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.
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.
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