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Alaska Air (ALK) Lowers Q3 View on Delta Variant-Led Woes

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Alaska Air Group (ALK - Free Report) has reduced its forecast for the third quarter after experiencing weakness in bookings due to increase in coronavirus cases, induced by the Delta variant. This follows similar moves by other U.S. carriers last month.

Per an investor update dated Sep 2, Alaska Air’s bookings have “deteriorated moderately” over the past few weeks due to rising coronavirus cases. Due to softness in forward bookings, the carrier now anticipates cash flow from operations in the range of 0-$50 million in the third quarter, compared with 0-$100 million expected previously.

Capacity, measured in available seat miles (ASMs), is estimated to decline 17-18% approximately in the third quarter from the comparable period in 2019 (previous expectation: down 17-20%). Revenue passengers are expected to decrease 21-23% from the 2019 level, compared with 15-18% decrease anticipated previously.


Passenger load factor (percentage of seats filled with passengers) is predicted to be in the band of 79-81% (previous expectation: 82-85%). Total revenues are forecast to drop 19-21% from the comparable period in 2019 (earlier expectation: down 17-20%). Cost per ASM, excluding fuel and special items, is expected to rise 11-12%, compared with the previous expectation of 10-12% increase. Economic fuel cost per gallon is estimated to be $1.98 in the third quarter (previous guided range: $1.95-$2).

While Alaska Air, carrying a Zacks Rank #3 (Hold), does not expect its August and September performances to be as strong as in July, it continues to anticipate positive pretax margin in the third quarter. It still expects to resume flying 100% of 2019 capacity by the summer of 2022, post which the airline expects to return to pre-coronavirus levels of growth. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Amid rising coronavirus cases, induced by the Delta variant, last month, American Airlines (AAL - Free Report) , carrying a Zacks Rank #3, said that its August revenues were falling short of expectations due to softness in bookings.

Spirit Airlines (SAVE - Free Report) , carrying a Zacks Rank of 3, estimates an impact of $80-$100 million on its revenues in the third quarter due to uptick in cancellations and softer-than-expected booking trends caused by rising COVID-19 cases.

Southwest Airlines (LUV - Free Report) , carrying a Zacks Rank #3, slashed its third-quarter operating revenue guidance after it “experienced a deceleration in close-in bookings and an increase in close-in trip cancellations” in August. The carrier also expressed doubts about being able to achieve profits in the third quarter as it had previously expected.

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