Southwest reports more bookings than cancellations in April: Green shoots or false dawn for US airlines?

southwest airlines luv

US low-cost carrier Southwest Airlines (LUV) reported a net rise in bookings over the last few days, which it hopes are green shoots that signal a pick up in air traffic as the economy slowly reopens.

The company said on Tuesday that this move — more tickets sold than cancelled — is a reversal from a consistent trend of negative net bookings it faced during March and April, even though its operational results are still far from normal.

Southwest said it expects its revenue to drop between 85% to 90% in May compared to a year ago. The airline predicts it will sell only 25% to 30% of seats on its greatly reduced schedule of flights this month.
This is an improvement from its earlier forecast of a 90% to 95% drop in revenue, when Southwest expected to sell just 5% to 10% of its flights. And the carrier expects June revenue to be down 80% to 85%, selling about 30% to 45% of seats. It cautioned that the environment remains uncertain.
Southwest, the nation’s fourth-largest airline behind American, Delta Air Lines and United Airlines, said its final numbers for April show a revenue drop of 90% to 95%, and that it sold only 8% of its seats.

Southwest shares benefitted from yesterday’s market rally, gaining from the overall positive sentiment infused by a potential coronavirus vaccine from US biotech firm Moderna (MDRN).

The stock gained 13.5% during yesterday’s session, closing the day at $27.09, while sliding 0.5% during this morning early trading.

southwest airlines luv stock chart

US airlines have been struggling to survive the economic fallout of the outbreak, as travel halts have resulted in a 90% plunge in ticket sales.

The US government offered commercial airlines around $50bn in loans to help them through the crisis, though much of this aid is tied to not sacking staff for several months.

A March report from Bank of America said Southwest Airlines was the best-positioned US carrier to weather the fallout, due to the company’s “conservative balance sheet and low earnings volatility”.

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    Alejandro Arrieche

    Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.

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