Alaska Air Group issued a bullish earnings forecast for the current quarter, citing a resurgence in demand for business travel, which lifted its shares.
Despite grappling with challenges such as the mid-air cabin blowout incident involving a Boeing aircraft in January and the grounding of its 737 MAX 9 fleet for over two weeks, the airline managed to narrow its first-quarter loss. Its stock surged approximately 5% to $44.95 in morning trading.
Chief Financial Officer Shane Tackett revealed in an interview with Reuters that while leisure travel demand remains robust, corporate travel spending is now gaining momentum, exceeding the company’s expectations.
The uptick in corporate travel, seen as a financial boon for the industry, has led Alaska to anticipate a more stable outlook for the rest of the year than previously projected.
Tackett disclosed that the airline now anticipates full-year earnings in the range of $3.25 to $5.25 per share, up from the earlier forecast of $3 to $5 per share.
However, Tackett expressed concerns about rising fuel costs, prompting the airline to consider reinstating its oil hedging program, which was suspended last year due to ineffective hedges against refining margin volatility.
Despite the challenges, Alaska reported an adjusted loss of 92 cents per share in the March quarter, surpassing analysts’ average estimates for a $1.05 loss.
Excluding the impact of the MAX 9 grounding, the company would have reported a profit of 3 cents per share for the quarter.
Alaska foresees a second-quarter profit ranging from $2.20 to $2.40 per share, surpassing Wall Street’s estimates of $2.12. The airline has increased its presence at Boeing’s factories since the January incident to ensure the production of high-quality aircraft that meet safety standards.
