Alaska Air's stock climbs to 8-month high as quarterly results beat views

By Ciara Linnane and Tomi Kilgore

Carrier has received $162 million in initial cash comp from Boeing over window blowout

Alaska Air Group's stock rallied toward an eight-month high Thursday, after the regional airline posted a narrower-than-expected first-quarter loss and revenue that beat analyst estimates, and affirmed its strong relationship with plane maker Boeing Co.

The company (ALK) acknowledged the impact on its performance of Flight 1282 on Jan. 5, when a window blew out on a flight from Oregon to Alaska, forcing pilots to make an emergency landing, as the Associated Press reported. That led to the grounding of its Boeing 737-9 Max fleet, which continued into February.

Alaska Air has received $162 million in initial cash compensation from Boeing Co. (BA) to address the financial damage caused by the blowout, which was found to be caused by loose bolts.

Chief Executive Ben Minicucci said on the post-earnings call with analysts said the compensation it received from Boeing was a "strong reflection" of importance of the longstanding relationship the companies have.

"We remain committed partners, but we will hold Boeing to the highest bar for quality out of the factory," Minicucci said, according to an AlphaSense transcript. "And to that end, we have enhanced our in-person overweight of our 737 production line and are regularly engaging with Boeing leadership on quality and schedule."

Basically, trust but verify.

On Wednesday, the airline briefly grounded all of its flights after it "experienced an issue while performing an upgrade to the system that calculates our weight and balance."

See: Alaska Airlines briefly grounds all flights due to technical issue

The stock ascended 4.6% in afternoon trading, putting it on track for the highest close since Aug. 15, 2023. It was headed for the biggest one-day, post-earnings gain it at least the past five years, according to available FactSet data.

The carrier reported a loss of $116 million for the quarter, or $1.05 a share, after a loss of $142 million, or $1.11 a share, in the year-earlier period. Excluding one-time items, it reported a loss of 92 cents a share, narrower than the loss of $1.05 consensus forecast by FactSet analysts.

Revenue rose 2% to $2.232 billion from $2.196 billion, also better than the $2.177 billion FactSet consensus.

"Despite significant challenges to start the year our results have far exceeded initial expectations," Chief Executive Ben Minicucci said in a statement.

For the second quarter, Alaska Air is expecting EPS to range from $2.20 to $2.40, which compares with a FactSet consensus of $2.12. It expects capacity measured by available seat miles to rise 5% to 7% and for economic fuel cost a gallon to range from $3.00 to $3.20.

For the full year, it expects EPS of $3.25 to $5.25, while FactSet is expecting EPS of $4.26.

It expects full-year capacity to fall about 3% and for fuel cost a gallon to range from $3.25 to $5.25.

Separately, CEO Minicucci noted that during the latest quarter, it received from the U.S. Department of Justice a second request for information regarding its proposed $1.9 billion purchase of Hawaiian Holdings Inc. (HA), the parent of Hawaiian Airlines.

Because of "substantial volume" of information involved, he said the company granted the DOJ an additional 60 days to review its response to the request.

"We still believe strongly in the pro-consumer and pro-competitive merits of this deal and are excited by the opportunities this will unlock for Alaska, both domestically and internationally," Minicucci said.

The stock has climbed 14.4% in the year to date, while the U.S. Global Jets ETF JETS has gained 7.3% and the S&P 500 index SPX has gained tacked on 5.1%.

-Ciara Linnane -Tomi Kilgore

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04-18-24 1432ET

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