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Alaska Air (ALK) Q2 Loss Narrower than Expected, Revenues Lag

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Alaska Air Group’s (ALK - Free Report) second-quarter 2021 loss places it in the same bracket alongside American Airlines (AAL - Free Report) , United Airlines (UAL - Free Report) and Delta Air Lines (DAL - Free Report) as all took a similar hit from the pandemic-led crisis.

Alaska Air Group, the parent company of Alaska Airlines, incurred a loss (excluding $3.45 from non-recurring items) of 30 cents per share, narrower than the Zacks Consensus Estimate of a loss of 31 cents. In the year-ago quarter, the company incurred a loss of $3.54 per share.

Alaska Air Group, Inc. Price, Consensus and EPS Surprise

Alaska Air Group, Inc. Price, Consensus and EPS Surprise

Alaska Air Group, Inc. price-consensus-eps-surprise-chart | Alaska Air Group, Inc. Quote

Operating revenues of $1,527 million skyrocketed 262.71% year over year. This massive year-over-year jump reflects improving air-travel demand as more and more people take to the skies following widespread vaccination. Revenues soared 91.6%, sequentially. However, quarterly revenues fell short of the Zacks Consensus Estimate of $1,531.8 million.

Passenger revenues, which accounted for bulk of the top line (88.5%), increased to $1352 million from a mere $309 million a year ago when the impact of coronavirus on air-travel demand was much severe. Cargo and other revenues surged in excess of 46% to $57 million, driven by the carrier’s focus on its cargo unit in the coronavirus era. Mileage plan other revenues accounted for the balance.

Total revenue per available seat mile (RASM: a key measure of unit revenues) increased 16.5% year over year to 11.38 cents in the reported quarter. Yield declined 30% to 13.09 cents.

Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) rose to 10.3 million in the reported quarter from a mere 1.6 million a year ago. To cater to this increased demand, capacity (measured in average seat miles) expanded to 13.4 million from 4.3 million. Consolidated load factor (percentage of seats filled by passengers) increased 38.6 percentage points to 77% in the second quarter of 2021.

In the second quarter, total operating expenses (on a reported basis) escalated 38% year over year to $978 million with aircraft fuel expenses including hedging gains and losses skyrocketing to $274 million from $59 million a year ago. Economic fuel price per gallon climbed to $1.90 from $1.20 a year ago as oil prices move north. However, consolidated operating costs per available seat mile (CASM: excluding fuel and special items) declined 57.9% to 9.20 cents.

Liquidity

As of Jun 30, 2021, the company had $3.95 billion in cash and marketable securities compared with $3.35 billion at the end of 2020.

This presently Zacks Rank #3 (Hold) company exited the second quarter with long-term debt of $2.32 billion compared with $2.36 billion at December 2020 end. Inclusive of operating leases, debt-to-capitalization ratio was 56% compared with 61% at the end of December 2020. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

During the quarter, the company received $664 million in the form of grants and loans from the U.S. Treasury under an extension of the Payroll Support Program.