The pandemic wiped out travel last year, sparking an unparalleled crisis for airlines. Altogether, U.S. carriers lost close to $35 billion in 2020, according to earnings reports this month.
Airlines had braced for a tough winter, but appetite for travel has deteriorated even further in recent weeks. Southwest said January and February bookings stalled amid high levels of Covid-19 cases and hospitalizations. Airport passenger volumes fell to their lowest level since June this week, according to the Transportation Security Administration.
“While vaccine availability should mark the beginning of the end of this pandemic, current passenger booking trends do not indicate significant improvement through March 2021,” Southwest Chief Executive Gary Kelly said.
January is typically a slow period for airlines, but this winter is proving to be especially bleak. Carriers are also grappling with the impact of rules put in place this week requiring all airline passengers arriving from abroad to test negative for Covid-19. Airlines broadly welcomed the testing requirements and believe such rules will eventually allow borders to reopen, but have said bookings to places like Mexico and the Caribbean, which had been tourism bright spots, have slowed down.
The Biden administration said this week that it plans to purchase more vaccine doses, aiming to inoculate most of the U.S. population by the end of summer.
Airline executives have different views of what that trajectory means for summer vacations.
American Chief Executive Doug Parker said 2021 will be a “year of recovery,” but said he doesn’t know when that rebound will begin. The airline expects first quarter revenue to be down as much as 65%.
“As vaccine distribution takes hold and travel restrictions are lifted, we will be ready,” he said.
United executives said last week demand may not start to climb significantly until midway through the year unless vaccine distribution speeds up. Delta Air Lines Inc. Chief Executive Ed Bastian, on the other hand, said this week that he expects the virus to reach a “much more contained state” by spring.
“Over the next 90 days, I am optimistic that we’re going to come out of this lockdown period,” Mr. Bastian said Wednesday at a Bloomberg conference.
Southwest said it would be cautious about bringing more flights back. The airline expects to stop bleeding cash sometime this year, but said it couldn’t predict exactly when. Reaching that cash break even level would require operating revenues to double from current levels, the company estimated. In the first quarter, the airline said it expects to lose $17 million a day—more than it lost in the final months of 2020 due to weak demand and rising fuel prices.
Southwest’s adjusted loss of $1.29 a share beat the $1.68-a-share loss that analysts polled by FactSet had expected. Excluding certain items, American lost $3.86 a share compared with the $4.11 a share analysts had anticipated.
