An increase in various labour expenses and fuel-related costs have driven Alaska Air’s $2 million net income loss (or $0.2 per share) for the fourth quarter of 2023, revealed in its fourth quarter and full year report for 2023. The result is markedly different from the same period result in 2022 with the airline reporting $22 million net income profit at $0.17 per share.
Total operating expenses rose 3% for the fourth quarter to $2.5bn from $2.4bn, and by 5% to $10bn in 2023 from $9.5bn in 2022.
However, revenue rose 3% to $2.5bn for Q4 and by 8% to $10.4bn in 2023 from $9.6bn in 2022. Net income for 2023 also rose $235 million, up from $58 million in 2022, representing diluted shares of $1.83 for 2023, up from $0.45 in 2022.
Alaska said that some 46% of its total revenue for 2023 was generated from its premium, loyalty and ancillary revenues - noting the continued strength of the front of the airplane. Chief Revenue Officer & Chief Commercial Officer Andrew Harrison noted on an earnings call on January 25 that premium cabin revenues were solid, with revenues up 15% for First and 10% for other premium classes, that are "continuing to substantially outpace main cabin revenue. At nearly 32% of total revenue, our premium product orientation provides a clear point of differentiation against our domestic focused peers, which will continue to be a core competitive advantage for us in years to come," he said.
Alaska Airlines opened the year to a rocky start with one of its 737-9 MAX aircraft’s door plug ripping off mid-flight in early January 2024; forcing pilots to make an emergency landing. The ensuing troubles saw the US Federal Aviation Administration ground over 170 MAX 9 jets across US carriers. The FAA eventually halted the grounding after two weeks. The airline said that it expects to make a loss of $150 million in 2024 due to the extended grounding.
Boeing has been prevented by the FAA from expanding its 737 MAX production, which is expected to cause future delivery delays. Alaska said it expects capacity growth to be at or below the lower end of its 3-5% targets due to the issues presented by the Boeing incident.
In its report, Alaska Air said it is preparing to complete the final inspection of all its 737-9 MAX aircraft and will be subsequently returned to service. It noted it had completed a requested inspection of al 737-900ER aircraft and had only one minor finding, which it corrected. It also said that it had initiated a “thorough review” of Boeing’s quality control systems for its production, as well as Boeing’s “production vendor oversight” to ensure quality control on new aircraft. Alaska was expected 23 mainline deliveries this year, 16 MAX 9 and seven MAX 8, but it now anticipate some of these deliveries may be delayed "but we don't know for how long" said CFO Shane Tackett in response to an analyst question on the earnings call.
Alaska Airlines is pushing ahead with its merger plans with Hawaiian Airline. Ben Minicucci stated on the call that Alaska had initiated the process of obtaining anti-trust clearance by submitting its HSR filing this month. "We've held initial conversations with the DOJ and the process will continue," he said. "We believe we have a stronger and differentiated case from JetBlue and Spirit and look forward to providing updates as they become available.