Earnings Results and Guidance: • Q1 2023 adjusted net loss of $116 million (excluding special items and fuel hedge adjustments) • Q2 2023 adjusted EPS guidance of $2.20 to $2.40 • Full year 2023 adjusted EPS guidance revised to $3.25 to $5.25 (up from prior guidance) • Q2 2023 capacity expected to be up 5-7% year-over-year • Full year 2023 capacity growth expected to be below 3% due to fewer Boeing aircraft deliveries • CapEx guidance for 2023 reduced to $1.2-1.3 billion (down from $1.4-1.5 billion) due to fewer deliveries
Themes, Trends, Market Conditions, and Sentiment: Alaska Air Group reported strong Q1 2023 results, significantly reducing losses compared to the prior year and even turning a small profit when excluding the impact of the Boeing 737 MAX grounding. The company’s performance exceeded initial expectations, driven by disciplined capacity planning, network optimization, the return of West Coast business travel, and robust leisure demand. Management expressed optimism about the future, citing continued strength in bookings, yields, and overall demand.
The company is focused on operational reliability, cost management, and revenue initiatives to drive margin expansion and generate free cash flow. Alaska is enhancing its premium product offerings and loyalty program to capitalize on the growing demand for premium travel experiences. The airline is also investing in sustainable aviation fuel (SAF) and exploring strategies to mitigate its exposure to higher West Coast fuel prices.
While the Boeing 737 MAX grounding and uncertainty around future deliveries present challenges, Alaska is taking steps to maintain a reliable schedule and mitigate potential headwinds. The company’s strong balance sheet, investment-grade credit rating, and cash position provide financial flexibility to navigate any near-term disruptions.
Overall, Alaska Air Group’s management conveyed a positive outlook, emphasizing the company’s resilience, competitive advantages, and strategic initiatives to drive long-term success in a recovering travel market.
Notable Quotes: • “Our commitment to changing the outcome in Q1 positions us at a better starting point, not only for the rest of this year, but also in years to come, as we look to grow profits and earnings over time from a stronger base.” - Benito Minicucci, CEO
• “Premium continues to be the place where most of the demand growth is happening, and I think we’re doing a good job meeting that demand.” - Shane Tackett, CFO
• “While we strive to do even better going forward, the underlying improvement in our core business in Q1, despite the significant disruption felt across our business from the MAX grounding is a fantastic result for Air Group.” - Benito Minicucci, CEO
merger
Yes, there was commentary on the proposed merger with Hawaiian Airlines. Here are the key points:
• During the quarter, Alaska Air Group received a second request for information from the DOJ regarding the proposed acquisition of Hawaiian Airlines.
• The company is working to respond to these requests as quickly as possible and has granted the government an additional 60 days to review the responses due to the substantial volume of information involved.
• Management believes strongly in the pro-consumer and pro-competitive merits of the deal and is excited by the opportunities it will unlock for Alaska, both domestically and internationally.
• The company is focused on closing the proposed acquisition and may need to raise funds in the market to do so.
Notable Quote: • “We still believe strongly in the pro-consumer and pro-competitive merits of this deal and are excited by the opportunities this will unlock for Alaska, both domestically and internationally.” - Benito Minicucci, CEO
The merger commentary suggests that while the acquisition process is ongoing and subject to regulatory review, Alaska Air Group remains committed to the deal and is working diligently to address the DOJ’s information requests. Management appears confident in the strategic rationale behind the merger and its potential benefits for the company and its customers.