Loading

Fuel helps US low cost airline CASK performance; Southwest's labour costs have grown 17.5% y-o-y

Significantly lower fuel costs were a major driver in the outcome of the four main US low cost airlines – Southwest, jetBlue, Alaska and Virgin America – posting significantly lower unit costs year-on-year in 2015. According to CAPA’s CASK database, most of those airlines posted double-digit decreases as the average decrease in top-line fuel expense among those airlines was 31% year-on-year.

Most of those airlines should continue to record a favourable unit cost performance in 2016 as fuel costs, while rising, will remain below historic highs. Southwest, which has recently forged a new contract agreement in principle with its pilots after years of long and tense negotiations, may need to refine its current cost forecast if the deal is ratified. jetBlue has revised its cost forecast downward slightly during 2016, while Alaska on a stand-alone basis should continue to post a solid cost performance.

Over the course of the next one to two years Southwest is likely to ratify agreements with three of its major labour groups – pilots, flight attendants and mechanics. If the pay raises in the tentative pilot deal are an indication of salary increases for other work groups, Southwest is likely to find itself outside the cost boundaries of a traditional low cost airline.

This CAPA Premium Analysis article is 1,973 words.

To access CAPA Premium Analysis you need a CAPA Membership

Your window into the latest insights

CAPA employs an industry-leading Analyst team based in Europe, North America, Asia and Australia who offer unique perspectives and independent and accurate commentary of critical industry developments globally. CAPA Members rely on our Analysis to unlock valuable insights and actionable intelligence to keep ahead of the game.

Big picture strategic view

Our Analysts don’t just report the news - they take a big picture strategic view of aviation dynamics, issues and trends and analyse the implications of these developments for you.

Global intelligence

The CAPA Analyst team is based globally to ensure our CAPA Members have access to independent, unique perspectives covering an entire spectrum of daily, worldwide commercial aviation developments.

Customise your Alerts

CAPA Members can use CAPA Alerts to receive daily, weekly or monthly and customised updates on our Analysis.

I'm very impressed by the factual and detailed analysis CAPA is always doing.

- CEO, Airline Member
To learn more, contact us:
Phone: +61 2 9241 3200 | Email: membership@centreforaviation.com