Why Alaska Air Shares Are Tanking Today

Alaska Air Group, Inc ALK shares are down Tuesday after the company's lackluster outlook, anticipating 0%-3% topline growth in the third quarter.

ALK reported second-quarter FY23 operating revenue growth of 7% year-over-year to $2.84 billion, beating the consensus of $2.77 billion.

Passenger revenues improved by 7% Y/Y to $2.6 billion.

Adjusted EPS was $3.00 compared to $2.19 in 2Q22, beating the consensus of $2.70.

The company generated adjusted pre-tax margins of 18.3%, up 250 bps versus 2Q19.

Operating expenses increased by 1% Y/Y to $2.50 billion. Alaska Air reported an operating income of 337 million (+80% Y/Y).

Revenue passengers increased 5% Y/Y, traffic increased 9%, capacity increased 10% Y/Y, and load factor contracted 110 basis points to 87%.

ALK repurchased 871,987 shares for ~$39 million in the quarter, bringing total repurchases to $57 million for the six months ended June 30, 2023. 

The company continues to expect share repurchases of at least $100 million in FY23.

Alaska Air generated an operating cash flow of $610 million in the quarter. ALK held $2.4 billion in unrestricted cash and marketable securities as of June 30, 2023. It ended the quarter with a debt-to-capitalization ratio of 48%.

3Q23 Outlook: Alaska Air expects 3Q23 capacity growth YY of 10%-13%; total revenue growth of 0%-3%; and CASMex down 0%-2%

FY23 Outlook: ALK sees capacity growth of 11%-13%; revenue growth of 8%-10%; CASMex down 1%-3%. ALK continues to expect EPS of $5.50-$7.50 vs. $6.6 consensus.

Price Action: ALK shares are trading lower by 12% at $46.92 on the last check Tuesday.