Advertising
  • News
  • Airlines
  • Business strategy
  • Alaska's 2018 profits slip amid predictions of 2019 recovery

Alaska's 2018 profits slip amid predictions of 2019 recovery

Alaska Air Group executives say the airline has moved beyond the worst of its recent financial troubles, having turned a corner toward financial improvement.

"Our growth is strong… Demand is solid," says chief executive Brad Tilden. "The progress we are making is also starting to show up in our financial results."

The comments came as Alaska announced it earned an operating profit in 2018 of $643 million, down 47% in one year. Alaska's 2018 net profit slipped 54% to $437 million.

The company generated $8.3 billion in operating revenue last year, up 5% year-on-year, while operating expenses jumped 14% to $7.6 billion.

Alaska's 2018 cost per available seat mile (CASM) increased 8% in one year to 11.66 cents, while CASM excluding fuel and special item expenses inched up just 3% to 8.50 cents.

Revenue per available seat mile slipped 0.6% in one year to 11.93 cents, Alaska says.

Alaska's financial results have suffered since it acquired Virgin America in late 2016 and as it worked to integrate the California-based airline into its Alaska Airlines unit.

But executives cite improvements, including a 5.2% year-over-year jump in fourth quarter revenue per available seat mile – the highest growth rate in years.

Alaska predicts unit revenue will increase 2.5-4.5% in the first quarter of 2019.

"We have good momentum heading into 2019," Tilden says.

Alaska has also set a goal to eventually generate profit margins of 13-15%. "We believe we can and will do this, as we unlock the value of our newer combined platform," says Tilden. Alaska reported an 8.9% adjusted profit margin in 2018.

Tilden describes the merger with Virgin America as nearly complete, saying the company has adopted single operational processes, merged computer systems, repainted more than half of former Virgin America Airbus narrowbodies with Alaska's colours and started refurbishing those aircraft's cabins.

Alaska is also now swapping Airbus A320 family aircraft with Boeing 737s – deploying the most-efficient aircraft on specific routes, he says.

Story corrected to note that Alaska's RASM grew 5.2% year-on-year in the fourth quarter.

Advertising
Related Content
Advertising