Alaska Airlines reported a net loss for the first quarter of 2023, with executives during a Thursday earnings call citing weather incidents coupled with lower than traditional levels of business travel as contributing factors.
The company also noted changing seasonality patterns, similar to what United mentioned on its earnings call Wednesday.
January and February tend to be the most difficult months "due to our network configuration and predominantly leisure consumer base," Alaska EVP and chief commercial officer Andrew Harrison said. "Layer in business travel that hasn't fully recovered, plus exceptionally high fuel prices, and it made for a tough quarter."
"It's important to note that Alaska, along with the entire industry, historically experienced weaker results in the first quarter, and our loss is primarily a reflection of our current network seasonality," Alaska CEO Ben Minicucci said.
Harrison added that leisure revenues are up about 130 percent compared with 2019. "So we're going to continue to capitalize on that and watch that," he said. "And on the network side, some of the hub-to-hub heavy traditional business traffic markets, we're going to sort of trim back and maybe put that capacity elsewhere. So again, we're watching it. But I think that's going to be a big question as we move forward through this year.
Harrison also noted that "nearly all of Alaska's core hubs are in geographies where business has not returned as quickly as in other major economic centers throughout the country, corporate layoffs and a heavy concentration in the tax sector being major contributors."
Still, Minicucci added that travel demand remains strong despite the challenges in the technology sector, which is highly concentrated on the West Coast, and key for Alaska.
"Yet despite the lagging tech sector, which is roughly 50 percent to 60 percent restored [by volume] to pre-pandemic travel levels, overall, business travel remains around 75 percent recovered by volume, and 85 percent to 90 percent by revenue when compared to 2019 levels," Harrison said.
Nonetheless, Harrison and Minicucci believe the lag in West Coast business travel could have an "upside" for the company.
"It's not in our forecast, but I think we just see a lot of upside going forward in the future," Minicucci said. "I think we're out of the trough."
Harrison noted that the company sees continuing strength this year in premium and loyalty performance. "First- and premium-class revenues were up 35 percent and 33 percent year-over-year, respectively, on higher payload factors and fares," he said. "This front-cabin preference has persisted, and I expect this trend to continue."
Harrison also noted that Wednesday and Tuesday were the weakest days for bookings, followed by Thursday and Monday, and that business travelers of late are booking further in advance than pre-pandemic levels.
"In my career, I've never seen 30-day advance purchase barriers that have gone up," Harrison said. "And we're seeing that across our network, which sort of leads me to believe that essentially business travelers are actually booking further out than they have historically."
Alaska Q1 Metrics
Alaska reported a first-quarter net loss of $142 million on passenger revenue of $2.0 billion and total revenue of $2.2 billion. Passenger and total revenue each were up 31 percent year over year. The net loss was in line with Q2 2022's loss of $143 million. Capacity was up 14 percent for the quarter versus Q1 2022 and was restored to pre-pandemic levels, Harrison said. First-quarter fuel costs were $3.41 per gallon.
Comparing unit revenue per month with 2019 levels, January was up 13 percent, February was up 15 percent and March was up 19 percent, with the latter above the company's record-breaking March performance in 2022, Harrison said.
Q2 Guidance
Alaska forecasts second-quarter revenue to be up between 2.5 percent and 5.5 percent year over year on capacity that is planned to be up 6 percent to 9 percent. Gas prices are estimated to be between $2.95 and $3.15 per gallon.
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