We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Alaska Air Group (ALK) Lifts CASM View on Deal with Pilots
Read MoreHide Full Article
Alaska Air Group (ALK - Free Report) , based in Seattle, WA, raised its forecast for a closely watched cost metric after pilots of Horizon Air, a subsidiary of Alaska Air Group, approved an amendment to the existing eight-year pay-related contract.
Pilots at Horizon Air who operates flights to more than 35 cities across the US, Canada and Mexico are represented by the International Brotherhood of Teamsters (IBT). Notably, following the amendment of the deal last month, compensation of the pilots (existing as well as new) has shot up significantly, implying toward a rise in labor costs. In fact, the carrier expects to incur a one-time cost approximately to the tune of approximately $9 million in the current year due to the ratification of deal.
Consequently, Alaska Air Group now expects cost per available seat mile or CASM (excluding fuel and other special items) in the range of 7.95 cents to 8 cents. The projected range is in fact an increase from the earlier guidance of 7.88 cents to 7.93 cents. We also note that the carrier raised the second-quarter forecast for fuel costs (economic) per gallon to $1.72 from $1.71. Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The guidance for CASM has also been raised for full-year 2017. Due to the ratification, the company now expects the metric in the band of 8.02 cents to 8.07 cents (earlier guidance: 8 cents to 8.05 cents).
Moreover, we remind investors that total operating expenses (on a reported basis) had increased 50% year over year in the first quarter of 2017 primarily owing to the 33% rise in wages and benefits. Due to increased costs the bottom line had contracted 27.6%., Following the deal ratification and the subsequent rise in CASM view, we expect the bottom line to remain under pressure in the second quarter as well. As a result, the stock fell on Jun 15 following the news.
Price Performance
With its bottom line being hurt due to high costs, it is no surprise that Alaska Air Group has underperformed the Zacks categorized Transportation- Airline industry in the last three months. The stock has declined 5.3% against the industry’s gain of 9% in the period.
We note that Alaska Air Group is not the only US carrier to be affected by higher labor costs. With labor deals in vogue in the airline space, it is natural that the costs are surging. In fact, this factor had not only hurt the bottom line of Alaska Air Group but other carriers like Delta Air Lines (DAL - Free Report) , Southwest Airlines (LUV - Free Report) and American Airlines Group (AAL - Free Report) in the first quarter. The trend is most likely to continue in the second quarter as well.
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy...
Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early. Download Report with 3 Top Tech Stocks >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Alaska Air Group (ALK) Lifts CASM View on Deal with Pilots
Alaska Air Group (ALK - Free Report) , based in Seattle, WA, raised its forecast for a closely watched cost metric after pilots of Horizon Air, a subsidiary of Alaska Air Group, approved an amendment to the existing eight-year pay-related contract.
Pilots at Horizon Air who operates flights to more than 35 cities across the US, Canada and Mexico are represented by the International Brotherhood of Teamsters (IBT). Notably, following the amendment of the deal last month, compensation of the pilots (existing as well as new) has shot up significantly, implying toward a rise in labor costs. In fact, the carrier expects to incur a one-time cost approximately to the tune of approximately $9 million in the current year due to the ratification of deal.
Consequently, Alaska Air Group now expects cost per available seat mile or CASM (excluding fuel and other special items) in the range of 7.95 cents to 8 cents. The projected range is in fact an increase from the earlier guidance of 7.88 cents to 7.93 cents. We also note that the carrier raised the second-quarter forecast for fuel costs (economic) per gallon to $1.72 from $1.71. Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The guidance for CASM has also been raised for full-year 2017. Due to the ratification, the company now expects the metric in the band of 8.02 cents to 8.07 cents (earlier guidance: 8 cents to 8.05 cents).
Moreover, we remind investors that total operating expenses (on a reported basis) had increased 50% year over year in the first quarter of 2017 primarily owing to the 33% rise in wages and benefits. Due to increased costs the bottom line had contracted 27.6%., Following the deal ratification and the subsequent rise in CASM view, we expect the bottom line to remain under pressure in the second quarter as well. As a result, the stock fell on Jun 15 following the news.
Price Performance
With its bottom line being hurt due to high costs, it is no surprise that Alaska Air Group has underperformed the Zacks categorized Transportation- Airline industry in the last three months. The stock has declined 5.3% against the industry’s gain of 9% in the period.
We note that Alaska Air Group is not the only US carrier to be affected by higher labor costs. With labor deals in vogue in the airline space, it is natural that the costs are surging. In fact, this factor had not only hurt the bottom line of Alaska Air Group but other carriers like Delta Air Lines (DAL - Free Report) , Southwest Airlines (LUV - Free Report) and American Airlines Group (AAL - Free Report) in the first quarter. The trend is most likely to continue in the second quarter as well.
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy...
Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early. Download Report with 3 Top Tech Stocks >>