Projections over COVID-19 have gone from bad to worse to downright depressing. While Southwest Airlines is banking on another round of taxpayer subsidies and a vaccine, Southwest CEO Gary Kelly is not at all optimistic about the future, especially concerning business travel.
Southwest Airlines CEO: Business Travel May Take A Decade To Recover
Speaking to The Dallas Morning News, Kelly shared his thoughts on how Southwest has finically weathered the pandemic and his outlook on business travel:
“We were very well prepared for the pandemic coming into it with record low levels of debt. We had plenty of cash and we boosted our cash reserves dramatically this year. And we’re working on adjusting our cost structure. We’ve already got a low-cost structure in the first place and very well suited to serve the leisure side of the market in addition to the business travel market.
“But I’m certainly not bullish that business travel is going to bounce right back. In fact, I would argue that relative to a normal recession and recovery scenario, this will be twice as long. I wouldn’t be surprised to see business travel languish for a decade before it gets back to 2019 levels. So yes, we’ll be prepared for that.”
It has become increasingly clear that a V-shaped recovery will not occur anytime soon. But while analysts have pushed back recovery predictions from 2021 to 2022 to 2024, Kelly seems particularly pessimistic.
Frankly, I don’t see how airlines can continue to operate on a leisure-only basis for years to come without dramatically scaling back the workforce on a semi-permanent basis.
Kelly: We Cannot Continue To Space Out Seats
Asked if he would continue to space out seats, Kelly said:
“I don’t think we can do it indefinitely. I agree with that. And I think our customers understand that. What we hear from customers is they’re very comfortable with what we’re doing. Obviously, the middle seats are an element of that. Right now, we are interested in learning more about the science of physical distancing on the airplane given all of the other layers of safety and health protection that are in place. In the end, it’s all about what customers are comfortable with.
“Customers are really happy with the Southwest Promise today. I’m not really prepared to say when we might change, but at some point yes, absolutely, we’re going to have to get our business back. It’s just going to have to be at the right time.”
Of course customers are happy with no threat of a stranger next to them. And with bookings depressed, not booking a plane full is likely not even a negative opportunity cost on most flights.
When will that right time be? Kelly refused to elaborate further, which is more an indication of the times than any attempt at obfuscation.
CONCLUSION
When you hear a major airline CEO predict that it may take up to a decade for business travel to return to 2019 level, you suddenly realize very clearly how real the economic fallout from the pandemic and subsequent shutdowns and travel restrictions have been. If recovery truly is a decade way, blocking middle seats will be the least of Southwest’s worry.
> Read More: Southwest Airlines Focuses On “Breadth” Over “Depth”
image: Southwest
My family has flown a couple of times in recent weeks on DL and WN, with another trip coming soon. We absolutely would not have done this on AA or UA, out of concern that we would be seated next to a stranger.
Hide in your bunker forever then. You will love to be 2000
As a former SWA employee (28 years)
till very recently it is the best company one could work for. My two complaints were that they jumped on every PC movement that came down the pike and about 99% of those were sticking a finger in the Eye of God. [Is the price now being paid for that?].. The second is that they NEVER pushed back on the whole Wuhan virus mask/lock down/distance/etc. They could have followed the recommended steps and yet pushed back with all the charts and graphs and counter facts about it BUT NEVER DID.
Well, it took how many years to rebound from the 2008 Financial crisis? This is far more catastrophic on business, especially in the travel and hospitality industry. I was walking around Georgetown yesterday and it’s shocking to see each day the number of stores and restaurants being shuttered, and the lack of people walking around outside in what was once an overflowing section of DC. Lease signs were everywhere in a city that you would have been hard pressed to find decent store or restaurant space anywhere a year ago. I imagine a decade to fully recover is pretty realistic. The only upside being that there is just one way to go now…up. But it will be a slow and arduous process.
Everything needs to be on the table. Infrastructure being the first. God knows our bridges and highways need it. As well, a rushing towards the legalization of Marijuana nationally to boost state tax revenues and help local economies.
There are 2 powerful headwind factors, in addition to considerations of the cost of travel:
First, occupational health and safety. Corporations will exercise an abundance of caution in approving staff travel.
Second, many will have realised that in a long period of zero travel, the world didn’t end , as they were able to adopt much lower cost measures using technology. It must be something that has put the wind up the fully-addicted road warrior points junkies.
