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Southwest reports first monthly profit since pandemic began with June income

Leisure travel demand surged in the second quarter, "an important milestone in the pandemic recovery," CEO Gary Kelly said Thursday.

DALLAS — Dallas-based Southwest Airlines reported a net income of $348 million in the second quarter of 2021, largely in part due to funding from the federal government of about $724 million under the Payroll Support Program, company officials announced on Thursday. 

June was the first month since March 2020 that the company made a net profit without taking into account federal funding, CEO Gary Kelly said in a statement with the release of the company's quarterly earnings report.  

The company still saw a loss of $206 million in the second quarter however, when excluding special items like that federal funding. The numbers are significant though, after the airline's total losses for 2020 amounted to a net of about $3.1 billion. 

It had been the first annual net loss for the company since 1972, Kelly had said earlier this year. 

Leisure travel demand surged in the second quarter as more people became vaccinated and willing to travel again, "an important milestone in the pandemic recovery," Kelly said Thursday.

Leisure passenger traffic in June was above that of June 2019, Kelly said, although passenger fares were comparable between to the two time periods. 

The company expects both traffic and fares for leisure travelers to trend higher in July than the levels seen in July 2019.

Business travel continues to lag behind, but Kelly said bookings in both the second quarter and so far in July have continued to improve as time has gone on.

The rapid surge in overall demand, though, has strained the company's downsized operations, according to the report. 

"While the rapid ramp up in June travel demand provided stability to our financial position, it has impacted our operations following a prolonged period of depressed demand due to the pandemic," Kelly said. "Therefore, we are intensely focused on improving our operations as we restore our network to meet demand." 

The company experienced problems earlier this summer after issues with its weather data provider and other staffing concerns led to thousands of canceled or delayed flights in June.

The CEO added that as flight activity increases, the company expects to call back "the vast majority of our employees early from voluntary time-off by the end of third quarter 2021." 

Operating revenues, at $4 billion, were still down about 32.2% in the second quarter compared with the same time period in 2019, but had significantly improved over the previous four quarters that largely represented the pandemic, per the report.

While the company's average core cash burn was about $1 million per day in the quarter, Southwest had a positive average core cash flow in June, at about $4 million per day, the report stated. 

"Based on our current booking trends and cost outlook, we are hopeful to be profitable, both on a GAAP and non-GAAP basis, again in third and fourth quarter 2021. Should the pandemic negatively affect our current trends, we are prepared to manage through it," Kelly added.

Profit-sharing with employees increased to $85 million in the second quarter, totaling $109 million of profit-share in the first half of 2021.

"I am beyond thankful for our People, who are heroes, and whose resiliency, hard work, and unwavering resolve is on display every day," Kelly said.

To see the entire earnings release, click here.