Alaska Air raises profit forecast on strong summer travel

Investing.com -- Alaska Air Group Inc (NYSE:ALK ) on Thursday raised its profit forecast for the third quarter, buoyed by strong travel demand throughout the summer season. 

The airline capitalized on increased passenger volumes, exceeding its earlier revenue expectations and delivering a robust operational performance, positioning itself for a better financial outcome than initially anticipated.

“We flew a record schedule and delivered a reliable operation for guests with a 99.3% completion rate QTD,” the company said in a statement.

Revenue growth outpaced earlier forecasts, driven by two main factors. Industry-wide disruptions in July, particularly those related to the CrowdStrike (NASDAQ:CRWD ) cybersecurity incident, prompted increased ticket sales as passengers sought alternatives, creating a surge in demand. 

Moreover, Alaska Air saw continued strength through August and into September, with unit revenue—measured as revenue per available seat mile—turning positive in August and maintaining that momentum. 

As a result, the company now expects its total unit revenue to grow by approximately 2% year-over-year in the third quarter, signaling the airline’s ability to respond effectively to market opportunities.

In addition to stronger-than-expected revenue, Alaska Air has benefited from declining fuel costs, which have further supported its positive outlook. 

Moderating crude oil prices, coupled with lower West Coast refining margins, have allowed the airline to revise its economic fuel cost estimates downward, now expected to be in the range of $2.60 to $2.70 per gallon. 

This reduction in fuel prices has provided additional relief to Alaska Air’s bottom line, as fuel costs remain one of the largest expenses for airlines.

These combined factors have led Alaska Air to revise its earnings forecast for the third quarter of 2024. The company now anticipates adjusted earnings per share (EPS) to range between $2.15 and $2.25, a marked increase from earlier guidance. 

The revised profit outlook underscores the airline’s ability to capitalize on a favorable mix of operational excellence, strong market demand, and cost efficiency.

Shares of the airline was up 4.3% in pre-open trade. 

Source: Investing.com