Southwest Airlines Throttles Back Its Cash-Burn Rate

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Southwest Airlines is still navigating through tough times, posting its worst quarterly loss on record, though it is managing to throttle back on its crucial cash-burn rate.

The Dallas-based airline posted a third-quarter net loss of $1.2 billion, or $1.96 a share vs. income of $659 million, or $1.23 a share, in the same period a year ago. Excluding special items, Southwest lost $1.2 billion, or $1.99 a share.

Analysts polled by FactSet had been expecting a loss of $2.35 a share.

Third quarter operating revenue was $1.8 billion, down 68% from a year ago. Southwest ended the third quarter with liquidity of $15.6 billion, consisting of cash and short-term investments of $14.6 billion and a secured revolving credit facility of $1 billion.

The airline’s cash-burn rate, a number carriers calculate that reflects how much cash they are using to continue operations despite losses, was approximately $16 million per day in the third quarter, an improvement from average core cash burn of approximately $23 million per day in the second quarter, “primarily due to improving revenue trends.”

October’s cash burn rate is currently estimated to be approximately $12 million per day, while fourth quarter 2020 is currently estimated to be approximately $11 million per day, “driven primarily by continued modest improvements in close-in leisure demand and booking trends, as well as cost savings from voluntary employee separation and leave programs,” Southwest said.

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