We recently issued an updated report on Alaska Air Group, Inc. (ALK - Free Report) .
Alaska Air has been witnessing significant loss of passenger revenues. The metric has plunged 53% year over year in the first six months of 2020. Weak passenger revenues are hurting the top line. In order to match capacity with the current demand scenario, the carrier reduced capacity by 39.6% in the first half of 2020. The carrier anticipates third-quarter capacity to decline approximately 50%, while in the fourth quarter, the same is estimated to fall approximately 35%.
Nevertheless, low fuel prices are helping Alaska Air partly offset the adversities. Notably, fuel prices declined 19.5% year over year in the first half of 2020. Additionally, the airline’s stringent cost-cutting measures support the bottom line.
The carriers’ steady improvement in the cash burn rate is also encouraging. The company has reduced its monthly cash burn rate to $165 million in May from $400 million in April. Alaska Air’s June cash burn declined to approximately $120 million. Alaska Air expects its cash burn to decline to less than $125 million in August from approximately $175 million in July. Alaska Air hopes to breakeven by the year-end.
In a bid to boost travel demand, the carrier is also adding new routes to its schedule as well as making travel almost entirely touch-free as it tries to attract customers by ensuring them of their safety amid coronavirus concerns.
Zacks Rank & Stocks to Consider
Alaska Air currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Canadian Pacific Railway Limited (CP - Free Report) and Werner Enterprises, Inc. (WERN - Free Report) . Knight-Swift sports a Zacks Rank #1(Strong Buy), while Canadian Pacific and Werner carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, Canadian Pacific and Werner is pegged at 15%, 8% and 8.5%, respectively.
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