Alaska and Southwest share a cautious outlook as expiring tax breaks could weaken demand

US carriers Alaska and Southwest conclude trends are pointing to solid demand at the start of 2013 despite the expiration of certain tax breaks threatening to dampen consumer appetite for travel. Both carriers cite favourable booking trends as overall industry capacity remains disciplined. But Alaska during 2013 will be one of the few carriers to increase its supply relative to the industry as it expects capacity growth of 7%-8% versus 2% growth for Southwest and virtually flat to negative growth among the large US network carriers.

Alaska appears poised to replicate the results it garnered from its higher than average capacity growth in 2012 of 6% compared with a range of negative 2% to 2% growth at US legacy airlines. While Southwest had 6% comparable capacity growth to Alaska during 2012, the Dallas-based carrier plans a 4ppt drop in capacity growth year-over-year to 2% for 2013. Despite the higher than average expansion of supply, Alaska grew its top-line revenues by 8% during 2012 to USD4.7 billion. Expenses grew 7% to USD4.1 billion, which helped lift the company's operating income 18% to USD532 million.