SEATTLE - Alaska Airlines has made a strategic investment in JetZero, a company leading the development of an innovative blended-wing body (BWB) aircraft, which is expected to cut fuel consumption by up to 50%. The investment, which also includes options for future aircraft orders, was announced today as part of the carrier's broader commitment to sustainability and its goal of achieving net zero carbon emissions by 2040.
The partnership with JetZero aligns with Alaska Airlines' sustainability strategy, which encompasses operational efficiency, fleet renewal, sustainable aviation fuels, waste reduction, and the exploration of electrified aircraft. The airline's investment arm, Alaska Star Ventures, is actively seeking out technologies that can help reach these environmental targets.
JetZero's BWB aircraft design integrates the wings and fuselage into a single aerodynamic shape to reduce drag significantly. This innovative design not only promises substantial fuel savings but also aims to lower carbon emissions and operational costs. Moreover, the unique aircraft structure is expected to enhance passenger comfort by offering a quieter and more enjoyable flying experience.
Tom O'Leary, CEO and co-founder of JetZero, highlighted the importance of the BWB design in addressing the airline industry's challenge of reducing fuel burn and emissions. He emphasized the immediate benefits of cost savings, dramatically lower emissions, and an improved customer experience that JetZero's aircraft will offer compared to current airplanes.
JetZero's collaboration with the United States Air Force, NASA, and the FAA has been crucial in advancing the BWB aircraft towards commercial viability. The company, co-founded by aerospace veteran Mark Page, aims to launch the world's first commercial BWB airplane into service by 2030, offering a significant step towards the aviation industry's 2050 net-zero goals.
Alaska Airlines, known for its award-winning customer service and industry-leading loyalty program, Mileage Plan, is the first airline to invest in JetZero's Series A funding. The airline, together with its regional partners and global alliances, serves over 120 destinations, providing a premium flying experience to its guests.
The investment in JetZero's BWB technology is based on a press release statement and reflects Alaska Airlines' ongoing efforts to influence the future of aviation and its commitment to environmental responsibility.
In other recent news, Alaska Air (NYSE:ALK) Group Inc. reported a strong second quarter with a GAAP net income of $220 million and an adjusted net income of $327 million. The company achieved a record revenue of $2.9 billion, significantly bolstered by nearly $1 billion from premium segments. Alaska Air also leads the industry with a 15.8% adjusted pre-tax margin. The company is currently enhancing premium seating on aircraft, a move expected to be completed by mid-2026.
In addition, Alaska Air announced an extension of the Department of Justice's (DOJ) review period for its proposed merger with Hawaiian Holdings (NASDAQ:HA) Inc. The merger, if approved, would result in a strengthened position in air transportation, particularly in the Pacific region. TD Cowen, while maintaining its Buy rating on shares of Alaska Air, reduced the price target reflecting the company's latest guidance and insights into the second half of 2024.
Despite a surge in summer travel, airlines including Alaska Air, are facing challenges due to an oversupply of seats and increased operating expenses. However, Alaska Air has demonstrated a strong financial performance and is making strategic moves to maintain its leading position in the domestic aviation market. These recent developments are part of ongoing trends in the airline industry.
InvestingPro Insights
Alaska Airlines' recent strategic investment in JetZero's blended-wing body (BWB) aircraft not only underscores its commitment to sustainability but also aligns with the company's financial strategy. According to InvestingPro, Alaska Airlines (ALK) is expected to see net income growth this year. This is a critical metric for investors as it indicates potential profitability and financial health in the context of the airline's ambitious environmental goals.
Moreover, despite some analysts revising their earnings expectations downwards, Alaska Airlines is trading at a low price-to-earnings (P/E) ratio relative to its near-term earnings growth, with an adjusted P/E ratio of 9.1. This could suggest that the stock is undervalued, providing an attractive entry point for investors who are optimistic about the company's future, especially considering its latest sustainability initiatives. Moreover, with a price-to-book ratio of 1.03, the company's market valuation is closely aligned with its book value, potentially offering a margin of safety for investors.
It is worth noting that Alaska Airlines operates with a moderate level of debt, which can be a double-edged sword. On one hand, it allows the company to invest in growth opportunities like the JetZero partnership; on the other hand, it necessitates prudent financial management to ensure long-term sustainability. For those interested in further analysis, InvestingPro offers additional insights, including 9 more InvestingPro Tips for Alaska Airlines, which can be found at https://www.investing.com/pro/ALK.
As Alaska Airlines continues to navigate the volatile airline industry, these financial metrics and InvestingPro Tips provide a snapshot of the company's current status and future potential, especially as it embarks on initiatives that could redefine aviation and its environmental impact.
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