Southwest Airlines will end capacity controls that enable it to keep middle seats vacant on Dec. 1, though it is increasing flexibility for passengers who prefer not to be on full flights.
The carrier, which does not assign seats, since the early days of the pandemic has been selling flights at a lower capacity so that middle seats are not filled except by groups traveling together who wish to use them. Chairman and CEO Gary Kelly said that policy "bridged us from the early days of the pandemic, when we had little knowledge about the behavior of the virus, to now." Citing recent studies that indicate Covid-19 transmission aboard aircraft is low, Southwest will begin selling flights to full capacity in December.
"The Department of Defense [study] is very compelling," Kelly said in an earnings call. "They're not biased—they wanted to make sure it was safe for them to move their troops around—and the conclusions were very compelling."
Passengers who already have tickets booked for December beyond will be given an option for a full refund if they are not comfortable with the new policy, Southwest president Tom Nealon said. In addition, Southwest will communicate with passengers booked on flights filled beyond 60 percent capacity and try to reaccommodate them if they wish, he said.
The move will leave Delta Air Lines as the only carrier among the four largest U.S. airlines with a policy of blocking middle seats. Delta CEO Ed Bastian earlier this month said that policy likely would be lifted in the first half of 2021.
Only five major airlines in the world, including Southwest, currently have such policies to block the middle seat, Kelly said.
For the third quarter, Southwest's passenger revenue declined 72.2 percent year over year to $1.5 billion. Travel demand, which had stalled July after two months of growth in May and June, due to a surge in Covid cases in July, began to show "modest improvements" again in August and September, according to Southwest. Those have continued into this month, and Southwest projects operating revenue will be down between 65 percent and 70 percent year over year in October and down between 60 percent and 65 percent year over year in November.
Cash burn improved in the third quarter to $16 million per day, compared with an average of $23 million per day in the second quarter. Southwest forecasts that will decrease further to $11 million per day in the fourth quarter, and breaking even will require operating revenues to reach between 60 percent and 70 percent of last year's levels.
Southwest reported a net loss of $1.2 billion for the third quarter, compared with a net income of $659 million in the third quarter of 2019.
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