Alaska Air Group Makes First Unassisted Profit Since ’19 | Business

SEATTLE – Unlike most major U.S. carriers, Alaska Air Group, parent company of Alaska Airlines and regional carrier Horizon Air, posted third-quarter profit, prompting management on Thursday to confidently reiterate its aggressive growth plans which are expected to enable it to hire around 3,000 people next year. and more beyond.

Even as the Alaska Airlines pilots union called a press conference the same day to complain about the stalling of contract negotiations and discontent among the ranks of pilots, executives spoke of plans to pay dozens of new workers in cash. Boeing 737 MAX and resume the return of money to shareholders. Next year.

The quarterly profit of $ 194 million, or $ 1.53 per share, was the first not supported by government grants since the end of 2019 and the start of the COVID-19 pandemic.

A year ago, in the same quarter, Alaska reported a net loss of $ 431 million, or $ 3.49 per share.

During Thursday’s earnings conference call with Wall Street analysts, CEO Ben Minicucci said the return to profitability “marks an inflection point on the road to recovery.”

“Despite the transient jolts we are experiencing from the delta variant, our plan is to return to our pre-COVID size no later than next summer and then grow from there,” he said.

The majority of Alaska employees have now returned from extended leave, so the airline group now has more than 20,300 active employees, up from 16,000 a year ago and 22,500 before the pandemic.

In an interview Thursday, CFO Shane Tackett said the airline planned to hire “around 3,000 net new people next year” and would therefore exceed its pre-pandemic size.

And he said that with Alaska’s plans for substantial fleet growth – taking delivery of 63 new Boeing 737 MAXs over the next two years – the airline’s employee numbers are expected to increase “quite aggressively. “from there.

Despite upward pressure on wages for track workers and other entry-level jobs, an impending pilot contract that will raise wages and skyrocketing fuel prices, Tackett said on the results teleconference that Alaska is in good financial health.

It plans to pay $ 1.5 billion in cash next year to take delivery of the Boeing MAXs and “north of that” for aircraft deliveries the following year.

Tackett said the company plans to resume returning money to shareholders in the form of dividends or buybacks “towards the end of next year.”

Airlines still struggle without government support

Data released Thursday shows Alaska carried 9.8 million passengers in the third quarter, more than 2-1 / 2 times the 3.6 million it had during the same period last year. Before the 2019 pandemic, it was carrying 12.6 million this quarter.

Total third-quarter revenue was $ 2 billion, still down from $ 2.4 billion in the same quarter of 2019.

Since the lows of business last year, Alaska has added planes to its fleet. Yet third-quarter fleet capacity, measured at 11.6 million available seat miles, remains significantly lower than the 2019 figure of 17.5 million. (Available seat miles, the industry standard metric for size of an airline’s fleet, is the number of seats available multiplied by the number of miles flown.)

Before the pandemic, in the third quarter of 2019, Alaska made a profit of $ 322 million, or $ 2.60 per share.

Alaska posted a profit in the second quarter of this year, but only because it received $ 664 million in government grants and loans under the Payroll Support Program. Without that, and other one-time items, he would have lost $ 38 million.

Unlike other major US airlines, Alaska did not receive any other PSP support during the third quarter. Excluding the benefit of this government support, only Delta made a profit in the third quarter.

Excluding $ 1.3 billion in government support, Delta reported net income of $ 216 million, a pre-tax profit margin of 2.6% compared to Alaska’s pre-tax margin of 12%.

In contrast, excluding government support and one-time adjustments in the third quarter, Southwest reported a net loss of $ 135 million, American Airlines a net loss of $ 641 million, and United a net loss of $ 349 million.

Alaska’s return to operating profits came despite a moderate drop in bookings in August and September as the number of COVID cases rose across the country. The planes were 88% full in July, but only 72% full in September.

Minicucci said the financial results and expected deliveries of 737 MAX “position us for significant growth as demand returns, which we hope will be in the second half of 2022”.

The promising financial results prompted the pilots’ union on Thursday to ask the company to make concessions and accept a new employment contract.

Negotiations on the pilot contract, which became modifiable in April 2020, have been going on for a year ago and recently have completely stalled.

The pilots want working rules consistent with those of other major airlines, which allow more flexibility in the scheduling of their flights and also offer job security by imposing so-called “scope clause” restrictions on who can fly. the biggest jets in the airline.

Agitation among pilots over management’s refusal to act on these issues has built up. The union, the Air Line Pilots Association (ALPA), is unhappy that management referred contract negotiations to the National Mediation Board (NMB) this month.

Captain Will McQuillen, president of ALPA’s Alaska Airlines unit, said the NMB process typically takes two years and can be even slower due to COVID travel restrictions.

“If Alaska is to attract the pilots it needs to execute its growth plan, it will need to tackle better labor rules and job security,” McQuillen said Thursday.

Major US airlines are looking to hire around 8,000 pilots in 2022.

Tackett in the interview said management accepts that a new contract will have to improve basic working rules and cost the company more, but are wary of making excessive commitments during the “very turbulent recovery”.

“We don’t want to make any mistakes as we set ourselves up under a new contract that won’t bode well for the company or the drivers in the long run,” Tackett said.

And Tackett said Alaska continues to attract pilots.

“We are filling pilot classes today,” he said. “We have more candidates than niches. “

Alaska Air shares fell $ 1.05, or 1.8%, Thursday to close at $ 56.20.

(c) 2021 The Seattle Times

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