Southwest Follows American Air in Quest for Government Aid
Southwest to Become Second U.S. Airline Applying for Relief
(Bloomberg) -- Southwest Airlines Co. said it would apply for federal aid, becoming the second U.S. carrier to confirm it will seek assistance as the new coronavirus batters travel demand.
The discounter will file an application “to discuss the specific details regarding possible grants” to boost liquidity and provide staff job security, according to a U.S. regulatory filing Thursday. The carrier joins American Airlines Group Inc., which has said it would apply for as much as $12 billion in aid. Southwest didn’t say how much it would seek.
U.S. airlines have slashed flying capacity, parked planes, frozen hiring and taken other steps to cut spending as the virus’s spread has reduced travel by more than 90%. Dallas-based Southwest will eliminate 40% of its daily flights starting in early May and will evaluate further reductions.
“We still don’t know the severity of this situation,” Chief Executive Officer Gary Kelly said in a video message to employees Thursday. “We don’t know how long it will last, so we intend to apply for our portion of the government grants” that will help provide employee job security for six months.
The carrier also tapped $2.3 billion under an amended credit agreement to help fund operations, according to Thursday’s filing.
Southwest shares fell 1.6% to $31.54 at 9:47 a.m. in New York. The stock had tumbled 41% this year through Wednesday while the S&P 500 dropped 24%.
The government relief package includes provisions for grants of $25 billion to passenger carriers designed to limit layoffs. Businesses that accept them must agree to not cut pay or trim staff through September. In exchange, the Treasury Department is authorized to receive stock, options or warrants in those airlines. The application deadline is Friday.
Another $25 billion in loans is available to airlines if financing isn’t otherwise available. The Treasury is required to take a stake in exchange for such lending. Southwest is still considering whether to apply for a loan, a spokesman said by email.
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