Alaska Air Wins By Losing Less

Investors rewarded Alaska Air Group, Inc. ALK for reporting first-quarter losses and cash burn projections that beat expectations, with the stock up 1.15% to $29.10 per share at Tuesday's market close.

The parent company of Alaska Airlines and Horizon Airlines said its first-quarter adjusted net loss was $0.82 per share, or $102 million, ahead of Wall Street's consensus of a $1.14 loss per share. Total revenue fell 13% to $1.6 billion compared to analyst estimates for $1.7 billion compared to the same period last year.

Cargo revenue fell 8% to $46 million.

The implosion of travel demand due to the coronavirus forced airlines to implement severe austerity programs. Alaska's measures include reducing passenger schedules by at least 80% through May and offering voluntary, unpaid leave, which more than 5,000 employees accepted. The deferral of predelivery aircraft payments and nonaircraft capital projects has saved more than $500 million in capital expenditures this year, and Alaska is lowering discretionary costs by negotiating payment extensions or reductions with lessors, vendors and airports.

Alaska said it reduced its cash burn from $400 million per month in March to $260 million in April, and hopes to t it to $200 million per month in June. The monthly negative cash flow translates to about $8.6 million per day in April compared to major domestic carriers like American Airlines ($70 million per day) and United Airlines ($50 million per day). 

The Seattle-based carrier has $2.9 billion of cash and cash-equivalents after accepting a $992 million payroll protection grant from the U.S. government and borrowing $875 million from private sources. It has also applied to the government for the option of taking a $1.1 billion loan.
CEO Brad Tilden thanked front-line workers for maintaining ongoing services at high levels and the leadership team for giving "us the best chance possible to navigate through this storm and capitalize on opportunities we may see on the other side."