Alaska Air Group's second-quarter revenue dropped 82 percent year over year to $421 million, but carrier had reduced its daily cash burn to "the best in the industry" by the end of the quarter, CEO Brad Tilden said.
Since March, Alaska's monthly cash burn has dropped from $400 million to $120 million, or about $4 million per day, in June. That rate likely will be up for July as ticket sales have dropped amid growing cases and quarantine restrictions across much of the United States, but the carrier still aims to get its cash burn rate to zero by the end of the year, Tilden said.
In a research note, Cowen analyst Helane Becker noted that Alaska has demonstrated "one of the clearer plans for a path to break-even" among U.S. carriers.
On the capacity front, Alaska plans to operate with capacity down 50 percent year over year in the third quarter, reach about 65 percent of last year's capacity by October and reach about 80 percent of 2019 capacity levels by the summer of 2021, Alaska Airlines president Ben Minicucci said. Cash bookings should recover to between 40 percent and 60 percent of normal levels by December, he said.
As with other carriers, corporate travel demand has shown little recovery at Alaska so far, with levels currently less than 10 percent of normal levels, EVP and chief commercial officer Andrew Harrison said.
"A big part of what the corporate accounts are dealing with is this concept of duty of care," Harrison said. "So, with the extension of closing of office spaces right now, we're not really seeing any thawing in the business demand."
Alaska's break-even goal means it will cut about 7,000 of its current 23,000 employees by the fourth quarter, though it aims "to mitigate to the greatest degree possible involuntary furloughs," EVP and CFO Shane Tackett said. Nearly a third of Alaska's workforce is on voluntary leave now, and the carrier this month introduced early-out programs for frontline workers and incentive leaves for pilots, he said. About 300 management positions, 15 percent in total, will be cut by Oct. 1, according to Tackett.
Carrier Set to Join Oneworld
The carrier on Thursday also received its formal invitation to join the Oneworld alliance, part of a new partnership strategy with American Airlines announced earlier this year, and it aims to enter the alliance by the end of the year, Tilden said.
"Both American and Alaska are really well-positioned to grow our presence and strength off the West Coast both on the corporate side and the leisure side," Harrison said. "We've spent a lot of months putting together a very compelling alliance on the West Coast and we're very excited to start to get that into motion.
Alaska Air Group reported a net loss of $291 million for the second quarter, compared with a net income of $351 million in the second quarter of 2019.
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