Alaska Air reinstates profit forecast as travel demand improves

Reuters

23-07-2025

CHICAGO, July 23 (Reuters) - Alaska Air Group (ALK.N), opens new tab on Wednesday reinstated its full-year profit forecast, citing improvements in passenger traffic and pricing power.
The Seattle-based airline, however, forecast a lower-than-expected profit for the third quarter.
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.
Alaska Chief Financial Officer Shane Tackett told Reuters reduced macroeconomic uncertainty has driven up bookings since late June.
U.S. West Coast-based technology companies have started to travel more, bolstering bookings closer to the travel date.
As a result, the airline's yields - a proxy for pricing power - are better than they were in the first quarter and the beginning of the second quarter, Tackett said.
"Yields on new bookings are coming in quite strong," he said.
Tackett said the company was "cautiously optimistic" that the recovery in travel demand would be sustained through the rest of the year.
Alaska now expects its full-year 2025 adjusted profit to be greater than $3.25 a share. That compares with analysts' average estimate for a profit of $3.41 a share, according to LSEG data.
In the third quarter, the company expects an adjusted profit in the range of $1.00 a share to $1.40 a share. The midpoint of the forecast is $1.20 per share, compared with analysts' average estimate of $1.65, according to LSEG data.
The company said its earnings would suffer in the third quarter due to an IT outage this week that disrupted its operations. It also expects higher operating costs during the quarter as a result of its decision to cut flights in weaker demand periods to avoid discounting pressure.
Alaska is the latest U.S. carrier to report improvements in demand trends. Last week, United Airlines (UAL.O), opens new tab said its bookings have picked up since the beginning of July, with a double-digit acceleration in business travel demand in the current quarter from the prior quarter.
Tackett said while the demand for premium cabins has stayed strong, bookings for main cabin seats have stabilized.
Echoing United and Delta Air Lines (DAL.N), opens new tab, Alaska said the industry's efforts to slash flights in off-peak travel periods in the third and fourth quarters are expected to boost margins.
Tackett said Alaska expects its unit revenue, or revenue generated from each seat, to be in a range of flat to up a low-single-digit percent in the September quarter. The company's unit revenue declined in the second quarter from a year ago.
Alaska is also facing higher costs for some of its aircraft due to the tariff war. Aircraft manufacturer Embraer (EMBR3.SA), opens new tab last week warned that Trump's proposed 50% tariff on imports from Brazil would result in an additional cost of around $9 million per aircraft for U.S. airlines.
Alaska is scheduled to receive three jets from Embraer early next year. Tackett said the proposed tariff would challenge the economics of those planes, adding the airline could even consider deferring the aircraft deliveries.
"We're not going to ultimately bring in...assets that we view are going to be potentially non-economic for us," he said.
Alaska reported an adjusted profit of $1.78 a share in the second quarter compared with a profit of $1.54 a share expected by analysts.
The company will discuss its financial results on a call with analysts and investors on Thursday.