Alaska Air Group, Inc. Q1 FY2024 earnings call

• Ben Minicucci highlighted the MAX grounding impact, with $162 million compensated by Boeing, focus on safe fleet return and oversight of new aircraft production, and DOJ request on Hawaiian acquisition. Q1 performance exceeded expectations, reducing losses and turning a small profit absent the MAX grounding.
• Andrew Harrison discussed record Q1 revenues, capacity down 2.1% Y/Y inclusive of grounding impact, strong unit revenue driven by network reconfiguration, corporate travel recovery, and premium cabin performance. Q2 capacity expected to step up 5%-7% Y/Y.
• Shane Tackett provided details on adjusted loss per share, fuel costs, liquidity at $2.8 billion as of March 31, CAPEX guidance revised to $1.2B-$1.3B, and SAF plans with 1% of 2024 fuel coming from SAF.

Alaska Air Group reported first quarter revenues totaling $2.2 billion, up 1.6% year-over-year. Excluding the MAX grounding impact, unit revenue would have been up 5%, markedly higher than initial guidance. Premium cabin revenues finished up 4% and 11% respectively during the quarter, with the loyalty program's co-brand cash remuneration in Q1 at approximately $430 million, up 4.2% year-over-year. Revenue contribution from premium and loyalty segments was a significant part of the overall revenue structure.

• Revised full year adjusted EPS from $3.25 to $5.25.
• Q2 capacity expected to step up 5%-7% Y/Y, with low end assuming no aircraft deliveries. Full year capacity growth expected below 3% due to fewer Boeing deliveries.
• Q2 economic fuel cost per gallon expected between $3 and $3.20, with strategies to mitigate West Coast refining margin disadvantage.

• Impact of the MAX grounding on financials and operations.
• DOJ review of the proposed Hawaiian Airlines acquisition with associated uncertainty.
• Fuel price volatility and West Coast refining margin headwinds affecting costs.

Q: Andrew Didora asked about CASM expectations for 2Q and RASM premium on corporate vs leisure travel.

A: Shane Tackett said CASM expected to improve in 2Q due to growth profile, and Andrew Harrison noted continued strength in corporate travel but didn't disclose specific RASM premium details.

Q: Helane Becker inquired about second half travel patterns and Alaska's capacity in Alaska.

A: Andrew Harrison said June is the strongest month, and industry capacity to Alaska long haul is up, but Alaska remains well-positioned in the market.

Q: Unidentified Analyst asked about commercial initiatives like Alaska Access and contribution expectations.

A: Andrew Harrison discussed broadening products and services due to distribution landscape changes, excited about technology to drive revenues.

Q: Ravi Shanker asked about close-in strength vs competitors and CASM-RASM gap in 2Q.

A: Andrew Harrison said Q2 expected to be strong with good network configuration, and Shane Tackett noted CASM expected to perform better in 2Q but unit revenues still pressured by prior impacts.

Q: Duane Pfennigwerth asked about Hawaii capacity recovery and regional mix.

A: Andrew Harrison said Maui recovery slow, regional capacity ~10% of total, and Ben Minicucci noted Horizon performing well.

Q: Jamie Baker asked about corporate travel behavioral changes and full year EPS guide variability.

A: Andrew Harrison said will have better answer next quarter, and Shane Tackett said $2 EPS range mostly habitual with fuel as main driver.

Q: Stephen Trent asked about fuel cost impact with Hawaiian merge and investment grade credit rating.

A: Shane Tackett said Hawaii fuel prices lower, and Alaska is deserving of investment grade but focused on Hawaiian acquisition and fundraising.

Q: Conor Cunningham asked about Boeing order book and premium inventory management.

A: Shane Tackett said focusing on MAX quality and delivery stream, and Andrew Harrison said Saver Fare is good product with deliberate pricing focus.

Q: Mike Linenberg asked about close-in leisure evolution and loyalty program updates.

A: Andrew Harrison discussed leisure booking closer in with better yields, and Shane Tackett said loyalty program evolving but no specific updates yet.

Q: Dan McKenzie asked about headcount vs fleet count and SAF gallons in 2024.

A: Shane Tackett said headcount in good shape, and Diana Birkett Rakow said ~1% of 2024 fuel from SAF with green premium over Jet A.

Q: Christopher Stathoulopoulos asked about CASM ex freighter cost and Alaska's supply-demand balance.

A: Shane Tackett said CASM ex freighter cost flattish, and Ben Minicucci said well-positioned for strong Q2 and rest of year due to demand and network strength