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Alaska Airlines Announces Two Labor Contract Ratifications

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Alaska Air Group’s (ALK - Free Report) subsidiary Alaska Airlines announced the ratification of its two five-year agreements with 5,200 airline staff (clerical, office and passenger service employees as well as ramp service and stores agent personnel) represented by the International Association of Machinists and Aerospace Workers.

The labor deals will provide employees with wage hikes, work security and retirement enhancements among other benefits.

The contract ratifications are a big plus, not just for the employees but also for the company on the whole as satiated labor groups prove to be a company’s major strength.

Meanwhile, the carrier seems to be on a solid footing for growth at least in the near term despite rising non-fuel unit costs. While non-fuel unit costs (excluding special items) rose 2.3% in the second quarter, the same is anticipated to ascend even higher by approximately 5% year over year in the current quarter. This downside is due to a $34-million expected increase in labor-related costs.

The tailwinds that should drive the company going forward are a steady rise in demand for air travel and modest oil prices (as fuel costs comprise a major chunk of any airline expenditure). Owing to these catalysts, the company estimates third-quarter unit revenues to inch up 2-5% while economic fuel cost is forecast to decline 5.2% year over year in the same period.

Zacks Rank & Key Picks

Alaska Air Group carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (VLRS - Free Report) , Copa Holdings, S.A. (CPA - Free Report) and Gol Linhas Aereas Inteligentes S.A. (GOL - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Controladora Vuela, Copa Holdings and Gol Linhas have rallied more than 61%, 28% and 16%, respectively, so far this year.

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