Southwest Airlines gets $1 billion 364-day loan amid declined bookings

By Wendy Van Sickle

Columbus, Ohio, March 16 – Southwest Airlines Co. obtained a $1 billion 364-day term loan on Thursday, according to an 8-K filing with the Securities and Exchange Commission.

Borrowings bear interest at Libor plus 112.5 basis points.

JPMorgan Chase Bank, NA is the administrative agent, and a lead arranger and bookrunner along with Bank of America, NA and Wells Fargo Bank, NA.

In the 8-K filing, the company reported it is withdrawing its previous 2020 financial guidance due to the rapidly changing environment as the Covid-19 pandemic evolves.

“The company has experienced more dramatic declines in passenger bookings in March and second quarter 2020, as well as an unprecedented increase in close-in trip cancellations,” the filing states.

Southwest said it recently saw several days of net negative bookings, primarily in March and April, on which trip cancellations outpaced new passenger bookings.

Southwest reported its month-to-date load factor through March 15 was about 67%, with recent days trending toward 50%.

“As the impact of the Covid-19 pandemic grows, and based on current booking and cancellation trends, we expect revenue trends for the remainder of March and second quarter 2020 to deteriorate further,” the filing states.

Southwest said it plans to help manage near-term financial impacts by reducing its published flight schedules; instituting a hiring freeze; offering voluntary leave options for employees; and aggressively evaluate all capital spending, discretionary spending, and all non-essential costs for near-term cost reductions or deferrals.

The airline said its investment-grade balance sheet and long-standing financial health has provided ready access to capital markets and bank financing. As announced in February, the company issued $500 million of 2.625% notes due Feb. 10, 2030.

On March 12, it entered into a $1 billion term loan credit facility agreement. It also drew down the full $1 billion under its revolver expiring in August 2022.

Southwest said its current unrestricted cash balance is about $6.2 billion and that it has about 525 unencumbered aircraft valued at about $10 billion.

Upon completion of its current share repurchase program, Southwest said it will have about $765 million remaining under its May 2019 $2 billion share repurchase authorization and will suspend further share repurchases.

Southwest Airlines is a Dallas-based airline company.

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