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Southwest Airways posts greatest loss ever as coronavirus slam demand fades

A Southwest Airlines jet leaves Midway Airport in Chicago, Illinois.

Scott Olson | Getty Images

Southwest Airlines posted its biggest loss ever on Thursday after the coronavirus pandemic hit the summer travel season, but the airline cut its cash usage and was optimistic about new bookings.

U.S. airlines' losses exceeded $ 10 billion in the third quarter as the pandemic kept many customers at home, especially lucrative business travelers. Executives have warned it could take years for the company to fully recover.

"We are encouraged by modest improvements in recreational passenger traffic trends since the demand slowdown in July," said CEO Gary Kelly in an earnings announcement. "However, until we have widespread vaccines and herd immunity, we expect passenger traffic and booking trends to remain fragile."

Airline shares were significantly higher on Thursday afternoon due to sunnier comments on demand, especially during the holidays, and continued talks about additional federal aid. Southwest's shares were up nearly 6%, American Airlines was up nearly 4%, and Delta's shares were up about 7%. United gained 5%.

American on Thursday reported a loss of $ 2.4 billion in the third quarter. Southwest revenue declined 68% from $ 5.6 billion a year ago to $ 1.79 billion. The Dallas-based airline lost $ 1.2 billion in the three months ended September 30, compared to a profit of $ 659 million last year. Adjusted for one-time effects, Southwest lost $ 1.99 per share, above analysts' expectations for a loss of $ 2.35 per share.

Southwest said it will soon stop blocking center seats, a move it has taken to reassure travelers worried about traveling during the pandemic.

"This practice of effectively keeping the middle seats open has bridged us from the beginnings of the pandemic when we had little knowledge of how the virus behaved until now," Southwest said. "Today, in accordance with science-based evidence from trusted medical and aviation organizations, we will resume sales of all available seats for travel starting December 1, 2020."

Southwest reduced its cash burn to an average of $ 16 million per day for the three months ended September 30, from $ 23 million in the second quarter. According to Southwest, operating revenues would have to rebound to 60% to 70% of 2019 levels, double the third quarter revenue, to break even.

Southwest predicts capacity will decrease 45% year over year in October and 40% year over year in the fourth quarter.

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