Southwest Airlines Receives The Final $860m In Government Aid
Southwest Airlines has received the final installment of its two-part government aid package. Coming from the previous round…
Southwest Airlines has received the final installment of its two-part government aid package. Coming from the previous round of government support passed at the end of 2020, the airline took its first disbursement in January and has now received the second for an amount of over $860 million.
Southwest receives another $860 million in government support
On March 5th, Southwest Airlines reported receiving the second and final disbursement under the federal government’s Payroll Support Program (PSP). First enacted in the early days of the crisis, the airline industry received the second round of government support at the tail end of 2020, with disbursements coming in mid-January.
Southwest received a second and final payment of $863,685,200 from the US Department of the Treasury on March 5th. This is the final disbursement of the $1,727,370,400 that the airline was expected to receive under the agreement with the Treasury.
Southwest has provided the Treasury Department an increase of the promissory note to the tune of $259,105,560. This took the airline’s overall promissory note, in the aggregate, to $488,211,120. Southwest has also issued warrants under the agreement to the Treasury Department to purchase up to 1,054,907 shares of Southwest’s stocks.
The second round of support
Southwest Airlines received the second round of support due to a massive relief package passed at the end of 2020. The airline industry was rallying for additional funding under the PSP program. The second round of support includes conditions similar to the first, in that airlines, have to recall furloughed workers through the end of March and continue flying to a prescribed minimum number of points.
Even before the initial package ran out at the end of September, airlines were gearing up the fight with their unions and industry support groups for another round of government aid. Though delayed, that aid finally came through. Now, however, there is another fight to get additional government support through the fall in the US.
The state of affairs at Southwest
Southwest Airlines posted an annual loss in 2020, representing the difficulty of the year for the industry, as it was the first annual loss in over 40 years for Southwest Airlines. The airline typically has a lot of strengths that allow it to be successful.
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For example, Southwest had to face a less dire liquidity situation at the start of the crisis because it got saved by a little over a month or two of cancellations and refunds for expensive long-haul international journeys. Domestic pressure lagged international, so Southwest escaped a little of the early brunt of the crisis, but the airline still had a difficult time.
Southwest had threatened there would be some furloughs at the end of 2020, though it appears now that the airline has the support it needs to avoid furloughs for some time, hopefully. The airline industry expects a robust domestic rebound, buoyed by improved March expectations, that should give Southwest a boost. The airline is adding plenty of new warm-weather and outdoor leisure-friendly destinations, like Bozeman in Montana, that should help it keep its planes more full.
For now, however, the government support will help Southwest keep all of its employees employed and on the payroll, but as April rolls around and the protection of government support runs out, Southwest will need to hope the improved travel environment lasts for a few months to give the airline a much-needed revenue boost.
Are you glad to see Southwest Airlines receive the second disbursement of government support? Let us know in the comments!