Southwest sees slower third-quarter cash burn as bookings improve, demand still choppy

Reuters

Published Aug 19, 2020 07:21AM ET

Updated Aug 19, 2020 08:30AM ET

By Ankit Ajmera and Tracy Rucinski

(Reuters) - Southwest Airlines (N:LUV) said on Wednesday it expects cash burn in the third quarter to slow as bookings improve modestly for August and September, even as demand remains choppy due to the coronavirus crisis, forcing the carrier to cut back its flight schedule.

An improvement in bookings had stalled in early July and they remained depressed throughout the month due to a rise in COVID-19 cases, Southwest added.

Shares of the U.S. budget carrier, rose more than 3% in premarket trade after the company forecast lower current-quarter cash burn of about $20 million per day, compared with its prior estimate of about $23 million per day.

Southwest, which has one of the strongest financial positions among U.S. airlines, said https:// it has decided to not participate in a U.S. government secured loan program as it had taken actions to boost liquidity, and could secure additional financing at favorable terms, if needed.

The company said its third-quarter capacity would likely slump between 30% and 35%, compared with its prior expectation of a 20% to 30% drop, with October capacity expected to decrease in the 40% to 50% range, year over year.

Southwest, which has limited the number of seats sold on each flight allowing passengers more space through October, now expects August 2020 operating revenue to fall between 70% and 75% from a year earlier, compared with its earlier estimate of a decline of 70% to 80%.