Alaska Air Group, Inc. (ALK - Free Report) reported first-quarter 2018 earnings (excluding 11 cents from non-recurring items) of 14 cents, surpassing the Zacks Consensus Estimate by 3 cents. However, the bottom line declined 86.7% on a year-over-year basis due to high costs.
Revenues came in at $1,832 million, marginally above the Zacks Consensus Estimate of $1,830.6 million. The top line also improved 5% on a year-over-year basis. Passenger revenues, accounting for a bulk of the top line (86.8%), were also up 5% on a year-over-year basis.
Airline traffic, measured in revenue passenger miles, rose 5.9% year over year to 12,403 million in the reported quarter. Capacity or available seat miles expanded 7.5% to 15,480 million. Load factor (percentage of seat occupancy) contracted 120 basis points to 80.1% as capacity expansion outweighed traffic growth.
Total revenue per available seat mile (RASM: a key measure of unit revenues) decreased 2.1% year over year to 11.84 cents in the reported quarter. Yield slipped 0.7% to 13.59 cents.
Operating Expenses & Income
In the quarter under review, total operating expenses were up 14% year over year to $1,803 million. Operating income plunged 82% to $29 million from the prior-year quarter. Fuel price (economic) was $2.14 per gallon, up 20.2%.
Consolidated cost per available seat mile — excluding fuel and special items — nudged up 5.1% to 8.81 cents, mainly owing to a 19% rise in wages and related benefits.
Liquidity & Buybacks
At the end of the reported quarter, this Zacks Rank #3 (Hold) company had $1,528 million in cash and marketable securities compared with $1,621 million at the end of 2017. You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alaska Air Group exited the quarter with long-term debt of $2,062 million compared with $2,262 million at the end of 2017. Adjusted debt-to-capitalization ratio was 53%, flat on a sequential basis. Moreover, the carrier repurchased 185,661 shares for approximately $12 million in the reported quarter.
Q2 & 2018 Forecast
For the second quarter of 2018, the carrier expects cost per available seat mile (CASM), excluding fuel and special items, to increase approximately 4.8% year over year. For 2018, the same is projected to rise 3.5%. Economic fuel cost per gallon is anticipated to be $2.25 per gallon in the second quarter, up approximately 32%. RASM is projected to decline between 2.75% and 3.75% in the same period.
Meanwhile, capacity is anticipated to expand around 8.5% in the second quarter. For the full year, the metric is likely to climb 6.5% whereas effective tax rate in 2018 is estimated to be approximately 25%.
Investors interested in the broader Zacks Transportation sector are keenly awaiting first-quarter earnings reports from key players like JetBlue Airways Corporation (JBLU - Free Report) , Norfolk Southern Corporation (NSC - Free Report) and Union Pacific Corporation (UNP - Free Report) . While JetBlue will report on Apr 24, Norfolk Southern and Union Pacific will announce the same on Apr 25 and Apr 26, respectively.
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