Alaska Air Group Inc. (NYSE: NYSE:ALK) has announced revised expectations for the first quarter of 2024, signaling a narrower projected loss than previously anticipated, according to a recent SEC filing. The airline now estimates an adjusted loss per share (EPS) between $0.55 and $0.45, an improvement from earlier predictions.
This updated financial outlook follows a period of operational challenges, including the grounding of the Boeing (NYSE:BA) 737-9 MAX aircraft, which impacted the carrier's schedule in January and early February. Despite these setbacks, Alaska Air has successfully returned its fleet to service and reports robust demand, particularly during the Spring Break travel period and a resurgence of business travel on the West Coast.
The airline's capacity, measured in available seat miles (ASMs), is expected to be down approximately 2.5% compared to the same quarter in 2023. However, Alaska Air had initially planned for a modest increase in capacity year-over-year before the grounding occurred. The company believes that if not for the grounding, it would have seen over a 30% improvement in profit year-over-year.
Alaska Air estimates that the grounding of the Boeing 737-9 MAX fleet has adversely affected profitability by at least $150 million. However, the airline has received partial compensation from Boeing, which will be reflected in their first-quarter earnings. The adjusted EPS forecast includes this compensation and accounts for an approximate remaining impact of $0.30 per share from the grounding.
Looking ahead, the airline's full-year capacity projections remain uncertain due to potential delays in aircraft deliveries. This uncertainty is attributed to increased scrutiny of Boeing by the Federal Aviation Administration and the Department of Justice, which could affect the timing of new aircraft becoming available to the airline.
The article is based on an 8K filing.
InvestingPro Insights
As Alaska Air Group Inc. (NYSE: ALK) navigates through its operational challenges, the company's financial outlook appears to be on an upward trajectory. According to real-time data from InvestingPro, Alaska Air's market capitalization stands at $4.71 billion, with a Price/Earnings (P/E) ratio of 20.2, which adjusts to a lower 8.2 when based on the last twelve months as of Q4 2023. This suggests that investors may be valuing the company more favorably when considering its recent earnings performance.
The airline's revenue growth also paints a positive picture, with an 8.09% increase over the last twelve months as of Q4 2023, indicating that despite earlier setbacks, Alaska Air is managing to expand its financial top line. Additionally, the company's gross profit margin during the same period was 23.62%, which demonstrates its ability to maintain profitability in a challenging industry environment.
InvestingPro Tips highlight some key points for potential investors: Analysts predict that Alaska Air will be profitable this year, and the company has been profitable over the last twelve months. However, it's important to note that four analysts have revised their earnings downwards for the upcoming period, and the company's stock price movements have been quite volatile. These insights suggest that while there are positive expectations for the company's profitability, investors should also be aware of the potential risks associated with earnings revisions and stock volatility.
For readers looking to delve deeper into Alaska Air's financial metrics and analyst forecasts, InvestingPro offers additional tips and insights. There are currently 5 more InvestingPro Tips available for Alaska Air, which can be accessed by visiting https://www.investing.com/pro/ALK. To enrich your investing strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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