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Alaska Air Sees June Revenues Dropping 80%, Less Than May

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Alaska Air Group Inc (ALK - Free Report) has been seeing signs of improving demand since May, with easing travel restrictions. After a dramatic drop in demand in April, the carrier has been witnessing fewer cancellations and an increase in new bookings since May. However, with coronavirus concerns continuing, demand is way below year-ago levels. Per the company, “Q2 demand remains significantly below historic levels, and Q3 is also expected to be significantly adversely impacted.”

With improving demand, the carrier anticipates revenue passengers to decline 80-85% year over year in June, indicating a betterment from 95% and 90% plunge in April and May respectively. Capacity in June is expected to be down approximately 70% year over year, compared with 78% and 79% decline in April and May respectively.  Load factor (percentage of seats filled by passengers) is predicted to improve to around 50-55% this month from 15% and 40% in April and May respectively. Meanwhile, total revenues are estimated to be down approximately 80% in June from 87% and 83% decline in April and May respectively.

Capacity cuts are expected to moderate with 60% and 50% reduction in July and August respectively, if demand continues to improve.


Liquidity

Thanks to improving demand and cost-control measures, Alaska Air anticipates June cash burn rate to decrease to approximately $150 million, from $165 million in May. The company remains committed to reducing monthly cash burn to zero by the end of this year. As of Jun 19, 2020, Alaska Air had cash and short-term investments of approximately $2.7 billion.

Zacks Rank & Key Picks

Alaska Air carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Scorpio Tankers Inc. (STNG - Free Report) , Teekay Tankers Ltd. (TNK - Free Report) and Frontline Ltd (FRO - Free Report) . While Frontline sports a Zacks Rank #1 (Strong Buy), Scorpio Tankers and Teekay Tankers carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Scorpio Tankers’ current-year earnings has been revised upward in excess of 100% in the past 60 days.

The Zacks Consensus Estimate for Teekay Tanker’s current-year earnings has been revised 35.6% upward in the past 60 days.

The Zacks Consensus Estimate for Frontline’s current-year earnings has been revised 17.1% upward in the past 60 days.

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