Southwest Airlines CEO 'hopeful' on more government aid but hesitant to cut capacity without it

  • The terms of airlines' $25 billion in federal support expires after Sept. 30.
  • Those coronavirus relief funds prohibit layoffs and require carriers to maintain minimum service levels.
  • Southwest's CEO Gary Kelly says further capacity cuts could hurt revenue rather than reduce costs.

Southwest Airlines CEO Gary Kelly on Wednesday said he is optimistic that Congress can pass a national coronavirus relief package that includes airline aid despite a months-long impasse between lawmakers and the White House.

Airlines earlier this year received $25 billion in federal payroll support which prohibits job cuts and requires minimum service levels through Sept. 30.

With that date a week away, airline CEOs, including Kelly, at have met with government officials and lawmakers in Washington in a last-minute plea for additional aid for the sector struggling with demand at less than a third of last year's levels because of the pandemic. Like other airline chiefs, Kelly said it doesn't expect a strong rebound in air travel anytime soon.

"We're very hopeful they can come to an agreement and get that passed and help the economy and obviously help the travel industry," Kelly told CNBC's Squawk on the Street.

The proposal has won bipartisan support on Capitol Hill and from the White House, but lawmakers and the Trump administration have repeatedly failed to reach a deal on a new national coronavirus package that would include that aid.

Even without additional aid Southwest is reluctant to further cut capacity because it could end up causing more pain for the airline, Kelly said.

"At a point, if we cut our flights too much then we cut a lot of itineraries and the revenue loss accelerates much faster than the cost cuts do," he said. "We have to strike the right balance."

He said the airline is sticking with capacity cuts of about 40%-45% from a year ago.

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