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Thursday, December 3, 2020

Southwest expects lower than previously estimated cash burn in Q3.

  • Southwest Airlines expects lower than previously estimated cash burn in Q3.
  • The U.S. airline expresses plans of slashing flight schedule for November.
  • The American air carrier expects the decline in operating revenue to slow down.

In an announcement on Wednesday, Southwest Airlines Co (NYSE: LUV) said that its per-day cash burn in the fiscal third quarter is now likely to print at a lower £13.10 million. The company also highlighted that signs of recovery were evident in bookings last month, and have also shown resilience in September to date.  

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In July, when the U.S. airline was struggling with passenger numbers, it had estimated a higher £15.41 million of daily cash burn for the third quarter. Southwest Airlines published its earnings report for the second quarter in July that highlighted the company to have swung to a loss of £720 million.

Southwest expresses plans of slashing flight schedule for November

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Southwest Airline, however, reaffirmed on Wednesday that its capacity will remain 30% to 35% lower in the current quarter on a year over year basis. The air carrier also expressed plans of slashing its flight schedule for November 2020 as well.

The Dallas-based airline expressed confidence in its financial stature as it confirmed that there were currently no plans of using the loyalty program to boost liquidity. The option, however, remains on the table should it require additional funding in the upcoming months.

As of 15th September, Southwest Airlines valued its cash and short-term investments at roughly £11.41 billion.

In contrast, its largest competitor, Delta Air Lines said earlier this week that it plans on strengthening its cash position by £5 billion via new bonds and loans. Delta’s SkyMiles loyalty program, as per the U.S. airline, will back its plan of raising new money.

Southwest expects the decline in operating revenue to slow down

Southwest Airlines also said that it now expects the decline in its operating revenue to slow down in the upcoming months. For September to date and August, however, its operating revenue was still about 70% down.

Southwest Airlines remained flat in premarket trading on Wednesday. The U.S. air carrier is currently exchanging hands at £31.45 per share. It printed a year to date low of £18.40 per share in mid-May when the Coronavirus pandemic brought the demand for air travel to a near halt. Interested in investing in the stock market online? Here’s an easy guide to get you started.

In comparison, Southwest was trading at a much higher £42.27 per share at the start of 2020. At the time of writing, it is valued at £18.46 billion and has a price to earnings ratio of 101.58.

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