Southwest Airlines (NYSE:LUV) might need to become a "dramatically smaller" airline if travel does not return, its CEO warned on Thursday.
Airlines have been hard hit by the pandemic, which has caused travel demand to fall upwards of 95% year over year. The U.S. federal government has authorized $50 billion in bailout funds to try to get the industry through the downturn without layoffs, but airline management teams have warned that the package will be enough to avoid taking other actions.
Southwest CEO Gary Kelly, addressing employees in a video message posted on the company's web site, said the airline had gained access to nearly $3.3 billion in government funds.
For now, he said, Southwest's cash balance is strong, but "I want to underscore this doesn't solve our problem." And with so much uncertainty about when travel demand will return, and how strong it will be upon return, he can't rule out having to take steps including layoffs in the months to come.
"If things don't improve dramatically over the May, June, July time periods, we'll have to prepare ourselves to be a dramatically smaller airline," Kelly said. "I am not predicting that. But life can be very humbling, and clearly this is a lesson that we are not in control of this coronavirus and how many people choose to fly."
The comments follow reports last week that Southwest has reached out to union leaders to discuss possible concessions. The airline famously has never in its 49-year history resorted to layoffs, furloughs, or pay cuts, keeping its entire staff on board even following the attacks of Sept. 11.
Kelly in his comments said he hopes to avoid layoffs, saying "to preserve precious jobs of our coworkers, our friends, our family, I would prefer we all take a small and hopefully temporary pay cut."