Alaska Air falls after Q3 profit guidance lands short of expectations

Alaska Air Group (ALK) traded lower in postmarket action after reporting second quarter earnings results.

Revenue rose 10% to $4.1B in the second quarter. Unit revenue was up 8.6%, and capacity was up 1% to 24.3M available seat miles. Alaska Air's (ALK) load factor for the quarter was 82.3% vs. 83.9% a year ago. Yields were noted to have strengthened through the quarter, with June producing double-digit unit revenue growth and double-digit pretax profit margins.

Non-fuel unit costs increased 6.5% year over year. Economic fuel cost was $4.43 per gallon, an increase of 85% year-over-year, resulting in $600M of incremental fuel cost for the period. 

In terms of the integration of Hawaiian Airlines, the company said the brand has been preserved while back-end systems, flight codes, and crew operations have all been merged with Alaska Airlines.

Looking ahead, Alaska Air (ALK) said with a strong demand backdrop and an improving unit cost trajectory, the airline company expects a widening spread between unit revenue and unit costs in Q3. Coupled with continued execution on  strategic initiatives, Alaska Air (ALK) expects a meaningful inflection in financial performance beginning in the third quarter. Unit revenue is expected to improve sequentially from the second to the third quarter to low double-digit growth year-over-year, supported by strong yields and demand. 

Alaska Airlines (ALK) announced that it is into long-term lease agreements to add four 737-800 Boeing Converted Freighter aircraft to its dedicated cargo fleet, increasing the carrier's 737 freighter fleet from five to nine aircraft. The additional freighters are expected to help strengthen the network that connects communities across the states of Alaska and Hawaii to the contiguous U.S. and links them into Alaska's broader global cargo network. 

The company also announced the future plans for a modern fleet of Hawaiian-branded Boeing 737-800 aircraft that will replace Hawaiian's retiring Boeing 717 fleet for its neighbor island service.

Shares of Alaska Air (ALK) fell 5.0% after a profit guidance range of $0.00 to $1.00 vs. 41.47 consensus.