Despite many rounds of cost-cutting, so-called legacy airlines—United, Delta, US Airways—still face costs 35% higher than low-fare carriers like JetBlue and Southwest, the Wall Street Journal reports. The younger outfits have maintained a “cost gap” analysts thought their older peers could close over time. For one thing, having more top-scale workers keeps aging carriers at a disadvantage. “Even if the scale is the same, the cockpit costs are different,” says US Air’s CEO.
Legacy airlines have survived on business travel and expensive international routes, but recession puts a damper on both. Another factor is fuel prices. “When oil went up, we lost a lot of our advantage,” says JetBlue’s CEO. “As it came down, the lower-cost guys regained our advantage.” And growing carriers are naturally leaner: They have new, reliable planes and less-senior employees.