In Q2 of last year, Southwest suffered an 87% drop in passenger revenues from $5.5 billion to $700 million, causing a staggering loss of $1.1 billion. Flying empty planesĪ comeback on that scale would be heroic, considering the depth of the drop, and how long the pandemic crunched air travel to the levels of the 1970s. Remarkably, Kelly tells Fortune that at least on a quarterly basis, he “hasn’t given up on” achieving Southwest’s biggest revenues ever by sometime next year, a record no other major is likely to match, or would have the nerve to predict. Southwest’s already seeing huge improvement in its fortunes: It’s estimating that for June, operating revenues will be down just 20% from 2019 versus three-fourths at this time last year, possibly bringing cash flow into balance and suggesting that it will make the turn to generating cash soon. As Americans line up once again at the ticket counters, it’s likely that Southwest will begin its second half-century in a much stronger position versus American, United, and Delta than before the pandemic. Southwest has achieved its biggest expansion ever in its deepest downturn just as it prepares to celebrate its 50 th anniversary on June 18. On that date in 1971, America’s first low-cost airline flew between Dallas, Houston, and San Antonio, following a model that cofounder Rollin King illustrated for Kelleher in a hotel bar by drawing lines connecting those three cities on a napkin. This time, they took advantage of once-in-a-lifetime opportunities.” Turning 50 “But what they did during the pandemic is the Big Gulp version of what they usually do.
“For decades, Southwest has been able to expand during crises because of its low costs, then come back stronger,” says industry expert Robert Mann. But when its rivals pulled back, precious landing slots opened, and Kelly pounced. Before the crisis, O’Hare wasn’t even on Southwest’s wish list. Put simply, Kelly grabbed plans off the shelf scheduled to take five years or more and exploited the pandemic to fast-track the campaign. He achieved that feat by deploying planes parked at desert airfields, and crews grounded by the pandemic, that Southwest still paid for, and dispatching them to the new routes, a gambit that brought sorely needed revenue. Over a dozen vacation destinations joined the network, from Sarasota to Colorado Springs to Palm Springs, important new dots since vacations and adventures rather than business trips are leading the recovery in air travel. While rivals were exiting market after market, Southwest has opened no fewer than 17 new destinations, a campaign that encompasses key hubs Chicago O’Hare, Miami International, and Houston Intercontinental. But at the same time, he showed the vision and moxie to pursue a superambitious flight plan for growth. To stanch the bleeding, Kelly indeed slashed outlays.
Southwest already entered the crisis hamstrung by the grounding of the aircraft it’s counting on for future expansion, the Boeing 737 MAX. You’d think that to weather the worst devastation in modern airline history, a tempest whose ferocity and duration were totally unpredictable, Kelly would play defense by onboarding a strategy of chopping costs and otherwise hunkering down. “The COVID hit was far more damaging because we kept getting false dawns, then it would go on and on.” “9/11 was awful, but we recovered quickly,” he observes. COVID might not be a short, quick shock like 9/11, but a long-lasting plague that hammered commercial aviation harder than any other big business.
carrier, couldn’t even guess at how long the mysterious virus would ground America’s travelers. This time, Kelly, whose 17-year tenure makes him the longest-serving CEO for a major U.S. Yet within months Southwest roared back to post steady profits. He recalled that in the days after the World Trade Center attack, when he as CFO sent similarly disastrous figures to the budget carrier’s legendary cofounder, and his own mentor, Herb Kelleher.
How do we recover?’” Marveling at a 97% drop in traffic from 2019, and a cash burn of $200 million that week, Kelly couldn’t help wondering the same thing. It said, ‘We have no words to describe the damage. “I’d never read a message from the finance staff anything like that dark. But the “color” that accompanied the report for the week of April 5, 2020, evoked the lowest of low-down blues. “Each week when the finance team sent me the figures for our operations, they would provide commentary that was typically upbeat,” he told Fortune. The numbers that the Southwest Airlines CEO surveyed in April of last year were unspeakably catastrophic, and he had no indicators to foresee if the pandemic signaled a brief nosedive or a slow-motion crash.
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