What should have been a good year is marred by recent news.
2023 ended well: Alaska Airlines announced its intention to acquire Hawaiian – a major move that substantially adds to its network and expands its global footprint. More importantly, Alaska Airlines had a record operating revenue of $10.4Bn.
CEO Ben Minicucci said. “I want to thank our people for delivering a reliable operation, industry-leading cost performance, and a strong 7.5% adjusted pretax margin. As we navigate early 2024, we remain steadfast in our commitment to safety, providing a premium experience for our guests, and delivering durable financial performance. I am also grateful for how the team has rallied together to demonstrate tremendous professionalism and care in the midst of a challenging start to 2024 for them and our guests. Alaska is a resilient company with a track record of operational excellence, and we are confident in the plans we have laid out to ensure that success moving forward.”
Let’s get the good news out of the way:
- They reported a net loss for the fourth quarter and net income for the full year 2023 under GAAP of $2 million, or $0.02 per share, and $235 million, or $1.83 per diluted share. These results compare to net income for the fourth quarter and full year 2022 of $22 million, or $0.17 per diluted share, and $58 million, or $0.45 per diluted share.
- They reported net income for the fourth quarter and full year 2023, excluding special items and mark-to-market fuel hedge accounting adjustments, of $38 million, or $0.30 per diluted share, and $583 million, or $4.53 per diluted share. These results compare to net income for the fourth quarter and full year 2022, excluding special items and mark-to-market fuel hedge accounting adjustments, of $118 million, or $0.92 per diluted share, and $556 million, or $4.35 per diluted share.
- It generated an adjusted pretax margin of 7.5% for the full year 2023, among the highest in the industry.
- Recorded $2.6 billion in operating revenue for the fourth quarter and a record $10.4 billion for the full year 2023.
- They reduced CASM, excluding fuel and special items, by 6.6% in the fourth quarter and 2.6% in the full year compared to 2022.
- It generated $1.1 billion in operating cash flow for 2023.
- Recognized over $400 million in bank card partner commissions in the fourth quarter and $1.6 billion for the full year 2023, representing a 13% year-over-year increase compared to the full year 2022.
- Air Group employees earned $200 million of incentive pay in 2023 by achieving profitability, sustainability, operational, and safety targets. The payout represents more than three weeks of pay for most employees.
- Received an investment grade credit rating of “Baa3” from Moody’s Investors Service, citing the Company’s “strong business profile and conservative financial policy.”
- They ended the year with a debt-to-capitalization ratio of 46%, within the target range of 40% to 50%.
- It repaid $40 million in debt in the fourth quarter, bringing total debt payments to $282 million for the full year 2023.
Now, the news that marred these results, casting a cloud over an airline that ended a great year – the MAX 9.
This morning, news broke that the MAX 9 might start flying again tomorrow. This is big for Alaska, as they are hurting from a lack of capacity with the MAX 9 grounded. The FAA is tightening its Boeing oversight.
Yesterday, Minicucci expressed his anger at Boeing. The airline is not out of the legal woods – almost certainly, lawsuits are coming from passengers on AS1282. The initial $1,500 compensation was smart, but it won’t stop the lawyers. The airline has a webpage devoted to the event and keeps everyone updated. The airline is doing whatever it can to mitigate against the brand damage. This is to its credit because, to date, Alaska Airlines has a fine reputation.
This image now likely causes uneasiness in the Pacific Northwest. Alaska Airlines just sold its last two Airbus jets to American Airlines. Focusing on the MAX 9 for its fleet update was a good choice. Look at our simple ESG model to see why.
The airline noted this: “Reduced CASM excluding fuel and special items by 6.6% in the fourth quarter and 2.6% in the full year compared to 2022.” The MAX 9 is a primary reason for the improved fuel burn. Our data shows the MAX 9 as the “greenest” single aisle in US operations.
Everything was looking so good going into 2024 for Alaska Airlines. Traffic is strong, and even if the demand looks softer this year, Alaska has the most fuel-efficient airplane in its fleet. Then those blots broke. That door plug disappearing into the dark sky over Portland allowed a blast of shock and fear into more than the airplane.
The damage from AS1282 will take some time to work through, hopefully soon for the airline. It is going to take much longer for Boeing. And that “Proudly All Boeing” statement now sounds like fingernails on a blackboard.
