Alaska Air Group forecast Q3 profit below estimates on Wednesday, citing a financial hit from its new flight attendant contract labor deal, while it topped market expectations for Q2 earnings. The Seattle, Washington-based carrier’s flight attendants are set for an average pay hike of 32% after it reached a new tentative agreement with the union.
Alaska Air expects a 50 cent-per-share hit to its Q3 earnings due to the labor deal, as per CFO Shane Tackett.
Alaska Air profit forecast
It forecast an adjusted profit of $1.40 to $1.60 per share during the period, compared with LSEG estimates of $2.05 per share.
Alaska, the operator of the Boeing plane that suffered a mid-air cabin blowout in January, also saw a $60 million impact to its Q2 revenue due to the incident as it affected its bookings in April.
During the quarter, Alaska received nine 737 MAX aircraft from Boeing, six of which were the 737 MAX 9 variant.
Airlines boom time
Airlines are enjoying a summer travel boom while business travel, which is seen as the cash cow for the industry, has also continued its upward trajectory as corporate customers ramp up their work-related travel expenses.
“There is really strong demand by almost any measure,” as per Tackett. “The most strength is on the premium segment of travel.”
Alaska posted Q2 adjusted net income of $2.55 per share, compared with estimates of $2.38.
Alaska’s operation cot
Alaska’s Q2 performance was driven by lower-than-expected operating costs. Unit costs in the quarter were down about 2% from a year ago, compared with an April projection of being flat.
“We actually think that ticket yields would potentially be positive relative to last year in August. And we certainly do see that happening in September at the latest,” Tackett added.
The airline’s adjusted pretax margin of 15.8% for the quarter ended June 30 came in higher than larger rival Delta Air’s (DAL.N), opens new tab 13%.
Total operating revenue rose 2% to $2.9 billion.
Alaska Air stock
Alaska Air stock traded down $0.44 during midday trading on Wednesday, reaching $40.06. 2,458,868 shares of the company were exchanged, compared to its average volume of 2,176,173. The company has a market cap of $5.08 billion, a price-to-earnings ratio of 21.42, a price-to-earnings-growth ratio of 0.51 and a beta of 1.60.
