Alaska Air Group Forecasts Q4 Loss as Fuel Costs Climb

SEATTLE — Alaska Air Group expects a fourth-quarter adjusted loss of US$2.00–US$2.50 per share as rising fuel costs outweigh revenue growth at the parent of Alaska Airlines (AS) and Hawaiian Airlines.

The group’s October 20 results put its expected full-year adjusted loss at US$5.00–US$5.50 per share, including US$1.8bn in fuel expense above its original plan.

Third-quarter operating revenue rose 14% year over year to US$4.3bn on capacity growth of 2.4%. On the same comparison, premium revenue increased approximately 25%, while managed corporate revenue grew 30%.

Why the Earnings Figures Differ

Alaska reported a third-quarter net loss under generally accepted accounting principles of US$147m, or US$1.32 per share. Its adjusted net loss was US$35m, or US$0.31 per share.

Management also presented adjusted earnings of US$0.36 per share excluding a US$0.67-per-share tax adjustment. Alaska said the adjustment followed a revision to its expected annual tax rate as its full-year outlook moved from a pretax profit to a pretax loss.

The financial statements accompanying the release show US$18m in third-quarter pretax income and US$165m in income tax expense. The net loss therefore includes a substantial tax effect; the positive adjusted earnings-per-share presentation excludes the specified adjustment.

Fuel Costs and International Growth

Alaska expects fourth-quarter economic fuel costs of US$4.65–US$4.85 per gallon, compared with US$3.94 in the third quarter.

Its international expansion follows April’s unification of Alaska and Hawaiian’s booking and app systems. According to the airline’s passenger-service-system announcement, that shared platform connects reservation records, websites, airport kiosks and loyalty programs. Both brands now use the AS flight code.

That integration provides the reservation infrastructure for selling trips across the combined network.

Alaska also announced its intention to join Atlantic and Pacific joint international businesses with oneworld and global partners. The release does not specify the participating partners, approval process or implementation timetable.

For the fourth quarter, the group expects capacity growth of 1%–1.5% year over year, concentrated in international flying. It forecasts unit revenue growth in the low double digits, alongside a mid-single-digit increase in unit costs excluding fuel.