In confirmation, TSA traffic is seasonably low at 35% of 2019 levels after the holiday season saw traffic rebound to nearly 50% levels through the first weekend of January. Management wasn't very positive on Q1 results due to the typical heavy business traveling season that isn't occurring this year. The only real impact to the financials will be the additional shares. Southwest Airlines has the cash to cut the debt levels back to similar levels while leaving the airline with plenty of cash. The amount is up from $28 million in the prior Q4, but the debt levels are up from only $2.7 billion to end 2019. The airline does have far higher interest expense now, but the $113 million cost in Q4 was just primarily due to the higher debt levels. Due to selling $2.2 billion worth of shares last year, Southwest Airlines is actually in a strong net cash position of $3.0 billion. For Southwest Airlines, the debt loads aren't even an issue now either.Īt the end of 2020, the airline had a cash balance of $13.3 billion and only has total debt balance of $10.3 billion. The bigger issue for most airline stocks are debt loads as the legacy airlines and others were heavily indebted headed into the crisis. In total, shareholders were diluted 63 million shares or ~12%. On the share count side of the stock, Southwest Airlines ended 2020 with 590 million diluted shares compared to 527 million in the prior year.

Despite reporting the first corporate loss since 1972 and a substantial one at $3.5 billion, Southwest Airlines ended the year in a financial position not too dissimilar from the end of 2019.Īs the airline sector gets back to normal and reduces cash burn rates, the stock market will focus on the long-term damage to the stock via share dilution and higher debt loads. The airline entered the COVID-19 shutdowns with one of the best balance sheets in the sector.

Image Source: Southwest Airlines website Limited Damage My investment thesis remains bullish on the normalization trade for Southwest Airlines. The airline enters 2021 ready to return to pass success. Southwest Airlines ( NYSE: LUV) just ended a year where the airline had the largest loss in the history of the company and the first loss since 1972.

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