I guess we can assume that airfares will remain high for years to come. Air travel might return to the luxury item status it had in the ‘50s and much of the ‘60s.
@ Matthew — Well, if our Dear Leader Hitler steals the election (likely, and the only way he will get re-elected), then our economy is sunk for a very long time. The US will quickly lose much of its economic might due to massive government corruption. If we get a real leader, like most any other breathing adult, things will improve in few years.
ABSOLUTELY!!
@Gene – really and if Biden wins, then what? Oh yeah he has already promised to take away state rights and lock everyone inside their house for the next year. Did you see the report that came out that did an extensive study and found only 6% of COVID deaths are actually COVID the rest would of died anyway? Why do you think deaths fot heart attacks, strokes etc are at all time lows? Right, because they are all being classified as a COVID. Not to mention Biden has already promised to raise taxes, and pander to the Marxist BLM movement. I’m sure businesses will be booming!
Never let the truth get in the way of a good story? The reality: people are dying of COVID, the deaths are premature…as measured by the excess deaths statistics which look at death rates over a period of years, and 2020 shows an obvious , indeed dramatic spike. “ Would have died anyway” ? Well, that’s stating the obvious but it’s a question of the timeframe.
Source?
https://www.nytimes.com/interactive/2020/08/12/us/covid-deaths-us.html
Based on CDC data
Average age of death higher than the norm. 78 GREAT FLU HOAX OF2020
Except your lying liar of a president actually admitted the truth to Bob Woodward…whoops!
@ Your daddy — Biden has never “promised to take away state’s rights”. That is a lie. Please show me where he promised that?
If you want to discard the value of the remaining life expectancy of everyone who has an underlying condition (that would be EVERY single human being, including you), then you are saying human life is of no value. The last time I checked, EVERYONE will die “anyway”. The overwhelming majority of those who have died from COVID would have lived many more years if not killed by this virus.
Yes, Biden has said that he will raise taxes, but he has also said he will cut taxes. He proposes to raise taxes on certain groups and lower them on others. It is just a proposal. Remember, unlike what Trump wants to do, the Congress has to actually pass laws since the President is not a dictator. If Americans cannot contribute to a government that treats the poor, old and sick with dignity and operates on a balanced budget, then maybe all “successful” Americans aren’t really so successful. If a business can’t make a profit after paying their workers a fair wage and benefits, and paying the government a reasonable amount of taxes to pay for the infrastructure, military, etc,. that enable their business to exist, then maybe the business shouldn’t exist.
I also have not seen Joe Biden say that he would “pander to the Marxist movement”. That too is a lie. Please show me where he promised that?
Gene – good luck with getting your jackass in the White House. As I recall jacka*** were famous for voting shenanigans back in Texas. See Johnson at https://www.nytimes.com/1990/02/11/us/how-johnson-won-election-he-d-lost.html Sending ballots by mail to all registered voters gets a “D” and is ripe for fraud since voters move and die each year, etc.. When I used to review voter roles in Texas about 30 years back I saw many duplicates and deceased voters. We used to joke about how the South would rise again, when voters came from the cemeteries to cast ballots. If anyone is out to steal an election look to those those in the party that keeps sending me emails with forged headers that turn out to be from DACA. As for business travel recovery in 10 years, I’m thinking more like we are going through a seachange, like the transition from suits at work to business casual attire.
@ ADK — You are right, it will take luck since Trump and Barr will do anything possible to cheat to win the election. Donald Trump has had a net favorable job approval rating exactly ZERO times since shortly after being sworn in. If he wins, it will be pretty likely that he cheated. Look no further than Republican operatives working to put Kanye West on the ballot in several states if you want evidence of attempts to cheat. Are you going to tell us that all elections in Colorado, Hawaii, Oregon, Utah, and Washington are fraudulent? Of course not.
THE GREAT FLU HOAX OF 2020. Comical
Wishful thinking from the head of a leisure airline.
I wish all these “warrior” like Gene truly tried living under Hitler, or Stalin, or Mao, or Pol Pot, etc, etc….I lived under Khrushchev, so I know what I am talking about…
@ Gene – what do you know about Hitler? WHat do you know about truly totalitarian regime?….. Not a thing…. Most of you people are cowards that would not survive for a week in a real totalitarian regime…..As we say in Russian, “you needed to live under Stalin to appreciate what you have”….
