Alaska Airlines commercial airplanes are shown parked off to the side of the airport in San Diego, California, U.S. January 18, 2024.
Refinery outages on the U.S. West Coast have tightened fuel supplies and driven prices sharply higher, placing additional strain on airlines already facing elevated operational expenses. “Fuel, it's volatile, and that's one of the things that we're having to manage through in terms of making an estimate for earnings in the fourth quarter,” Alaska Air CFO Shane Tackett told Reuters.
The aviation sector has been facing increasing operational disruptions this year, with storms and limited air traffic control capacity causing widespread flight delays and cancellations. These challenges have resulted in higher costs for U.S. carriers and impacted profit margins despite ongoing demand recovery.
Alaska Air now expects its full-year adjusted profit per share to be at least $2.40, down from its earlier forecast of more than $3.25. For the fourth quarter, it anticipates adjusted earnings of at least 40 cents per share, below the analysts’ average estimate of 88 cents, according to LSEG data.
The company also experienced a major IT outage in July, which disrupted hundreds of flights and stranded thousands of passengers during the busy summer travel period. The incident added to operational setbacks in an already challenging year for the carrier.
Despite these headwinds, Alaska Air indicated that industry-wide capacity management measures are beginning to show results. Airlines have limited seat supply and moderated fare discounting to stabilize pricing following weaker demand in the first half of the year. “We expect to have positive unit revenues in the fourth quarter,” Tackett said.
According to the company, yields—a measure of average revenue per passenger mile—increased about 1.4% in the quarter ended September, reflecting modest improvement in pricing power. Unit costs excluding fuel rose approximately 8.6% during the same period, driven by labor and maintenance expenses. Tackett noted: “Costs will meaningfully improve sequentially on a unit cost basis from Q3.”
For the third quarter, Alaska Air reported adjusted earnings of $1.05 per share, slightly below analysts’ average forecast of $1.13. However, its total operating revenue for the quarter rose 23% year-on-year to $3.77 billion, nearly matching analysts’ expectations of $3.76 billion.
On the broader market, U.S. stocks advanced on Thursday, with the Dow Jones Industrial Average gaining nearly one-third of a percent. Despite persistent cost pressures, Alaska Air emphasized its focus on operational reliability, cost efficiency, and revenue management to navigate a volatile fuel environment and maintain financial stability heading into 2025.
