Southwest Airlines shares drop as boss assesses bank loans against government grants

Southwest Airlines (NYSE: LUV) the stock has lost ground this morning on recent gains as its CEO questions whether the equity stake that the government can demand that it return for its bailout against the impact of the coronavirus comes at a cost too raised.

“Load factors are at levels we’ve never seen before,” budget airline boss Gary Kelly said in a video message to employees, referring to the proportion of seats occupied on planes. “I can assure you that we are losing money on every flight, and a lot of money. So it cannot go on indefinitely.

But he added the funds “come at a cost,” Kelly said on Friday. The money for the airlines, which is part of a $ 1 billion bailout passed by Congress last week, is intended for employee compensation and benefits.

Shares of the Dallas-based carrier fell just under 2% to around $ 35 on Monday morning trade, falling from the $ 43 per share the company received last Thursday. However, activity is down 36% year-to-date as airlines have been hit hard by the health emergency due to travel restrictions imposed by governments around the world.

US airport security officials only screened 239,000 passengers on March 25, up from 2.2 million a year earlier, according to the Airlines for America trade group.

Passenger airlines are eligible for up to $ 25 billion in wage assistance under the pending US bailout program, with an additional $ 25 billion in loans.

Southwest, which has never laid off workers or cut wages, has no plans for time off, but “I can’t promise that won’t happen,” the airline boss said.

Analysts suggest that airline revenues across the industry could fall by 80% in the second quarter of this year. Southwest Airlines generated revenue of $ 5.3 billion last quarter, while earnings per share were $ 0.98 per share.

“We think the industry has lost at least two years of growth, and probably more. As a result, we don’t think we’ll see a return to normal until 2022/2023, ”predicts Cowen analyst Helane Becker. She believes airlines will try to avoid bank loans and eventually accept government subsidies.

US carriers are cutting their April schedules by about 90% due to travel restrictions and a growing number of infections in America. US President Donald Trump has extended the lockdown deadline to April 30, pulling out of his previous plan to restart the US economy by Easter. As the number of coronavirus cases in the United States rose to 143,025, Trump says keeping the death toll at 100,000 would be “very good work.” Extending travel restrictions and blockages would further exacerbate the problems for travel companies and airlines.