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Why Southwest CEO Gary Kelly is 'euphoric' about airline recovery

Adam Shapiro
·Anchor
·2-min read
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Southwest Airlines (LUV) released earnings that beat expectations on Thursday morning, and CEO Gary Kelly told Yahoo Finance Live that his mood is "euphoric" as passengers return to the skies. 

The airline boosted flight activity by 50% on March 11 and added 1,000 daily departures, Kelly pointed out to Yahoo Finance. Operating revenue, $2.1 billion, was down year over year 51% and down 60% compared to 2019 but still beat analysts' expectations, according to the first-quarter earnings results. 

While Southwest posted a $116 million profit, the airline would have had a $1 billion loss for the quarter if it had not received aid from the federal government.

Still, booking trends have improved, and Southwest projects operating revenue in May will be down 35% to 40%. "We can actually forecast June to the point where we think it could be break-even or even positive cash flow," Kelly said. "Gives us a lot of confidence that the worst is behind us."

Things are 'definitely looking up'

Southwest ended the quarter with $15.3 billion in liquidity and an increase in ASMs (available seat miles) or capacity, which will allow it to accommodate pandemic fatigued Americans who are ready to travel. "We believe there is significant pent-up demand for leisure travel and are optimistic about summer 2021," the airline told investors in its Q1 earnings report.

Southwest Airlines CEO Gary Kelly speaks at the annual Aviation Summit in Washington, DC, on March 5, 2020. (Photo by Nicholas Kamm / AFP) (Photo by NICHOLAS KAMM/AFP via Getty Images)
Southwest Airlines CEO Gary Kelly speaks at the annual Aviation Summit in Washington, DC, on March 5, 2020. (Photo by Nicholas Kamm / AFP) (Photo by NICHOLAS KAMM/AFP via Getty Images)

The improving trends explain why Southwest is flying high heading into the summer travel season. But Kelly cautioned a similar trend last year stalled when the pandemic intensified. 

"You know we had a faint last year in June, July where things were improving and we were extrapolating those trends into the fall and boosted our flight activity and it turned out to be premature," he said.

But this time, Kelly says vaccines that prevent serious COVID-19 illness, which started becoming available in January, are making a big difference. "And so finally, January, February with the vaccines rolling out we began to see a change," Kelly added.

Southwest has expanded during the pandemic by adding 17 new destinations to its schedule and modernizing its fleet of Boeing (BA) 737 aircraft.  

Last month, the airline added orders for 100 737-MAX aircraft, which includes 70 737 MAX 8 jets. "It may be one of the proudest achievements for our company in a long, long time," Kelly proclaimed.  

As he looks to the future, Kelly believes the Boeing purchase and expansion to new markets will pay off. "It really positioned us very well for the next decade or more," he said.

Adam Shapiro is co-anchor of Yahoo Finance Live 3pm to 5pm. Follow him on Twitter @Ajshaps

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