Alaska Air Warns Boeing Fleet Grounding Incident To Hit 2024 Earnings By $150M

Alaska Air Group Inc ALK reported fourth-quarter operating revenue of $2.55 billion, up 3% Y/Y, in-line with the consensus of $2.55 billion.

The company reported adjusted EPS of $0.30, down from $0.92 a year ago, beating the consensus estimate of $0.18.

Alaska said that it is preparing to complete the final inspections of all of its Boeing 737 MAX 9 planes and that the aircraft will return to service after the inspection has been completed and any findings resolved. 

The company also initiated a thorough review of Boeing Co’s BA production quality and control systems, including Boeing’s production vendor oversight to enhance quality control on new aircraft.

Also Read: China Says ‘Yes’ To Boeing — 737 Max Back In Business Amidst US Scrutiny.

The head of the Federal Aviation Administration, Mike Whitaker, recently informed The Wall Street Journal that the Alaska accident was likely the result of a manufacturing error rather than a design flaw.

Guidance: Alaska Air expects 2024 adjusted earnings of $3-$5 a share, way below the consensus of $4.85. 

The forecast incorporates a $150 million negative impact from grounding Boeing’s 737-9 MAX fleet and assumes a gradual return to service of the 737-9 MAX fleet through early February. 

Before the 737-9 MAX grounding, the company expected its full-year 2024 capacity to grow 3% to 5% compared to 2023. 

Given the grounding and the potential for future delivery delays, the company expects capacity growth to be at or below the lower end of this range.

Read Next: FAA Halts Boeing’s 737 Max Production Expansion Amid Quality Control Issues: ‘Won’t Be Back To Business As Usual’

Price Action: ALK shares are up 3.21% at $36.97 on the last check Thursday.

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