Southwest Airlines Chairman and CEO Gary Kelly updated the low-cost carrier's more than 60,000 employees on the ongoing impact of the coronavirus (COVID-19) pandemic in the latest edition of Ask Gary on Thursday, warning that the airline could shrink "drastically" if conditions don't improve in the months to come.
"If things don't improve dramatically over the May, June and July time periods, we'll have to prepare ourselves for a drastically smaller airline. I'm not predicting that. But life can be very humbling and clearly this is a lesson that we are not in control of this coronavirus or how many people choose to fly," said Kelly, who also confirmed that the airline received an injection of cash from the U.S. government under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
"We reached agreement on Monday with the U.S. Treasury on the Payroll Support Program of the CARES Act and that means we have access to a much-needed $3.259 billion in grants and loans. We received our first round of proceeds yesterday so our cash balance is strong. I want to underscore that this doesn't solve our problem though. This gets us through the next five months. It doesn't fully cover our payroll costs through September nor will it guarantee profitability."
Kelly acknowledged the bleakness of the current state of the aviation industry but pointed to some reasons for optimism moving forward.
"Our traffic is virtually zero. So we've cut our flight schedule by more than 50 percent. We've grounded hundreds of aircraft. We are burning through cash and it is an alarming rate and that's the reality we all know," he added. "This is where we can seek and find comfort and encouragement. We have cash. We have a strong balance sheet. We have low costs. We have a great low-fare business model, extraordinary people and award-winning customer service."
Reiterating that Southwest and other impacted businesses need to hope for the best but prepare for the worst, Kelly outlined the airline's plan for further reducing costs in the event that things don't improve this summer.
"We'll likely have to make sacrifices to survive this," warned Kelly. "If we do have to resort to downsizing our company and reducing our headcount, we'll start with volunteers. We'll look for early retirement, early out, extended time off and voluntary furloughs. And if things don't improve to the point where we stop burning through cash, then we'll be forced to seek cuts in benefits and then in pay and all of that to avoid involuntary furloughs," he said.
"To be clear, we have not asked your union representatives for concessions. We have never had a pay cut or involuntary furlough in our history and that is my greatest source of pride. It's premature to ask for concessions and we're not at that point. My goal is to never get to that point."
Southwest also announced a donation of more than $400,000 in snacks and other inflight provisioning items to several nonprofit organizations across the U.S. on Thursday. The supplies will be distributed to food pantries, homeless shelters, senior centers and children's meal programs in underserved communities.
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