Alaska, jetBlue and Southwest cost projections; good in the short term but long term challenges loom

Just as the large three global US airlines - American, Delta and United - work to contain their unit costs, their rivals Alaska, jetBlue and Southwest are committed to keeping their respective unit costs in line as the current revenue environment in the US remains weak.

The latter three airlines face different cost dynamics in the future. Alaska is attempting to embark on a merger with Virgin America, which will inevitably create some cost pressure as the full integration gets under way. Southwest is in the middle of complex pilot and flight attendant negotiations, which makes predicting its cost performance in the near- to mid-term difficult. At some point jetBlue will also conclude a new pilot contract that will affect its cost structure.

Cost performance results for Alaska, jetBlue and Southwest for 2Q2016 and the full year look reasonably favourable, although Alaska has refined its 2016 targets slightly, driven in part by increases in performance-based pay. But its costs should remain competitive compared with its peers, and solidly lower than those of the larger network carriers.