Southwest Will End Middle Seat Ban to Lift Bottom Line

As expected, more bad news from the airline industry arrived this morning as American Airlines and Southwest each announced their latest quarterly earnings. American Airlines saw revenue fall 73% year over year, losing $2.4 billion this quarter, while Southwest's revenue fell 68%, down $1.2 billion. Including Alaska Airlines, which also announced its earnings this morning, the country's five largest airlines have lost a collective $21.7 billion since the outbreak of the pandemic. Most notably, Southwest revealed it is ending the blocking of middle seats and will begin filling planes to 100% capacity by Dec. 1. The airline hopes the extra seats will help boost revenue heading into the holiday season. Travelers on flights booked above 65% capacity will be told before the flight and given an option to rebook. "It's very clear that the aircraft environment is one of the safest indoor environments anywhere in the world," said Southwest CEO Gary Kelly. "We would not have made this decision without the overwhelming data that makes clear that this does not put customers or our employees at risk.” That now makes Delta the only carrier of the major four to continue the practice. During Delta’s earnings call last week, CEO Ed Bastian said the airline had yet to make a decision as to when it would begin filling those seats again, but hinted that it would happen within the first half of 2021. "We are encouraged by modest improvements in leisure passenger traffic trends since the slowdown in demand experienced in July. However, until we have widely available vaccines and achieve herd immunity, we expect passenger traffic and booking trends to remain fragile," Kelly said. In a sign of changing traveler sentiment, Southwest saw its revenue climb by just over 6% from July to September, when the airline was only down 64.8% from a year before. The airline also said fares were down 20% year over year. Both airlines said they expect to see demand rise for the Thanksgiving and Christmas holidays. Delta and United have posted similarly dour figures. With lobbying and legislative efforts failing to secure additional funding from the federal government, American has let go of nearly 19,000 employees. Southwest—which has never cut employee pay or held furloughs in the company’s history—has so far been able to retain its workforce, but Kelly admitted the airline was 20% overstaffed. Additionally, while United’s Scott Kirby called improvements in the rapid testing of travelers a “milestone” for the industry, little was mentioned of American’s own testing program, currently available for travelers going to Hawaii, Costa Rica and, soon, Jamaica, besides noting that the airline hoped to expand its pilot program to the rest of the Caribbean. According to the aviation industry trade group Airlines for America, international summer travel was down 91%, while domestic travel declined 73%.

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Southwest Will End Middle Seat Ban as Airlines Continue to Lose Billions

What we learned from American Airlines and Southwest's quarterly earnings calls

Ryan Barwick

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Ryan Barwick