Southwest Airlines breaks its streak of quarterly profits since 2011 as Coronavirus weighs on demand

Southwest Airlines (NYSE: LUV) broke its streak of quarterly profits since 2011 on Tuesday. The U.S carrier also said that it doesn’t see the demand for air travel improving this spring as Coronavirus continues to weigh on the global travel and tourism industry.

Southwest is focusing intensely on cutting expenditures and minimizing daily cash burn that it predicts to lie in the range of £24.20 million to £28.20 million in Q2. On Tuesday, the airline also offered £1.29 billion worth of public stock (55 million shares) in a bid to shore up its financial reserves. The company also expressed plans of issuing £810 million in additional debt to cushion the economic blow from COVID-19.

Southwest Airlines forecasts a 95% drop in revenue in May

According to Southwest Airlines, its revenue in May is likely to drop by 95% as compared to the year-ago figure. Performance after May, it added, is currently difficult to estimate.

Southwest received a part of the government’s £20 billion financial support to the airline industry. The grant restricts U.S air carriers to keep their employees on the payroll through September 30^th. CEO Gary Kelly of Southwest Airlines, however, recently accentuated that if demand fails to recover by October, the company will have to resort to a job cut. Demand for air travel, Kelly added, likely hit its lowest at the start of April with the rest of the month having posted modest improvements.

Southwest Airlines is currently relying on cutting capacity to minimize expenditures. In May, the company plans on reducing its capacity by roughly 70%.

Southwest Airlines Q1 financial results versus analysts’ estimates

At £3.41 billion, the Dallas-headquartered airline posted slightly lower revenue in the first quarter as compared to the analysts’ estimates. On a year over year basis, its quarterly revenue marked an 18% decline. Southwest saw a 12 pence of adjusted loss per share in the recent quarter that topped experts’ forecast.

The U.S carrier also highlighted to have raised £5.48 billion in Q1. Much of it (£4.19 billion) was attributed to debt while the remaining came from the government-backed payroll support program. Following recent debt activity, Southwest’s assets free of financial liabilities were worth £6.45 billion.

Southwest Airlines was reported around 1% in extended trading on Tuesday. At £24.20 per share, the company is around 45% down year to date in the stock market. It is currently valued at £12.19 billion and has a price to earnings ratio of 7.05.