Southwest Airlines pandemic play: a mix of opportunism and realism

There is little argument that Southwest Airlines is one of the best positioned operators for a robust rebound from the COVID-19 crisis. Its balance sheet strength is unmatched, and the company remains well positioned to repay the debt it has amassed during the coronavirus pandemic.

Southwest is, no doubt, encouraged by the inflection point in US leisure demand, and believes the worst of the crisis is now over. However, the company has adopted what can be deemed as a more realistic view of the recovery, as visibility into the US autumn period remains murky.

But the airline's typically cautious approach does not mean Southwest has been resting on its laurels during the pandemic. It is in the midst of adding 17 new markets, and has solidified its order book for the next decade and a half - neither of which are small feats, when the airline's traffic during 1Q2021 was still down by approximately 38%.