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Alaska Air’s Route Expansion Impresses, Competition a Drag


On Nov 22, 2016, we issued an updated research report on Alaska Air Group Inc. ALK.

The company’s wholly owned subsidiary, Alaska Airlines, is a leading carrier in the United States. The company posted impressive results in the third quarter with both earnings and revenues beating estimates. Both metrics also increased on a year-over-year basis. The company’s traffic and capacity improved in the third quarter. Load factor remained flat with the prior-year quarter. The company’s operating income, however, declined year over year. Another matter of concern is the increase in debt-to-capitalization ratio for funds undertaken in part to fund the Virgin America Inc. VA acquisition. The buyout is expected to be completed shortly.

October Metrics

Alaska Air Group posted a significant rise in air traffic and capacity for Oct 2016. Load factor increased to 84.2% from 82.3% in Oct 2015. The company recently launched new flights between San Diego and Newark, San Diego and Baltimore, Washington and Hawaii, and Portland and Newark. We are optimistic about the company’s network expansion. We are also positive on the company’s shareholder returns policy. However, an increase in operating expenses remains a concern. We expect the company’s fourth-quarter metrics to be boosted by the Cyber Monday sale.

The company continues to face increasing competition from peers such as JetBlue Airways JBLU and Southwest Airlines Co. LUV.

Zacks Rank

Alaska Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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