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Alaska Air Group (ALK) May Load Factor Up, Q2 View Upbeat

Zacks

Alaska Air Group, Inc. ALK reported traffic statistics for May. Traffic, measured in revenue passenger miles (RPMs), increased 1% to 4.88 billion.

Also, on a year-over-year basis, consolidated capacity (or available seat miles/ASMs) inched up 0.7% to 5.7 billion. With traffic growth outpacing capacity expansion, load factor or percentage of seats filled by passengers improved 30 basis points (bps) to 85.7%.

In the first five months of 2019, the carrier generated RPMs of 21.95 billion (up 0.5% year over year) and ASMs of 26.66 billion (up 0.2% year over year). As a result, load factor increased 20 bps to 82.3%. Meanwhile, economic fuel cost was $2.40 per gallon in May compared with $2.33 a year ago.

Alaska Air Group, Inc. Price

Alaska Air Group, Inc. Price

Alaska Air Group, Inc. price | Alaska Air Group, Inc. Quote


Bullish Q2 Outlook

The company now anticipates Revenue per ASM (RASM) in the range of 13.26-13.45 cents, representing an approximate year over year rise of 3.5-5%. Previously, the metric was anticipated in the band of 13.07-13.45 cents. Additionally, cost per ASM, excluding fuel and special items, is expected between 8.45 cents and 8.50 cents, indicating a change of approximately 4% from the prior-year reported number. The past view for the metric was 8.53-8.58 cents. Meanwhile, the estimate for economic fuel cost per gallon has now been reduced to $2.25 from the earlier forecast of $2.30. This projection denotes a 2% decline year over year.

Labor Deal

This month, the company inked a tentative deal with the Aircraft Mechanics Fraternal Association (AMFA) to integrate Airbus and Boeing technicians into a collective bargaining agreement. The technicians are presumed to vote on the agreement early next month. The pact includes a signing bonus and some wage rate increases. However, the company believes, the deal in the event of being ratified, will not have a substantial effect on full-year results.

Zacks Rank & Key Picks

Alaska Air Group carries a Zacks Rank #3 (Hold). Some better-raked stocks in the broader Transportation sector are SkyWest, Inc. SKYW, GATX Corporation GATX and Fly Leasing Limited FLY. While Fly Leasing sports a Zacks Rank #1 (Strong Buy), SkyWest and GATX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest and Fly Leasing have surged more than 31% and 56%, respectively, so far this year. Meanwhile, GATX boasts a stellar earnings history, having surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 16%.

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