Alaska Air Group ($ALK) raised its fourth-quarter earnings guidance and revealed its long-term strategic plan to generate $1 billion in incremental profit. The airline expects fourth-quarter adjusted earnings to be between $0.40 and $0.50 a share, a significant increase from the previous range of $0.20 to $0.40.
Analysts surveyed by FactSet anticipate earnings of $0.49. The positive adjustment is primarily attributed to robust revenue performance and reduced non-operating expenses outlined in a filing with the US Securities and Exchange Commission. The airline forecasts revenue per available seat mile growth in the mid- to high-single-digit range, which exceeds earlier projections of mid-single-digit growth.
Following this announcement, Alaska Air shares surged 13% in Tuesday afternoon trading, marking a staggering 56% increase for the year. Despite a slight decrease in capacity compared to prior expectations due to challenging weather conditions, Alaska Air's forecast for full-year adjusted EPS is now positioned between $4.25 and $4.50, raising the lower limit from $3.50.
Wall Street estimates peg EPS at $4.22. The board of Alaska Air recently approved a share repurchase program worth up to $1 billion, as indicated in the filing. Additionally, Alaska Air completed the acquisition of Hawaiian Airlines' parent, Hawaiian Holdings, and disclosed a three-year plan aimed at realizing $1 billion in incremental profits.
The 2027 outlook projects EPS to reach at least $10 and pretax profit margins between 11% and 13%. Shane Tackett, Alaska Air's CFO, stated, "The combination with Hawaiian gives us the scale to be stronger than either of us could have been on our own. It will drive substantial financial results that will continue to set us apart from our competitors." The airline's 2025 projections indicate an EPS of at least $5.75, with expected capacity growth of 2% to 3%, while capital expenditures are anticipated to range from $1.4 billion to $1.5 billion.
Alaska Air also announced plans to offer nonstop flights from Seattle to Tokyo Narita in Japan and to Seoul Incheon in South Korea starting in 2025. In related news, the International Air Transport Association reported that global airline industry revenue is expected to surpass $1 trillion for the first time next year, with a 4.4% annual increase to about $1.007 trillion.
Passenger numbers are predicted to grow by 6.7% to reach 5.2 billion by 2025, marking an unprecedented milestone of surpassing the 5 billion mark. Net profit is projected to increase to $36.6 billion from an estimated $31.5 billion in 2024, despite ongoing cost and supply chain challenges. IATA Director General Willie Walsh commented, "The buffer between profit and loss, even in the good year that we are expecting of 2025, is just $7 per passenger.
With margins that thin, airlines must continue to watch every cost and insist on similar efficiency across the supply chain -- especially from our monopoly infrastructure suppliers who all too often let us down on performance and efficiency.".