Delta Air Lines and Southwest Airlines announced (21-May-2012) an agreement has been signed for Delta to acquire Southwest’s Boeing 717s. Southwest Airlines and Boeing will lease 88 717s originally delivered to AirTran to Delta from 2013. Delta’s recent tentative agreement with its pilots union contributed to the new deal, which allowed the addition of new aircraft. Delta CEO Richard Anderson said, “These actions pave the way for us to restructure and upgauge our domestic fleet, which will lower our costs, provide more pilot jobs and improve the onboard experience for our customers. The addition of the Boeing 717s, additional large regional jets and the planned replacement of 50-seat aircraft continue Delta's commitment to operating an efficient, flexible domestic fleet that offers customers even more opportunities to upgrade to our First Class and Economy Comfort cabins." [more - original PR]
Delta to acquire Southwest’s 717s
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Alaska Air Group: locked in limbo until the government renders a decision on Virgin America merger
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In the short term Alaska is experiencing slightly improving trends in the US marketplace, and its unit revenue improved on a sequential basis from 2Q2016 to 3Q2016. Another positive development for Alaska is a slowing of competitive capacity growth in its markets in 4Q2016 and in early 2017. The tempering of growth is reflective of most US airlines planning to lower capacity expansion in 2017 as higher oil prices heighten the importance of returning to positive unit revenue.
Alaska also plans slower capacity growth of 7% in 2017, versus 8.5% in 2016. Approximately 3ppt of the increase is driven by longer stage lengths and the annualisation of nearly 10 new routes launched in 2016 – a mix of smaller and larger markets with varying levels of competition.
Pressure mounts on Southwest Airlines to deliver on its goal of positive unit revenue in early 2017
Southwest Airlines believes it can potentially achieve a positive unit revenue result in early 2017, but its sequential trends from 3Q2016 to 4Q2016 are not improving at the rate of the three large US global network airlines. In fact, if Southwest hits the upper end of its unit revenue guidance for the last three months of 2016, the company’s performance could worsen on a sequential basis.
Many factors are driving Southwest’s unit revenue pressure at the end of 2016, including the effects of a credit card agreement that lifted its unit revenues in 2015 and 2016, competitive capacity additions in its markets and a still-soft, but improving domestic pricing environment. In order to regain positive unit revenue Southwest’s planned capacity growth is decreasing year-on-year for 2017. Additionally, the airline is scrutinising its network in order to determine which routes can generate maximum revenue production.
Southwest is also bracing for cost inflation in 4Q2016 driven by tentative collective bargaining agreements recently reached with pilots and flight attendants in 3Q2016. The cost increases from those agreements – if they are ratified – will continue into 2107, putting extra pressure on Southwest to deliver on its unit revenue targets.