Alaska Airlines has become the latest US airline to announce first quarter earnings, and it’s not pretty, as you’d expect.
Alaska Airlines reports $232 million loss
Alaska Airlines has announced a net loss of $232 million for the first quarter, compared to a profit of $4 million over the same period last year.
Excluding impairment charges, merger-related costs, and mark-to-market fuel hedge accounting adjustments, the airline reported a $102 million loss.
To compare that to the results of other airlines:
- American had a net loss of $2.2 billion, or $1.1 billion excluding special items
- Delta had a net loss of $534 million, or $326 million excluding special items
- Southwest had a net loss of $94 million loss, or $77 million excluding special items
- United had a net loss of $1.7 billion, or $630 million excluding special items
Other updates from Alaska Airlines
Alaska notes that the impact of COVID-19 on the business has been unprecedented. Demand deteriorated in February, and in March cancellations overwhelmed new bookings. Today demand remains over 90% below normal levels.
Alaska’s priority is to ensure the health and safety of guests and employees, preserve financial strength, and plan for the future. As a result, here are some of the action items the airline is taking:
- Alaska expects May capacity to be cut by at least 80%, and expects capacity cuts in June to be significant
- Right now Alaska has parked 156 mainline aircraft and 13 Horizon Air aircraft, and has also suspended flying of eight SkyWest aircraft
- As of March 31, 2020, Alaska held $2.1 billion in unrestricted cash and marketable securities
- As of May 4, 2020, Alaska holds $2.9 billion in cash and marketable securities, including CARES Act funds received in April
- Alaska has reduced cash burn from $400 million per month in March, to $260 million per month in April, with the goal of reaching $200 million per month by June
- Alaska has suspended over $500 million in capital spending, largely through the deferral of pre-delivery aircraft payments and non-aircraft capital projects
- Alaska believes they’re more agile than other airlines, based on the fact that they exclusively have narrow bodies and also have a higher percentage of leisure passengers than other airlines
- Alaska will be permanently parking a dozen aircraft, including 10 A319s and two A320s
Expect the second quarter to be much worse
If you think the first quarter results are bad, expect the second quarter to be much worse. The reality is that it’s only the tail end of the first quarter where demand really plummeted.
The first quarter ended on March 31, and data shows that passenger traffic in the US really only started decreasing materially as of early March (this is based on the number of travelers passing through TSA checkpoints):
- On March 1, passenger traffic was roughly comparable to last year (within 1%)
- On March 16, passenger traffic was less than half compared to the same day last year
- On March 26, passenger traffic was less than 10% compared to the same day last year
- On April 5, passenger traffic was less than 5% compared to the same day last year
It does look like traffic numbers bottomed out in early April and are ever-so-slowly recovering, though expect for it to be a really slow recovery.
Alaska Airlines is one of the most well run US airlines, but even so, the big loss was expected. At this point nothing is really surprising anymore…
While Alaska is doing what they can to reduce costs, the airline hasn’t announced any massive restructuring plans, unlike at other airlines. While airlines like United plan to shrink by about a third, there has been no such announcement from Alaska.
What do you make of Alaska’s first quarter results?