JetBlue to add new service from Boston
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Southwest Airlines:domestic changes, continued international expansion, as overall 2017 growth slows
Southwest Airlines plans lower system capacity growth in 2017. The company joins other US airlines working feverishly to return to positive unit revenue as oil prices and labour costs are forecast to rise for most of the country’s airlines.
Even as Southwest’s capacity increases are projected to fall year-on-year in 2017 the airline is broadening its international reach with the debut of new flights from Fort Lauderdale, and is making moves in its domestic network.
This includes its decision to launch service from Cincinnati, a market that has attracted significant low cost service during the past two to three years as its hub status for Delta has diminished. Southwest’s service entry at Cincinnati comes at the cost of flights from Akron and Dayton, which is not surprising, given Cincinnati’s potential to garner higher revenue.
Although Southwest cited some positive trends at the end of 2016, it struck a cautious tone about the operating environment in the US, noting that while yields were improving, the revenue environment remains challenging. US airlines, including Southwest, are being closely watched after declaring they will return to positive unit revenue in 1H2017.
LCC jetBlue sets ambitious cost targets; quiets critics over staying power of its business model
Since 2014 jetBlue Airways has delivered marked revenue and margin improvement through several new revenue initiatives, including a new fare segmentation scheme and a co-branded credit card deal. During 2015 the airline delivered a revenue unit performance that outperformed the US industry, which itself largely struggled to obtain positive results in that metric.
But jetBlue admits that during that period it was lagging behind the US industry in cost performance; and although the airline has made progress in improving its unit costs, jetBlue holds the view that it has more to accomplish in order to maintain a competitive cost structure for delivering its low fare, medium frills product.
The company has outlined plans to keep its cost growth from flat to 1% from 2018 to 2020, and aims to shed USD250 million to USD300 million through savings by 2020 – in maintenance, corporate, distribution and airport operations. However, the airline is cautioning that certain elements – including a seat densification programme and aircraft delivery schedules – are creating some choppiness in its mid-term unit cost forecast.