Southwest Airlines Withdraws From US Treasury CARES Loan

Southwest Airlines today revealed that it will not participate in the US Treasury’s secured loan program. The airline had signed a letter of intent for a $ 2.8 billion loan backed by the CARES Act. However, this letter of intent was not binding.

Southwest Airlines has said it will not take $ 2.8 billion in loans guaranteed by the US Treasury. Photo: Southwest Airlines

The past six months have been difficult for airlines in the United States and indeed around the world. However, passenger traffic is slowly increasing, with more than 800,000 passengers registered by the TSA for two consecutive weeks. It appears that this recovery is starting to be noticed by airlines, as Southwest has shown today.

No loan of $ 2.8 billion under the CARES Act

In July, many airlines in the United States signed thedeclarations of intent with respect to loans granted by the United States Treasury as a member of VSoronavirus Ausername, Rrelief, and Eeconomic Ssecurity law. Southwest Airlines was one such airline, agreeing through a non-binding letter of intent to take a total of $ 2.8 billion.

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However, Southwest Airlines no longer wishes to contract this loan. The airline revealed today that the move was made because of its “tightening” of cash flow following major actions. The airline stressed that its current estimates for August 2020 are more favorable than previous forecasts.

Southwest Airlines, US Treasury, CARES Loan
The airline has recently seen its liquidity strengthened. Photo: Southwest Airlines

Simple Flying has contacted Southwest for comment on this story. It will be updated with any subsequent responses received.

How are things going for the Southwest?

Overall, it looks like things aren’t too bad for Southwest. According to the airline’s preliminary results for July, its operating revenue is down 70 to 75 percent from the same month last year. However, the airline’s capacity only declined by around 31%.

During the month, the load factor stood at around 43%. This meant that for every 175-seat aircraft, about 75 were occupied and 100 were vacant. Until October 31, Southwest “blocks” middle seats, which means that only 66% of the seats will be sold on each flight. As the airline does not have assigned seats, it is up to the passengers to ensure that the middle seat is left free, but groups can still sit together.

Southwest Airlines, US Treasury, CARES Loan
Many changes have taken place as Southwest adapts to flight during COVID-19. Photo: Southwest Airlines

Coping with COVID-19

Like all airlines in the United States, Southwest has taken steps to ensure that flights are as safe as possible. This, of course, includes the obligatory masks and, as mentioned above, the middle seats being left free.

However, a series of other procedures are also followed to reduce the risk of COVID-19 on the airline. This includes encouraging passengers to use mobile boarding passes and suspending the service of drinks and snacks on board. The latter will surely save a small amount for the airline as well.

Have you flown with Southwest since they started implementing the changes related to COVID-19? Let us know how you found it in the comments!

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