Alaska Airlines has cash on hand to last about a year with no demand growth, though the carrier expects to reach a break-even point by the end of the year, executives said in an earnings call on Tuesday.
First-quarter passenger revenue declined 14 percent year over year to $1.5 billion, and Alaska reported a net loss of $232 million, its first quarterly loss in more than a decade. With no demand growth in the near term, the loss in the second quarter will be deeper, CEO Brad Tilden said. Alaska cut capacity by more than 80 percent in April, will cut at least 80 percent in May and will have "significant" capacity cuts in June, according to the carrier.
Through cost-cutting measures, including short-term and incentive leave programs for more than 5,000 employees, senior management salary reductions and a capital spending suspension, Alaska reduced its cash burn from $400 million in March to $260 million for April. CFO Shane Tackett said the carrier aims to reduce that to $200 million in June and to zero by the end of this year.
Alaska currently has about $2.9 billion in liquidity, including federal aid for payroll support via the Covid-19 stimulus package, which Tackett said would sustain nearly a year with zero demand and a cash burn rate that stayed at $260 million per month. There are "multiple channels" of additional liquidity if necessary, including assets such as aircraft, real estate and the loyalty program it can use as collateral, he said.
The carrier also will have some competitive advantages as demand returns, president Ben Minicucci said. For one, its network largely is domestic, and domestic travel is expected to recover more quickly than international travel. In addition, Alaska is structured with less costs than its competitors, and "we see a future where low fares and low costs matter," Minicucci said.
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