Southwest Airlines swings to a £720 million loss in Q2

Southwest Airlines (NYSE: LUV) announced to have swung to a loss of £720 million in the fiscal second quarter on Thursday. In the same quarter last year, the company had reported a net income of £583 million. Analysts, on the other hand, were anticipating an even broader loss in Q2. Southwest also warned that demand for air travel was likely to remain under pressure unless an effective treatment for COVID-19 is not developed.

Shares of the company were reported almost flat in premarket trading on Thursday. At £26.24 per share, Southwest Airlines is roughly 40% down year to date in the stock market after recovering from an even lower £18.78 per share in May. Learn more about how to choose winning stocks.

Southwest Airlines tops analysts’ estimates for revenue

Southwest Airlines said that ticket sales dwindled again in recent weeks as COVID-19 cases continued to surge in the United States and pushed states like New York into reinstating travel restrictions. Earlier this week, the airline announced 28% of its workers to have applied for leave or exit.

According to CEO Gary Kelly of Southwest Airlines, the company is committed to making timely and aggressive adjustments to the flight schedules in a bid to combat this unparalleled volatility in demand. Last month, Southwest Airlines had expressed confidence in its cash reserves that it said were sufficient to sustain operations for two more years.

In the third quarter, the U.S. air carrier sees its capacity to remain 20% to 30% lower as compared to the same quarter last year. Southwest reported an unprecedented 83% decline in its revenue in the second quarter from £4.64 billion last year to roughly £800 million. Its sales, however, came in stronger than the experts’ forecast of £746 million.

Southwest Airlines’ passenger revenue tanks 87.2%

On an adjusted basis, the air carrier posted £2.10 of loss per share in Q2 that came in slightly lower than the FactSet consensus of £2.15 per share. At £554 million, Southwest Airlines’ passenger revenue tanked 87.2% in Q2 but was stronger than £454 million expected.

Experts had also estimated the air carrier’s load factor to print at 20.5% in the recent quarter versus 31.4% that it reported on Thursday. In the comparable quarter of last year, the Dallas-based air carrier’s load factor stood at 86.4%.

At the time of writing, the world’s largest low-cost carrier has a market cap of £15.45 billion and a price to earnings ratio of 9.82.