Alaska Air Group, Inc. (ALK) has reported its earnings for the third quarter of 2023, with earnings per share (EPS) of $1.83, marking a year-over-year decline of 28%. The figure missed the Zacks Consensus Estimate of $1.88. Operating revenues for the same period totaled $2,839 million, slightly below the Zacks Consensus Estimate of $2,876.1 million. Despite the earnings and revenue miss, the company experienced a 0.4% YoY increase in top line, largely driven by a 0.1% growth in passenger revenues, reflecting the ongoing recovery in air travel demand.
Passenger revenues amounted to $2,618 million, while cargo and other revenues fell 7% YoY to $62 million. Meanwhile, mileage plan other revenues increased by 9% to reach $159 million. The decline in revenue per available seat mile led to a 12% YoY decrease to 15.28 cents, with yield also dropping 10% to 16.66 cents.
Outlook for Alaska Air
Looking ahead, Alaska Air expects a year-over-year improvement of 11-14% in capacity for the fourth quarter. The company also anticipates a 3-5% decline in cost per available seat mile, excluding fuel and special items. Additionally, total revenues are projected to grow by 1-4% compared to the previous year. The economic fuel cost per gallon will likely fall within the range of $3.30 to $3.40, with an adjusted pre-tax margin forecasted to be between 0% and 2%. For the full year, Alaska Air expects EPS to be between $4.25 and $4.75, with adjusted pre-tax margin ranging between 7% and 8%.
Liquidity and Financials
As of September 30, 2023, Alaska Air had $2,451 million in cash and marketable securities, a slight increase from the end of June 2023. Long-term debt, net of current portion, stood at $2,128 million, while the debt-to-capitalization ratio remained flat at 48%. The company generated $271 million in cash from operating activities in the third quarter and repurchased 248,988 shares for approximately $13 million.
Comparison with Industry Peers
Alaska Air’s performance in Q3 2023 follows a similar trend seen in other transportation companies. J.B. Hunt Transport Services, Inc. (JBHT) reported a decline of 30% YoY in EPS, while total operating revenues fell 18%. On the other hand, Delta Air Lines, Inc. (DAL) recorded a 35% YoY improvement in EPS and an 11% YoY increase in revenues, driven by higher air travel demand.
Alaska Air’s Q3 earnings and revenues fell short of expectations, reflecting the challenges faced by the airline industry. However, the company remains optimistic about future improvements in capacity and cost efficiencies. Investors will be closely watching the company’s ability to capitalize on the recovery in air travel demand and deliver on its revised outlook.
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