Alaska Airlines CEO expects full-year profit despite pricing struggles

Reuters

2 days ago

NEW DELHI, June 3 (Reuters) - Alaska Airlines (ALK.N), opens new tab CEO Ben Minicucci said the company's pricing power has not recovered yet even as its bookings have stabilised following economic uncertainty that led to volatility in the first quarter.
Still, Minicucci said the company expects to report a profit this year. In the current quarter, the Seattle-based carrier's earnings are shaping up along expected lines, he told Reuters on the sidelines of an IATA airline summit in New Delhi.
Like most U.S. airlines, Alaska pulled its full-year financial forecast in April as President Donald Trump's trade war created the biggest uncertainty for the industry since the COVID-19 pandemic.
With little clarity on how consumers would behave in the face of a potentially worsening economy, airlines said it was difficult to accurately forecast their business.
Soft travel demand, meanwhile, has dampened U.S. airfares, which declined at their fastest pace in 16 months in April from a year ago, government data shows.
"We're filling airplanes, just not at the yields we'd like," Minicucci said.
Alaska has forecast an adjusted profit of $1.15 per share to $1.65 per share in the quarter ending June. The company's performance, thus far, is "solidly" in the forecast range, he said.
The pullback in U.S. travel demand has been the sharpest among price-conscious consumers. Demand for high-end travel remains the "bright spot," Minicucci said.
Alaska, which completed its acquisition of Hawaiian Airlines last year, is looking to drive up the share of premium travel in its revenue. The carrier will launch its first-ever transatlantic service next year, with a non-stop flight between Seattle and Rome.
It is also adding more upscale seats on its aircraft. Premium cabins are estimated to account for 29% of its seats over the next three years, up from 25% at present, he said.
The company, however, is having to deal with seat supply chain problems. Minicucci said seat manufacturers will need to expand production to keep up with strong demand.
"They're oversubscribed right now," he said.
Minicucci said he is encouraged by safety and quality improvements at planemaker Boeing (BA.N), opens new tab. Alaska had to ground its fleet of MAX 9 aircraft last year after a door plug missing key bolts blew off one of the carrier's new jets at 16,000 feet.
While the planemaker still has a lot of work ahead of it, he said it continues to make improvements "quarter over quarter."
Boeing CEO Kelly Ortberg recently told trade publication Aviation Week that the company aimed to secure certification for the smallest and largest of its best-selling 737 MAX aircraft - the MAX 7 and MAX 10 - from the U.S. Federal Aviation Administration by the end of this year.
The MAX 7 and MAX 10 have been delayed in part due to concerns with the engine de-icing system.
Alaska is one of the airlines waiting for the MAX 10. Minicucci said the jet is not part of the carrier's plans until 2027.
"We don't want to put pressure on Boeing," he said. "We want them to follow their own certification process."