Alaska Airlines Stock Supported By Strong Fundamentals
The shares of Alaska Air Group (NYSE: ALK) observed another round of sell-off after WHO declared the Omicron mutation as a variant of concern and investors became wary of a decline in air travel demand. However, the passenger numbers at TSA checkpoints regained strength as infection numbers quickly ticked down earlier this month. Alaska Air Group incurred just $234 million operating cash burn in 2020 largely due to multiple grant arrangements by the government and a stringent cost curtailment plan. As domestic demand continues to drive strong passenger numbers, Trefis believes that Alaska Air Group’s revenues to observe 36% (y-o-y) growth in 2022. We highlight the historical trends in key revenue drivers of Alaska Air along with near-term projections in an interactive dashboard analysis.
How did Alaska Air Group perform in 2021?
In 2021, Alaska Air Group reported 30% contraction in operating revenues driven by a 21% reduction in capacity (available seat miles) and a 10% decline in load factor over 2019. However, pent-up demand pushed the top line to almost pre-pandemic levels in H2 2021. The company ended the year with $478 million of net income and $1 billion of operating cash. Notably, the company’s $1 billion of investment activities were assisted by a combination of cash on hand and yearly earnings. On the operational side, CASMex (representing operational expenses other than fuel per available seat mile) observed a 13% surge and passenger yield declined by 1% over 2019.
- Should You Pick Alaska Airlines Stock At $45 After Q1 Beat?
- Should You Pick Alaska Air Stock At $37 After Q4 Beat?
- Will Alaska Air Stock Rebound To Its Pre-Inflation Shock Highs of $70?
- What’s Next For Alaska Air Stock After A 24% Fall This Year And A Downbeat Q3?
- Which Is A Better Pick – Alaska Air Or UAL Stock?
- What’s In The Cards For Alaska Air’s Q2?
Per Q4 2021 filings, the company expects Q1 2022 capacity to be down by just 10-13% over Q1 2019 and the passenger load factor to range between 71-74% – almost 10% below historical average numbers. With revenues expected to be down by 14-17% over pre-pandemic levels, Q1 2022 is likely to observe a similar performance sequentially. (related: Is JetBlue Airways Stock Poised For Strong Gains?)
Trends In Key Performance Metrics
A prudent capital investment plan, stable demand, and high passenger load factor assisted 7% growth in ASMs (capacity) from 62 billion in 2017 to 66.6 billion in 2019. Subsequently, the top line observed a similar 11% expansion from $7.9 billion in 2017 to $8.8 billion in 2019. After the acquisition of Virgin Airlines in 2016, the company followed a conservative strategy and repaid $2.5 billion of long-term debt by 2019 instead of aggressively repurchasing shares. We elaborate more in our earlier article, What If American Airlines Had Implemented Alaska Air’s Capital Allocation Strategy?
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.
| Returns | Feb 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| ALK Return | 7% | 12% | -34% |
| S&P 500 Return | 2% | -4% | 105% |
| Trefis MS Portfolio Return | 2% | -8% | 264% |
[1] Month-to-date and year-to-date as of 2/10/2022
[2] Cumulative total returns since the end of 2016
Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates