Alaska Air pulls its 2025 outlook, sees weaker profit in second quarter
Summary
Companies
Alaska Air withdraws full-year forecast due to economic uncertainty
Lower-than-expected profit forecast due to softening travel demand
Premium travel demand in Hawaii remains strong, CFO says
CHICAGO, April 23 (Reuters) - Alaska Air Group (ALK.N), opens new tab on Wednesday withdrew its full-year financial forecast, citing the prevailing macroeconomic uncertainty.
The Seattle-based airline also forecast a lower-than-expected profit for the current quarter due to softening travel demand.
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Alaska is the latest U.S. carrier after Delta Air Lines (DAL.N), opens new tab and Frontier (ULCC.O), opens new tab to pull its guidance as President Donald Trump's trade war has created the biggest uncertainty for the industry since the COVID-19 pandemic.
With little clarity on how consumers will behave in the face of a potentially worsening economy, airlines are struggling to accurately forecast their business. Last week, United Airlines (UAL.O), opens new tab gave two different forecasts, a highly unusual move. United said this was necessary because it was impossible to predict the macro environment this year with "any degree of confidence."
As travel is a discretionary item for many consumers and businesses, the deteriorating economic outlook has led to a pullback in travel spending.
In an interview, Alaska's chief financial officer, Shane Tackett, said that while demand has stabilized in recent weeks, bookings were mostly coming at lower fare levels.
"Consistent with our peers in the industry, we have seen lower fare levels being booked into April and throughout the summer," Tackett told Reuters.
Weaker pricing power is estimated to shave off about 6 percentage points from Alaska's revenue in the current quarter.
It expects an adjusted profit of $1.15 per share to $1.65 per share in the quarter through June. The midpoint of the forecast is $1.40 per share, compared with analysts' average estimate of $2.47, according to data compiled by LSEG.
In a sign of resilient premium travel demand, Tackett said the airline is seeing higher passenger traffic and stronger pricing power in Hawaii.
Alaska will likely provide an updated full-year forecast in July when it hopes to have more clarity about the economic backdrop, he said.
"We just want to go another 90 days to see where the economy ends up," Tackett said.
In January, the company had forecast a profit of more than $5.75 a share in 2025.
Tackett said if the current revenue environment persists throughout the second half of the year, Alaska's earnings would be below $5.75 a share. "We will still be solidly profitable," he said.
Alaska reported an adjusted loss of 77 cents a share in the first quarter compared with a loss of 75 cents a share expected by analysts. The company reported a double-digit increase in premium and loyalty revenue from a year ago during the March quarter.
The company will discuss its financial results on a call with analysts and investors on Thursday morning.
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