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Alaska Air (ALK) Posts Q3 Loss, Suffers Revenue Decline Y/Y

Maharathi Basu
·5 min read

Alaska Air Group ALK, the parent company of Alaska Airlines, incurred a loss of $3.23 per share (excluding 26 cents from non-recurring items) in the third quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $2.86. However, in the year-ago quarter, the company delivered earnings of $2.63 when air-travel demand was strong. The September-quarter’s underperformance can be attributed to the advent of the coronavirus, which dramatically changed the scenario for the airlines.

Revenues at Alaska Air came in at $701 million, surpassing the Zacks Consensus Estimate of $680.3 million. The top line, however, declined 70.7% year over year. Passenger revenues — contributing 81.6% to the top line — were down 74% on a year-over-year basis due to weak travel demand.

Alaska Air Group, Inc. Price, Consensus and EPS Surprise

Alaska Air Group, Inc. Price, Consensus and EPS Surprise
Alaska Air Group, Inc. Price, Consensus and EPS Surprise

Alaska Air Group, Inc. price-consensus-eps-surprise-chart | Alaska Air Group, Inc. Quote

Other Details

Consolidated traffic, measured in revenue passenger miles, fell 74.6% year over year in the reported quarter. Consolidated capacity (measured in available seat miles) dropped 55.1%. Load factor (percentage of seats occupied by passengers) deteriorated 37.3 points to 48.5% as traffic plunged more than the amount of capacity contraction.

Total revenue per available seat mile (RASM: a key measure of unit revenues) slumped 34.8% year over year to 8.9 cents in the reported quarter on a consolidated basis. Meanwhile, yield inched up 1.9% to 14.99 cents.

In the third quarter, total operating expenses (on a reported basis) were down 35% year over year to $1,272 million. Consolidated fuel price (economic) was $1.32 per gallon, down 38% year over year. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 57.4%. Consolidated cost per available seat mile excluding fuel and special items surged more than 66% to 14 cents, mainly due to the capacity cuts.

Liquidity

At the end of the third quarter, this Seattle, WA-based company had $3,759 million in cash and marketable securities compared with $1,521 million at the end of 2019.

This currently Zacks Rank #4 (Sell) company exited the third quarter with long-term debt of $2,672 million compared with $1,264 million at the end of 2019. Inclusive of operating leases, debt-to-capitalization ratio was 59% compared with 41% at the end of December 2019.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Key Airline Releases

Apart from Alaska Air, the likes of Delta Air Lines DAL and United Airlines UAL reported third-quarter 2020 losses earlier this month. Take a look.

Delta incurred a loss (excluding $5.17 from non-recurring items) of $3.30 per share in the September quarter, wider than the Zacks Consensus Estimate of a loss of $3.14. However, Delta reported earnings of $2.32 per share (on an adjusted basis) in the year-ago quarter, driven by high passenger revenues as air-travel demand was buoyant at that time.

United Airlines incurred a loss (excluding $1.83 from non-recurring items) of $8.16 per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of $7.63. Results were hurt by the coronavirus-induced weakness in air-travel demand. Moreover, operating revenues of $2,489 million slumped 78.1% year over year and also lagged the Zacks Consensus Estimate of $2,570.1 million. This year-over-year plummet was due to 84.3% drop in passenger revenues to $1,649 million.

Environmentally-Friendly Deal

In another development, Alaska Airlines and Microsoft MSFT inked a partnership deal in a bid to reduce carbon emissions in business travel. Now employees of Microsoft who fly on Alaska Air flights between their global headquarters in Redmond, Washington and California can do so more sustainably, courtesy of the usage of sustainable aviation fuel (SAF) to cover their business travel. The SAF will be supplied by the industry leader SkyNRG.

The agreement pertains to CO2 emissions from the business travel of Microsoft employees on Alaska Air flights between Seattle-Tacoma International Airport to San Francisco International Airport, San Jose International Airport and Los Angeles International Airport. This is a first of its kind U.S. partnership

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