Alaska Airlines: 'Stunning' Corp. Revenue Growth During Q1

The start to the first quarter for Alaska Airlines was rocky at best, with the Flight 1282 door-plug incident in January followed by the weeks-long grounding of the Boeing 737 Max 9 aircraft. The combined incidents cost the carrier $162 million, "which Boeing has fully compensated us for," Alaska president and CEO Ben Minicucci said during a Thursday quarterly earnings call.

But the carrier recovered and had a "positive performance," minus the grounding impact, in part due to the return of West Coast business travel, particularly among technology companies, Minicucci said. 

For the quarter, the carrier's managed business travel revenue grew 22 percent year over year, Alaska CCO Andrew Harrison said, with approximately 50 percent driven from yield and 50 percent from volume. 

"Tech companies saw the biggest improvement with revenues up over 50 percent year over year, and professional services revenue [was up] an impressive 20 percent," Harrison added. "To put the speed of recovery into perspective, managed business revenues increased 10 percent [year over year] in January, a stunning 30 percent in February and 24 percent in March. These results were achieved despite the grounding and book-away we experienced."

The carrier's managed corporate revenue has fully recovered to 2019 levels, while the tech sector is approximately 85 percent recovered, Harrison said. "As we've said for some time, we expected business travel to come back, which we are clearly seeing today. While we did not bake this into our Q1 forecast, we do not anticipate any step back in corporate travel in Q2."

Alaska Q1 Metrics

Alaska reported $2 billion in first-quarter passenger revenue, up 1 percent year over year, with total revenue at more than $2.3 billion, a 1.6 percent increase. The carrier's operating loss was $166 million, including the grounding impact.

Capacity for the quarter was down 2.1 percent year over year, inclusive of an approximate 5.5 percentage-point effect from the grounding, Harrison said. Without that incident, capacity would have been up about 3.5 percent. 

Average Q1 fuel costs were $3.08 per gallon, and the carrier expects Q2 cost of $3 to $3.20 per gallon, according to CFO Shane Tackett. 

Alaska projects second-quarter capacity to be up 5 percent to 7 percent year over year, with full-year 2024 capacity up less than 3 percent. The carrier does not expect to receive all 23 Boeing deliveries on the books for this year and has "extended the retirements of several of our older aircraft over the next few months and pushed utilization slightly higher across the mainline fleet, where we had opportunity," Harrison said.

Also during the first quarter, Alaska received a second request for information from the U.S. Department of Justice regarding the carrier's proposed acquisition of Hawaiian Airlines. Alaska is working to respond as quickly as possible, and "granted the government an additional 60 days to review its responses," Minicucci said. "We will continue to work with them to advance the process as swiftly as possible."

 Alaska Q4 performance