Alaska Air Group, Inc. ALK reported fourth-quarter 2017 earnings (excluding $2.14 from non-recurring items) of 83 cents, meeting the Zacks Consensus Estimate. The bottom line plunged 46.79% on a year-over-year basis.
Revenues came in at $1,962 million, marginally above the Zacks Consensus Estimate of $1,961.8 million. The top line also improved 28.7% on a year-over-year basis. Passenger revenues, accounting for a bulk of the top line (86.8%), surged 32.2% on a year-over-year basis.
Operating Statistics
Airline traffic, measured in revenue passenger miles, rose 37.6% year over year to 13,265 million in the reported quarter. Capacity or available seat miles expanded 39.4% to 15,901 million. Load factor (percentage of seat occupancy) contracted 110 basis points to 83.4% on capacity expansion outpacing traffic growth.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 5.1% year over year to 10.71 cents. Total revenue per available seat mile (RASM) also declined 7.6% to 12.34 cents in the quarter under review while yield fell 3.9% to 12.84 cents.
Operating Expenses & Income
In the quarter under discussion, total operating expenses soared 40% year over year to $1,800 million. Operating income reduced 33% to $162 million from the prior-year quarter. Fuel price (economic) was $2 per gallon, up 19%. Consolidated unit cost or cost per available seat mile — excluding fuel and special items — nudged up 2.2% to 8.64 cents.
Alaska Air Group, Inc. Price, Consensus and EPS Surprise
Alaska Air Group, Inc. Price, Consensus and EPS Surprise | Alaska Air Group, Inc. Quote
Liquidity
At the end of the reported quarter, this Zacks Rank #3 (Hold) company had $1,621 million in cash and marketable securities compared with $1,580 million at the end of the comparable period in 2016. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alaska Air Group exited the quarter with long-term debt of $2,262 million compared with $2,645 million at the end of 2016. At the reported quarter-end, adjusted debt-to-capitalization ratio was 51% compared with 59% at the end of comparable quarter in 2016. Moreover, the carrier has announced a dividend hike of 7% to 32 cents per share from the previous count of 30 cents.
Q1 & 2018 Forecast
For the first quarter of 2018, the carrier expects cost per available seat mile (CASM) excluding fuel and special items to rise approximately 6% year over year. While the same for 2018 is predicted to increase around 2.5%. Economic fuel cost per gallon is anticipated to grow 21% in the first quarter of 2018. While capacity is anticipated to expand around 8% in the first quarter. For the full year, the metric is likely to climb 7.5% whereas effective tax rate in 2018 is estimated to be approximately 24.5%.
Upcoming Releases
Investors interested in the broader Transportation sector keenly await fourth-quarter 2017 earnings reports from key players like Hawaiian Holdings, Inc. HA, Allegiant Travel Company ALGT and Union Spirit Airlines, Inc. SAVE. While Hawaiian Holdings is scheduled to report fourth-quarter earnings on Jan 29, Allegiant and Spirit Airlines are slated to announce the same on Jan 31 and Feb 6, respectively.
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