Southwest Airlines CEO On 'Breathtaking' March Declines, Financial Plans

Southwest Airlines Co LUV was flying high in January and the beginning of February, but started to see signs of the effect of the coronavirus at the end of February, CEO Gary Kelly said on CNBC's "Squawk Box."

Southwest Sees 'Breathtaking' Traffic Decline 

By the end of February, the spread of the coronavirus translated to an uptick in consumers canceling flights and fewer new bookings, Kelly said.

This translated to a "breathtaking" decline in traffic throughout March — but there is still some "good news" related to the company's health, he said. 

Southwest had "excess liquidity" coming into the crisis, and its ratio of debt-to-capital was the lowest in the airline's history, the CEO said.

Being prepared for any crisis is a standard requirement for the airline industry, Kelly said. 

Why It's Important For Southwest 

Before the country can "come back to life," there need to be a lot of changes, the CEO said. Southwest is ready to do its part to keep employees and passengers safe, but more important is communicating what it is doing and why customers should be reassured, he said. 

Some of the examples include offering PPE kits and maintaining social distancing measures even inside the planes, Kelly said.

The company has $9.3 billion in cash, and management will be raising more capital, the CEO said. 

"It just doesn't pay to not have enough cash in an environment like this." 

What's Next Four Southwest 

Any expectations or hope for airplane makers like Boeing Co BA to redesign part of a plane to make it more "anti-COVID" are unrealistic, the CEO said. Any certification and development would take too long, but Kelly said it's still a good idea worth exploring.

"As a world, we just weren't prepared for this pandemic and I think there is tremendous learning from this and we need to be better prepared the next time around," he said. "And hopefully it won't be for another century."

Nevertheless, April is expected to be the worst month in terms of cash burn at around $900 million, and hopefully this improves with each subsequent month, Kelly said. 

Southwest shares were up 3.33% at $30.08 at the time of publication Tuesday. 

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Posted In: NewsTravelManagementMediaGeneralairlineAirlinersCNBCCoronavirusGary Kelly
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