Alaska Air Group increased net profit in the third quarter as yields turned positive, but a shortfall in aircraft deliveries means heightened cost pressures and curtailed capacity will continue for the remainder of the year.
The Oneworld carrier completed the acquisition of Hawaiian in September and the airline’s results are the first to feature its new acquisition, albeit including only 13 days worth of contribution.
Alaska Airl Group increased net profit from $139 million to $236 million for the third quarter. That was achieved on revenues up 8% to nearly $3.1 billion. The vast majority of that revenue was delivered by Alaska Airlines and its regional operation, generating $2.5 billion and $500 million respectively. The inclusion of 13 days of Hawaiian added $95 million in revenue during the quarter.
Alaska Airl Group chief executive Ben Minicucci says: “We are creating a resilient airline that can meet the challenge of competing in a rapidly shifting industry.
“We have the resources and flexibility to navigate challenges, embrace new opportunities, and write the next chapter for our company. Our industry-leading margins and strong operational performance are proof points that we are making the right investments to differentiate ourselves from our domestic-focused peers. Today’s results reinforce we are on the right path for the future.”
One key challenge ahead is continued delays in deliveries of Alaska’s on-order Boeing 737 Max jets, which has prompted the carrier to reduce its capacity growth plans. While Alaska had already lowered its delivery and growth expectations amid the Max production challenges earlier this year, the impact of the ongoing machinists’ strike at Boeing has prompted a further cut in capacity expectations.
”We now expect legacy Air Group [excluding Hawaiian] capacity growth to be less than 2% for the year versus our previous expectation of less than 2.5% growth year-on-year,” it says, in Q&A document released in lieu of an earnings call; the airline will instead hold an investor call in December.
The integration of Hawaiian brings Airbus aircraft back into the Alaska fleet. Intriguingly, the carrier raises the potential of exercising some of Hawaiian’s A321 purchase rights if certification of the 737 Max 10 is further delayed.
”It remains too early to predict our future fleet strategy now that we operate a mixed fleet again,” the carrier says. “We are familiar with the A321 and its capabilities and our future fleet design will be influenced by Boeing’s ability to restart Max production and certify the Max 10 aircraft on schedule.”
While the group’s unit revenues were 1.3% higher in the third quarter – turning positive at both Alaska and Hawaiian in August – cost pressures have been compounded by delays in aircraft deliveries.
”2024 has been significantly impacted by lower growth than the level we had planned and built the company for, and we remain resourced for higher capacity delivery,” the airline says. ”This relative over-staffing and historically low attrition, as well as the natural pressure that lower capacity puts on our fixed cost base, contributed to approximately one-third of our unit cost pressure in the back half of the year.
”We expect this pressure to be transitory and to return to more optimised resource levels relative to our capacity throughout 2025,” the carrier says.
