Southwest Airlines strikes a cautious tone for its 2017 unit revenue performance outlook

Southwest Airlines remains committed to capping its capacity growth at 3.5% in 2017, of which 2.5% is pegged for the US domestic market. At the end of 2016 the company said that US domestic seats were outpacing the country's GDP growth, and Southwest has often cited capacity pressure in many of its markets.

The large US airlines, including Southwest, seem to be keeping their domestic growth in check during 2017 as they work to achieve and sustain a positive unit revenue performance. Southwest expects sequential improvement in 1Q2017, and believes two year declines have now bottomed out - a conclusion drawn by most of its US airline counterparts.

Similarly to most US airlines, Southwest is facing cost pressure in 2017 stemming from recent collective bargaining agreement it has reached with large labour groups. The challenge for Southwest and the rest of its competitors is achieving a unit revenue performance that offsets cost inflation.