Alaska unit cost growth to peak in Q1

Washington DC
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Alaska Airlines anticipates consolidated unit cost growth of about 5.5% during the first quarter, well above the 1% increase it expects in 2014.

Brandon Pedersen, chief financial officer of the Seattle-based carrier, calls the cost per available seat mile (CASM) excluding fuel and special items growth during the quarter an “outlier” due to a number of one-time expenses that it expects early in the year, during an earnings call today.

These expenses include a new pilots agreement that was ratified in 2013, a $12 million investment in its IT systems, its new lease with the Port of Seattle and the potential costs of repainting its fleet with a new livery, he says.

CASM excluding fuel and items is expected to rise slightly in the second and third quarters, and fall in the fourth quarter, says Pedersen.

CASM excluding fuel and items rose 1% to 8.81 cents during the fourth quarter of 2013. It fell 0.1% to 8.47 cents in 2013.

A new livery could be the biggest change at Alaska in 2014. Pedersen says that this is likely to be rolled out later in the year.

The airline aims to make its brand “more energetic and compelling” with the update, Pedersen said in October. The eskimo, which has graced Alaska’s aircraft since the late 1970s, will remain.

Alaska anticipates a roughly 4.5% increase in consolidated capacity during the first quarter, according to an investor update today.

Capacity is expected to increase roughly 6% during each of the remaining three quarters of 2014, for an annual increase of about 5.5%.

Alaska has already announced new service from Salt Lake City International airport to Boise, Las Vegas, Los Angeles, Portland (Oregon), San Diego, San Francisco and San Jose (California) from June.

Advance bookings are down 0.5 percentage points in January and February, and down 1.5 points in March compared to the same months a year earlier, according to the update.

Alaska anticipates $525 million in capital expenditures during 2014, with $290 million related to aircraft.