 planes in Victorville, Calif. That’s up from the 24 it announced two weeks ago and in addition to the 34 Boeing 737 Max jets in storage for more than a year after the aircraft was grounded by the Federal Aviation Administration.

Kelly said he is unsure how many more planes the airline will have to ground.

“We’re taking some of our aircraft that are perhaps older, have some maintenance coming up,” Kelly said. “We won’t be spending money on those airplanes right now to go through a significant overhaul, and they’ll save us a lot of cash here in the near term.”

Southwest could begin an early retirement program in addition to a voluntary leave of absence proposal it has made to flight attendants and pilots, Kelly said.

“A month ago, we had no plans to do (early retirement), because we want to grow,” Kelly said. “But that would be a very logical thing for us to think about.”

Kelly didn’t mention Monday whether Southwest will take government grants or loans as federal officials determine what kind of conditions it will put on airlines. The legislation passed by lawmakers last week requires airlines to keep workforce numbers level, forgo stock buybacks and limit executive salaries if they accept aid from the federal government.

Southwest has told its pilots union that it is not considering furloughs at this point, something Kelly reiterated in the message. The company also told pilots that it is not considering bankruptcy.

“So we’ve never had a furlough in our history,” Kelly said. “I’m certainly not wanting to do that now. And that’s not our plan. And we just can’t ever promise that that won’t be the case. But it’s all predicated on this being a dip, and then returning to normal.”

Just how long Southwest can withstand the downturn is another question. Kelly said the 53-year-old company can withstand a six-month downturn, but a year would be more difficult.

“If the loads continue where they are today for 12 months, that’s just impossible,” Kelly said. “There’s no way we can do that. We would run out of cash. Or we’d be in such bad shape at the end of that, that we would really be hobbled for the future.”

Southwest, which has about 62,000 employees worldwide, also doesn’t want to temporarily shut down to preserve money.

“I’d rather keep the blood flowing through the arteries, so to speak,” Kelly said.


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