Finance

Southwest Sees June Profit, ‘Steady’ Corp. Travel Improvement in Q2

Southwest Airlines reported improving business travel bookings in the second quarter as the carrier saw its first profitable month since the beginning of the Covid-19 pandemic.

During the quarter, Southwest reported $3.6 billion in passenger revenue and $4 billion in total operating revenues, more than two-thirds of its operating revenues in the second quarter of 2019. Leisure passenger traffic in June was above June 2019 levels at comparable fares, and while business travel recovery is lagging, the carrier is seeing a “very steady sequential improvement,” Southwest Airlines president Tom Nealon said in an earnings call.

In April, revenues from managed business travel were down 80 percent compared with 2019 levels. In May, that improved to down 77 percent from 2019 levels, and in June, the year-over-year decline further decreased to 69 percent.

“Keep in mind that in our Q1 call, we reported that our business revenues were down 88 percent,” Nealon said. 

Fares paid by corporate travelers also have been lower amid the decreased volume but have “showed improvement,” Nealon said. That improvement in both volume and fares should continue as corporate customers return to the office and ease travel restrictions, he said. Nealon said he is “very encouraged” in what he is hearing from Southwest’s corporate travel and travel management company partners in terms of travel plans and noted that all the professional services and consulting firms among the carrier’s largest corporate accounts are now traveling again.

In the meantime, Southwest projects operating revenue in July will be down 10 percent to 15 percent compared to July 2019, and August operating revenue will be down between 12 percent and 17 percent as business travel’s recovery continues to lag leisure travel’s recovery.

Southwest reported a net income of $348 million for the second quarter, which included $724 million from the Payroll Support Program and other proceeds to offset payroll expenses. Excluding that and other special items, Southwest had a loss of $206 million for the quarter.

In June, however, cash flow turned positive to $4 million per day and the carrier saw a profit for the month even without payroll support programs, the first time that has happened since the onset of the pandemic in March 2020, chairman and CEO Gary Kelly said.

Southwest should be profitable in the third and fourth quarter “based on our current trends and cost outlook,” according to Kelly.

RELATED: Southwest Q1 earnings

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