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Business travel likely to be depressed for years, says Southwest Airlines CEO

With U.S. commercial flights largely empty amid the fallout from the COVID-19 pandemic, airlines are taking a serious financial hit. But while their revenue has plunged due to the drop in demand, they are receiving billions in federal aid. Southwest Airlines CEO and chairman Gary C. Kelly joins Judy Woodruff to discuss the safety of air travel and the financial challenges of the economic crisis.

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  • Judy Woodruff:

    With commercial flights largely empty of passengers, airlines are taking a bath financially, losing tens of billions of dollars combined.

    But they also are receiving billions in aid from the federal government. As part of that deal, they cannot lay off their employees before October.

    There are big questions about what happens in the months ahead.

    Southwest Airlines is the largest domestic carrier in the U.S. Gary Kelly is its CEO and chairman. And he joins us now.

    Gary Kelly, welcome to the "NewsHour."

    So, your bookings are way down. You're taking precautions with your planes, and yet Americans, most of them, still afraid to fly. What do you say to them?

  • Gary Kelly:

    Well, great to be with you, Judy. And, again, thank you for having us.

    Well, yes, it's a really tough time for the world, quite frankly. And I think people are very concerned about the pandemic. They're concerned about their health.

    Even if people want to travel and have the means to travel right now, in a lot of ways, there's nowhere to go, if you know what I mean, because, you know, the country's been on lockdown.

    So, it's incumbent upon us, first of all, to keep air transportation available. We are essential, according to the federal government. We take that seriously. That's also a commitment out of the CARES Act, is that we continue to fly.

    So, then we need to offer a very safe product. And that's what we're determined to do. We have encouraged the TSA to began temperature scans, as an example. We're doing deep cleaning in the airport, on the airplanes. We're doing physical distancing at the airports, also on the airplanes.

    So, there's a number of things that we're doing. I'm happy to go into those in more detail. But we just want to make the environment as safe as possible, not only for our customers, but also for our own employees.

  • Judy Woodruff:

    And we see some of the images of what Southwest is doing.

    And yet people think about flying and they think about walking down the aisle. They think about how close passengers are to one another. You said you won't do away with middle seats, for example.

    I mean, how do you truly make an airplane, which is an enclosed space, where people are going to be close together, feel safe right now?

  • Gary Kelly:

    Well, we will use a multilayered approach.

    The first thing is, we're requiring all of own employees to wear masks. We're also requiring our customers to wear masks. We are not going to remove middle seats, but we won't book so many reservations, so that all the middle seats could be unoccupied, if that's what customers choose to do.

    We deep clean the airplanes between flights and also at night. I think, interestingly, we're using an electrostatic mister, which as an antimicrobial mist in it, which will adhere to surfaces, and then kill the virus upon contact for up to 30 days.

    We have got hospital-grade HEPA air filters that keep the air clean and fresh on the airplane.

  • Judy Woodruff:

    Right.

  • Gary Kelly:

    So there's a number of things we do. And we feel very confident about it being a safe environment.

  • Judy Woodruff:

    But no matter how clean you make the plane, how disinfected, the passengers get on, and they bring whatever they bring with them.

    I think that's what has people concerned about flying. Is that a fear that you think can go away until there's a vaccine, which may be a year-and-a-half or two years from now?

  • Gary Kelly:

    I think that remains to be seen.

    I don't think that it will take quite that long for people to become more confident to get out and go about their daily lives, travel being a part of that.

    But I think all of us should have an expectation that travel will return gradually. And that will be, I think, one deterrent. I do think this, too, shall pass. I do think that things will get back to normal.

    But you're right. I think we have to be confident with testing, with therapeutics, ultimately a vaccine.

    We're in a recession right now. Business travel will certainly be depressed, and probably for years, and I think we're in a low-fare environment. Southwest is a low-cost, low-fare airline, and it really fits our business model very well.

    So we're here to serve. We're an essential part of the — not just the U.S. economy, but worldwide economy. And we're going to do the best we can to take care of our people and serve our customers.

  • Judy Woodruff:

    Are — is the airline industry going to survive? Is every airline company, in your view, going to make it?

  • Gary Kelly:

    This is the worst economic environment I have ever witnessed, and I have been in business a long time.

    I think it's the worst thing that's happened since the Great Depression. So it's hard to imagine that you won't see businesses shut their doors, well beyond just the airline industry. So I think all that remains to be seen.

    We have got a duty at Southwest to protect our company and protect our people's jobs. And we're determined to do that as best we can, do that with great service, keep our fares low, and obviously offer a very safe product.

    So, that's our mission. And I feel like our folks are very much up to the task.

  • Judy Woodruff:

    How hard is it to do that, though, Gary Kelly, without, frankly, ending up laying people off?

    You have made a commitment it won't happen until the fall, but how can you — I mean, looking at the picture realistically, how do you avoid it?

  • Gary Kelly:

    Well, Judy, it's — right now, it's way too early to know.

    I think — I certainly recognize that there is a challenge. Right now, we're experiencing 15 to 20 percent load factors, which is well we low what break-even cash flow is. So we certainly have our work cut out for us.

    The good news is, we're seeing each week improve. The bottoming was early April. May looks like it will be a better month, hopefully June better still. The bookings out in July look more encouraging. It's going to be a gradual process. But it's just too early to make the call.

    If things don't improve, clearly, we're going to have to radically restructure. But that's not something that we have to commit to at this point.

  • Judy Woodruff:

    And can you say at this point how much more you need from the federal government, from the taxpayers?

  • Gary Kelly:

    Well, first of all, we came into this year very strong.

    We have the strongest balance sheet in the U.S. industry by far. We have got an investment-grade credit rating. Our leverage was 24 percent in terms of the debt to total capital. We have raised a significant amount of money and have over $15 billion in the bank as we speak.

    So, we have got ample resources to see ourselves through a reasonable time horizon to fight our way through this challenge.

    So, you know, the money that we got from the government so far was entirely dedicated to paying our employees. And it's — and it only covers 60 percent to 65 percent of the total payroll.

    We did apply for a government-secured loan program and have access to that, if we choose, through September the 30th. It's $2.8 billion. It's just a staggering amount of money that's required, not just for Southwest, but for the whole country, to get through this crisis.

    But, in the end, I don't know exactly what it's going to take, but I do feel like, based on a reasonable outlook, a reasonably optimistic outlook for the next 12 months, that we have got what we need to see our way through.

  • Judy Woodruff:

    Gary Kelly, CEO of Southwest Airlines, we certainly wish the best for you, for — and for all of your employees.

    Thank you very much.

  • Gary Kelly:

    Thank you, Judy.

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