Southwest Airlines proactively outlines 1H2018 capacity as retirements drive fleet flux

There are several moving parts to Southwest's revenue, cost, and capacity forecasts for the remainder of 2017, but the airline is projecting a positive message for each metric, concluding that revenue headwinds are easing and cost inflation is largely weighted toward 1H2017.

Technology spend and recently negotiated labour contracts are pressuring Southwest's unit cost performance in 2017, but after posting unit cost growth in the high single digits in 1H2017, the airline is aiming for flat growth by 4Q2017. Its unit costs excluding fuel for the full year will grow in the low single digits.

Southwest is going on the offensive by offering a capacity outlook of less than 4% for 1H2018. The company is experiencing a lot of puts and takes with its fleet over the course of next year as it retires its Boeing 737 Classics and begins deliveries of next generation Boeing 737 MAX narrowbodies. The company seems to be offering a 2018 forecast to allay investor concerns over potential protracted capacity growth in 2018.