Southwest Air Sees ‘Brutal Low-Fare’ Pressure in Virus Aftermath

(Bloomberg) -- Southwest Airlines Co. CEO Gary Kelly predicted that intense competition for passengers will create “a brutal low-fare environment” among carriers once coronavirus fears subside and more people start to fly.

Even with capacity cuts, the number of available airline seats will still far outnumber customers in the near term, the chief executive officer said in a video message to Southwest employees on Friday. Demand for airline travel is expected to return slowly as the country starts to reopen its businesses.

With a potential price war putting more pressure on already struggling airlines, Southwest is preparing contingency plans in case more radical changes are required for survival, the CEO said.

“We're well prepared for this catastrophe and we must strive to stay that way,” Kelly said. “Our low-cost philosophy, strategy and structure will serve us very well.”

The Covid-19 pandemic brought the airline industry to its knees as travel demand plummeted more than 90% in a few weeks. Carriers responded with a wave of job cuts, furloughs and deep cost-cutting measures.

On Thursday, Southwest said it expected to operate about the same capacity in late 2020 as it did a year earlier after flying was reduced by the grounding of Boeing Co.'s 737 Max. Kelly added that demand “still has a long way to go.” That thought was echoed this week by United Airlines Holdings Inc.'s CEO Scott Kirby, who said it's still unclear when demand will “bounce back.”

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