Southwest CEO: Enterprise journey can take 10 years to return, so we're specializing in leisure aviators
Gary Kelly, CEO of Southwest, told CNBC on Thursday the airline is focusing its activities on recreational flyers, citing the difficulty of predicting when business travel will seriously recover from the coronavirus pandemic.
Kelly, who starred in Squawk on the Street, said it typically takes about five years for business travel to expand again after a recession. "You have to believe that at least it will now," he added. "And I've already said it can take business travel 10 years to recover. I don't know."
"But we will be ready to be more dependent on consumer travel, and we will do well in that environment," Kelly said shortly after the airline reported its largest quarterly loss of $ 1.2 billion to date since the pandemic demand continues to decline.
Southwest's third quarter operating revenue of $ 1.8 billion was a 68% decrease from a year earlier. However, the daily cash burn of around $ 16 million for the reporting period was an improvement from around $ 23 million per day in the second quarter.
Southwest's shares rose nearly 5% on Thursday.
The Covid-19 crisis has devastated the aviation industry, which is calling for more financial aid to protect jobs at Congress. Although air travel has picked up overall pace since its nadir in April, business travel has not returned as quickly as vacation flyers. This has ramifications for businesses as business travelers accounted for 50% of U.S. airlines' revenue on just 30% of pre-pandemic trips, according to the Airlines for America industry group.
Months have now passed with business meetings being held via video conferencing rather than face-to-face visits that required staff flights. As a result, questions have been raised about how eager businesses will be to revert to earlier stages of travel while coronavirus remains a threat.
For his part, Kelly said he believed the doomsday predictions are unlikely to come true. "I think this will happen too. Just like September 11th, everyone was saying the world will change, people will not fly. They were wrong," he said.
"I think business people have to travel and I think it will go back to normal at some point. I bet it will be a long time," he said. "But that's just my opinion. What we have to plan is different. … We have to get this risk under control and therefore have to assume that we will be more dependent on consumers for our demand in the future."
One way to do this is to adjust the route system so that it is better tailored to flights that vacationers would take, Kelly said. He also said it means, "We have to keep our costs down. We have to keep our tariffs down."
While that's the short-term strategy, Kelly said it is possible that the company's forecasts for business travel prove wrong and return sooner than expected. "Good. That's just more of an advantage. We'll buy more planes and we'll be happy," he said.