US global airlines work feverishly to offset cost headwinds in 2018 after cost escalation in 2017
Cost inflation has been a major headwind for nearly every US airline in 2017, and the country’s three largest global network airlines are no exception. American, Delta and United are offering unit cost inflation forecasts excluding fuel ranging from 3% to 5.5%.
There is a variety of factors driving cost pressure for those airlines, spanning from growing labour costs to higher depreciation and amortisation expenses.
American and Delta are pledging to keep their 2018 unit cost inflation at 2% or less, while United, for now, is refraining from offering a cost forecast for next year. At one point, United believed it could deliver a unit cost performance of less than 1% growth from 2018 to 2020, but analysts and investors are becoming increasingly sceptical that the airline can meet those targets after a series of missteps in 2017.
American is pushing a longer term view on cost inflation, noting the industry as a whole is catching up on important and necessary investments in airport infrastructure and employee salaries and benefits. The airline believes once those investments are complete, cost pressure in those areas should abate.
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