In a positive shift, Alaska Air Group has raised its expectations for third-quarter earnings, signaling a robust travel season ahead. On Thursday, the parent company of Alaska Airlines announced that it now anticipates adjusted earnings per share (EPS) to be in the range of $2.15 to $2.25. This marks a significant increase from the earlier projections of between $1.40 and $1.60, as documented in a filing with the Securities and Exchange Commission.
Analysts, on average, had been expecting an adjusted EPS of $1.66 for the ongoing period, which indicates stronger than expected performance. Moreover, Alaska Air Group is projecting a total unit revenue increase, defined by revenue per available seat mile (RASM), of approximately 2% year-over-year for the third quarter.
This outlook contrasts with the previous prediction that RASM would remain flat or show slight positive growth. According to the company, demand remained constant throughout the summer travel period, driven by a record flight schedule and dependable operational performance for its customers. Alaska Air's quarterly performance has also been influenced by an unexpected technology outage related to CrowdStrike's software update, which occurred in July.
This incident inadvertently diverted additional passengers to Alaska Air from its competitors experiencing more severe disruptions. As a result, unit revenue experienced a positive inflection in August, continuing to show strength as the month of September progressed. Capacity growth is projected to be consistent with earlier expectations, maintaining a range of 2% to 3% for the third quarter.
Adding further benefit to the company's financials, Alaska Air has noted a drop in crude oil prices and West Coast refining margins. Consequently, it has revised its economic fuel cost estimate downwards to between $2.60 and $2.70 per gallon, compared to the previous guidance which ranged from $2.85 to $2.95. JetBlue Airways, another player in the airline industry, has similarly improved its revenue outlook for the September quarter, buoyed by similar favorable demand trends.
The company now expects its sales to fluctuate between a decline of 2.5% to an increase of 1%. This marks an improvement from their earlier forecast, which estimated revenue drops between 1.5% and 5.5%. In response to changing market conditions, JetBlue has also adjusted its fuel cost estimate for the third quarter to a range of $2.70 to $2.80 per gallon. Overall, Alaska Air Group's improved projections reflect confidence in strong travel demand, effective management of operational costs, and a responsive adaptation to market challenges.
Investors are keenly watching these developments, especially amidst the backdrop of changing fuel prices and competitive dynamics in the airline industry..