Southwest Airlines says its cash reserves are sufficient to sustain business for two more years

In an announcement on Wednesday, Southwest Airlines (NYSE: LUV) expressed confidence in its cash reserves that it said were sufficient to sustain business for two more years. In a previous forecast, the air carrier had estimated its cash to last for 20 months. Southwest remained dovish in its Q1 earnings report in late April.

Shares of the company were reported marginally higher in premarket trading on Wednesday. At £28.75 per share, Southwest Airlines is roughly 35% down year to date in the stock market after recovering from a low of £19 per share in mid-May. Learn more about stocks and the stock market.

Southwest estimates £15.93 million of average daily cash burn in June

For June, the U.S. airline forecasts its average daily cash burn at roughly £15.93 million. Southwest Airline currently boasts £11.07 billion in cash and investments (short-term). The air carrier also stated that it is now seeing early signs of recovery in demand for air travel in June. Southwest said in a statement on Wednesday:

“The company has continued to experience a modest improvement in passenger demand and bookings in June 2020; primarily leisure-driven demand.”

The company also forecast £23.90 million to £27.88 million of daily core cash expenditures (average) in the second quarter. In earlier guidance, the company had expected its capacity to see an up to 60% year over year decline.

In an SEC filing, Southwest also highlighted that its operating revenue is likely to remain 70% to 75% down in June on an annualized basis. The forecast came in significantly better than an 80% to 85% YoY decline in operating revenue it had estimated in its previous guidance.

American Airlines to freeze daily cash burn before the start of 2021

In separate news, American Airlines also said last week that thanks to the gradually recovering travel demand and aggressive cost-cutting measures, it now hopes to freeze its daily cash burn before the start of 2021.

Southwest has resumed flying after months of pause due to the Coronavirus pandemic that brought the global travel and tourism industry to a near halt. In a bid to ensure social distancing, Southwest revealed on Tuesday that it has placed a limit on bookings on each of its flight to ensure space between passengers.  

Southwest Airlines performed fairly upbeat in the stock market last year with an annual gain of more than 10%. At the time of writing, it is valued at £16.96 billion and has a price to earnings ratio of 10.65.