ALK Q1 2023 Earnings

Call Details

• Call Title: Alaska Air Group, Inc. Q1 2023 Earnings Call
• Date: April 20, 2023 at 3:30 PM UTC
• Management Team:
  • Ryan St. John (Vice President of Finance, Planning, and Investor Relations)
  • Ben Minicucci (Chief Executive Officer)
  • Andrew Harrison (Chief Commercial Officer)
  • Shane Tackett (Chief Financial Officer)
  • Emily Halverson (Vice President of Finance)
  • Nat Pieper (Finance)
  • Kyle Levine (Chief Legal Officer)

Call Summary

Financial Performance

• Air Group reported a Q1 GAAP net loss of $142M and an adjusted net loss of $79M excluding special items and mark-to-market fuel hedge adjustments.
• First quarter revenues were $2.2B, which is up 31% versus Q1 2022.
• System capacity was up 14% year-over-year in Q1 and ASMs were up 14% versus Q1 2022.
• Load factor for Q1 was 80%, which was three percentage points higher than the prior-year quarter.
• CASM excluding fuel (CASMEx) was down 1% year-over-year in Q1, which was within the company's original guidance range.
• Reported Q1 fuel cost was $3.41 per gallon, which added more than $30M versus the original guidance and equated to roughly a 150 basis point margin impact.
• Trailing 12-month return on invested capital closed the quarter at 10.6%, exceeding double digits for the first time since the pandemic.

Guidance

• Full-year adjusted pre-tax margin guidance remains 9% to 12% and full-year EPS guidance remains $5.50 to $7.50, assuming a stable economy.
• For Q2, the company expects total revenue to be up 2.5% to 5.5% year-over-year on capacity that is up 6% to 9%.
• The company estimates Q2 jet fuel will be between $2.95 and $3.15 per gallon, with month-to-date all-in per gallon near the $2.95 low end.
• Q2 CASMEx is expected to be up 1% to 3% year-over-year versus the prior-year quarter.
• The company reiterated a full-year unit cost reduction target of 1% to 3% driven by productivity, network restoration, and lapping labor deals in the back half of the year.
• Management stated they have line of sight to returning to strong double-digit adjusted pre-tax margins in the upcoming quarter.
• Company continues to assume roughly flat unit revenues for the full year absent material fuel-driven demand changes.