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Alaska Air Group (ALK) Posts Q4 Loss, Suffers Revenue Dip Y/Y

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Alaska Air Group ALK, the parent company of Alaska Airlines, incurred a loss of $2.55 per share (excluding 92 cents from non-recurring items) in the fourth quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $2.91.

In the year-ago quarter, the company delivered earnings of $1.46 when air-travel demand was strong. The December-quarter’s loss meant that this Seattle, WA-based company suffered losses in each of the four quarters of the coronavirus-scarred 2020.

Revenues at Alaska Air came in at $808 million, surpassing the Zacks Consensus Estimate of $786.6 million. The top line, however, declined 63.7% year over year. Passenger revenues — contributing 81.3% to the top line — were down 68% on a year-over-year basis to $658 million due to weak travel demand.

Other Details

Consolidated traffic, measured in revenue passenger miles, fell 68.7% year over year in the reported quarter. Consolidated capacity (measured in available seat miles) dropped 42.1%. Load factor (percentage of seats occupied by passengers) deteriorated 38.4 points to 45.3% as traffic plunged more than the amount of capacity contraction.

Total revenue per available seat mile (RASM: a key measure of unit revenues) slumped 37.3% year over year to 8.39 cents in the reported quarter. Meanwhile, yield inched up 2% to 15.06 cents.

In the fourth quarter, total operating expenses (on a reported basis) dropped 30% year over year to $1,381 million. Consolidated fuel price (economic) was $1.39 per gallon, tumbling 37.1% year over year. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 45.9% to $117 million. Consolidated cost per available seat mile excluding fuel and special items (non-fuel unit costs) increased 26% to 11.35 cents, mainly due to capacity cuts.

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

Liquidity

As of Dec 31, 2020, the company had $3,346 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 final quarter of 2020 with long-term debt of $2,357 million compared with $1,264 million at the end of 2019. Inclusive of operating leases, debt-to-capitalization ratio was 61% compared with 41% at the end of December 2019.

Moreover, on Jan 15, 2021, the carrier received $266 million of the total amount of $533 million from the U.S. Treasury. Notably, Alaska Air reached an agreement with the U.S. treasury in January 2021 to receive an extension of the payroll support amounting to $533 million.

Alaska Air’s total liquidity as of Jan 22, 2021 stood at $5.2 billion.

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

Annual Results

For the full year, the carrier’s loss (on an adjusted basis) came in at $10.17 per share. Revenues tanked 59% year over year to $3.56 billion. The Zacks Consensus Estimate was of a loss of $10.50 per share while the same for revenues was $3.55 billion.

Q1 Outlook

For the first quarter of 2021, the carrier expects capacity (measured in available seat miles) to decline roughly 30% from the comparable reported figure of first-quarter 2019. Revenue passengers are likely to plummet in the 60-65% range during first-quarter 2021 from the level reported in the March quarter of 2019.

Total revenues are also likely to decline in the 60-65% range during first-quarter 2021 from the March-quarter 2019 actuals. Passenger load factor in the quarter is expected in the 40-45% range. Non-fuel unit costs for first-quarter 2021 are likely to increase approximately 20% from the recorded first-quarter 2019 levels.

Sectorial Snapshots

Let’s take a look at some of the other recently released earnings reports from companies within the Zacks Transportation sector.

United Airlines UAL incurred a loss (excluding 6 cents from non-recurring items) of $7 per share in the fourth quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $6.56. Further, operating revenues of $3,412 million lagged the Zacks Consensus Estimate of $3,420.4 million.

J.B. Hunt Transport Services JBHT reported earnings of $1.44 per share, beating the Zacks Consensus Estimate of $1.27. Total operating revenues of $2,737.7 million also surpassed the Zacks Consensus Estimate of $2,514.3 million.

Delta Air Lines DAL incurred a loss (excluding $1.34 from non-recurring items) of $2.53 per share in the fourth quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $2.43. Total revenues of $3,973 million topped the Zacks Consensus Estimate of $3,754.5 million.

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