@ Matthew — Wow, your blog must get pretty good traffic to have been infiltrated by Trump’s Russian re-election machine.
Gene, you’re an idiot!
The Davos crowd has used the Covid to usher in the “Global Reset” which is code for New World Order. Cashless global banking all controlled by Rothschild’s City of London. Mark of the beast soon required for all transactions. No more cash or privacy. Global pharma injecting untested DNA altering concoctions into 7 billion with Gates and company reaping $1T. Embedded tattoo required to fly or make a purchase. Agenda 21 on fast track. 5G rollout. Global satellite strings emitting RF. No place to hide. Dems off the left rail 2 shills, one a communist and the other a Rapist and pedo. 2 companies counting all USA votes in Israel, what could go wrong?
Gary Kelly is pretty much telling it like it is. SWA in history only had lost money 1 Q when they wrote off Muse Air. I predict further consolidation, all airlines in bankruptcy in 21 and return of CAB type regulation. Capacity will shrink 60% globally. The empty center seat is a moronic feel good that has no basis in reality. Once the door closes the re-circulation fans disburse every exhaled breath. So if you have some delusion about being safe from a virus because the seat next to you is empty. You are one of 3, idiot, imbicel, moron. And if you are a communist you are all 3.
Yesterday was Sept 11. To the young communists in the streets it has no meaning. 19 years later we have not prosecuted a single perp. The actors within our own government that orchestrated this heinous act of treason have gotten away with their crime. The good Lord will judge them. Wake up sheep we don’t get a redo!!!
@ TWA John — I will pray for you.
And building #7 imploded from trash fires. Thermite was a byproduct of building collapse. TWA 800 exploded from a shorted fuel pump.
An interesting take on things by Kelly. I think that there are something worth considering though. You hear the term “normal” bandied about a lot but what exactly does that mean in the commercial aviation context? The trade and lobbying group IATA has said that it will take years for travel to reach normal levels but counts normal as the best year EVER: 2019. Using that logic, every time the stock market hits a new high, that’s automatically the new normal, right? Yeah, I don’t think so either. How about measuring inflation or unemployment, but only for last month? A similarly bad idea. Instead, how about averaging the last five years to get a less skewed view on things. The idea is not to make it easier to hit normal but instead to set a reasonable standard for normal. Then you can see how your predictions look based on a more rational assessment.
I think normally almost universally refers to 2019, but you make a very good point.
“I wouldn’t be surprised” is far different than “predicting.”
So here we have yet another example of a reporter framing a topic in the most inflammatory manner possible, far more concerned with generating clicks than informing readers accurately.
This is why so many Americans despise the press and regard journalists one step above lawyer and one step below pimp as a profession.
Sorry William, you are splitting hairs here.
Sorry Matt, but I’m just not. Kelly did not “predict” that it would take a decade for business travel to return to 2019 levels. What he said was (and let’s quote, shall we?), that he “wouldn’t be surprised” if it took that long.
Do you really not understand the difference there? Because if you don’t, you’re pretty stupid.
If you do and chose to frame it as you did, a “”prediction,” then you are guilty of my accusation, which is being far more concerned about clicks than in gathering and distributing accurate information.
Either way, it’s not a good look…
YMMV. Your comments stand and will not be deleted. I respectfully disagree. I guess people will have to decide for themselves.
Fair enough, but saying if I go through this red light I COULD get into an accident is not the same thing as saying if I go through this red light I WILL get into an accident…
I am (or was) a frequent business traveler, as were many people from my company. Our corporate travel budget was nearly $2M per year. These hundreds of expensive, last minute tickets, usually in first/business class. We have simply stopped traveling altogether during the pandemic, and almost every single coworker of mine has indicated that they will not fly until the mask mandates are over and regular service returns to first class. Many of our customers and vendors have said the same thing. So within my circle, we are talking close to 125 professionals that are pretty much on the sidelines until comfort and convenience returns.
This is, I think, the biggest quandary for airlines. They are bending over backwards to make the economy budget leisure travelers feel safe, but at the expense of the customers that are actually profitable. I don’t know how long that can continue, and my sense is that none of thew airlines will want to go first in the great unmasking. But whichever one is bravest will likely reap the benefits of the only travel that really pays the bills.