Southwest's code-sharing and network integration with its AirTran Airways will be phased in by April, allowing single-ticket itineraries that combine travel on both carriers. That will provide a big revenue boost for the remainder of the year, Southwest believes, contributing to its goal for a $1.1 billion increase in annual revenue and 15% return on invested capital. That return was just 7% in 2012.
Southwest's 2013 capacity will be only about 2% higher than in 2012, and that increase will come mainly from the six additional seats it is installing on its Boeing 737-700s and its receipt of larger 737-800s. In terms of trips, Southwest's operations actually will decline 2-3% this year.
This capacity constraint at the largest U.S. carriers—and, in some cases, capacity and route cuts—is encouraging some smaller competitors to take advantage. One of them is New York-based low-cost carrier JetBlue Airways, a smaller but major carrier that, like Delta, does not have merger concerns on its plate.
At $128 million, the carrier's 2012 profit was one of the highest annual tallies in its history in spite of a $30 million hit from the affects of Hurricane Sandy on the New York metropolitan area.
JetBlue's leaders are optimistic about 2013, and the carrier is expanding its capacity by 5.5-7.5% this year, led by increases of 15% in Boston and 10% on Caribbean and Latin American routes.
With the capacity additions, “we're taking advantage of opportunities that are unprecedented,” Hayes proclaims, citing capacity reductions by competitors in markets such as Boston and Puerto Rico—the latter of which has seen American greatly reduce its presence.
Major U.S. Airlines 2012 Full-Year Results
|AIRLINE||PROFIT/(LOSS)||% CHANGE||OPERATING INCOME||OPERATING MARGIN|
|United Continental Holdings||($723 million)||n/a*||$39 million||0.1%|
|Delta Air Lines||$1 billion||18%||$2.2 billion||5.9%|
|Southwest Airlines||$421 million||137%||$623 million||3.6%|
|US Airways||$637 million||797%||$856 million||6.2%|
|JetBlue Airways||$128 million||49%||$376 million||7.5%|
|Source: Airline financial reports|