DBEA55AED16C0C92252A6554BC1553B2 Clicky DBEA55AED16C0C92252A6554BC1553B2 Clicky
May 20, 2024
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You know it was an awful event when the airline’s earnings report starts off talking about a near disaster.

The airline reports that “Air Group’s first quarter operation and results were significantly impacted by Flight 1282 in January and the Boeing 737-9 MAX grounding which extended into February. The Company has received $162 million in initial cash compensation from Boeing to address the financial damages incurred during the first quarter.”

Alaska Airlines

Separately, here is our chart showing the impact of that MAX 9 grounding. There is no doubt that the effect was a nasty earnings hit

DoT; AirInsight

Financial results

  • A net loss for the first quarter of 2024 under GAAP was $132 million, or $1.05 per share, compared to a net loss of $142 million, or $1.11 per share, for the first quarter of 2023.
  • A net loss for the first quarter of 2024, excluding special items and mark-to-market fuel hedge accounting adjustments, of $116 million, or $0.92 per share, compared to a net loss of $79 million, or $0.62 per share, for the first quarter of 2023.
  • Repurchased 561,086 shares of common stock for approximately $21 million in the first quarter.
  • Generated $292 million in operating cash flow for the first quarter.
  • Held $2.3 billion in unrestricted cash and marketable securities as of March 31, 2024.
  • Ended the quarter with a debt-to-capitalization ratio of 47%, within the target range of 40% to 50%.

Operational items

  • Hawaiian shareholders approved the agreement to buy Hawaiian Airlines for $18 per share. The proposed combination remains subject to regulatory approval.
  • Ratified a five-year collective bargaining agreement with approximately 1,000 Alaska Airlines employees represented by AMFA.
  • Completed inspections of all 737-9 MAX aircraft and returned the fleet to service in February.
  • Enhanced quality oversight program at the Boeing production facility to validate the work and quality of our aircraft as they progress through the manufacturing process.
  • Received two E175 aircraft during the quarter, bringing the total in the Horizon fleet to 43.

Notes:

  • The MAX 9 grounding was a significant issue. While the aircraft is back in service, trickle-down impacts from FAA rate limits on Boeing’s MAX line remain.  Our analysis shows that the MAX 9 fuel burn per seat is industry-leading, and delivery delays do not enable Alaska to benefit as much as it might have.
  • It’s not clear what compensation will be given to the airline.  Based on what we know is happening with other airlines, delivery delay compensation rolls into future delivery discounts.
  • Another item to watch for is the Hawaiian deal. The current DoT does not seem as sympathetic to airline consolidation.
  • Labor costs are rising, which squeezes margins. This is an industry problem, and this impact will become apparent during the rest of the year.
  • The market reaction to 1Q24 has been positive. Boeing paid Alaska $162m to compensate for the MAX 9 grounding. Alaska should have reported a 3c/share profit for 1Q24, making this the best first quarter since 2019.
author avatar
Addison Schonland
Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

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