By Shivansh Tiwary and Rajesh Kumar Singh
(Reuters) – Alaska Air Group forecast third-quarter profit below estimates on Wednesday, citing a financial hit from its new flight attendant contract deal, while it topped market expectations for second-quarter earnings.
The Seattle, Washington-based carrier’s flight attendants are set for an average pay hike of 32% after it reached a new tentative agreement with the union.
It expects a 50 cent-per-share hit to its third-quarter earnings due to the labor deal, CFO Shane Tackett told Reuters in an interview.
It forecast an adjusted profit of $1.40 to $1.60 per share during the period, compared with LSEG estimates of $2.05 per share.
Alaska, the operator of the Boeing plane that suffered a mid-air cabin blowout in January, also saw a $60 million impact to its second-quarter revenue due to the incident as it affected its bookings in April.
During the quarter, Alaska received nine 737 MAX aircraft from Boeing, six of which were the 737 MAX 9 variant.
Airlines are enjoying a summer travel boom while business travel, which is seen as the cash cow for the industry, has also continued its upward trajectory as corporate customers ramp up their work-related travel expenses.
“There is really strong demand by almost any measure,” Tackett told Reuters. “The most strength is on the premium segment of travel.”
Alaska posted second-quarter adjusted net income of $2.55 per share, compared with estimates of $2.38.
Its second-quarter performance was driven by lower-than-expected operating costs. Unit costs in the quarter were down about 2% from a year ago, compared with an April projection of being flat.
“We actually think that ticket yields would potentially be positive relative to last year in August. And we certainly do see that happening in September at the latest,” Tackett added.
The airline’s adjusted pretax margin of 15.8% for the quarter ended June 30 came in higher than larger rival Delta Air’s 13%.
Total operating revenue rose 2% to $2.9 billion.
(Reporting by Shivansh Tiwary in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Maju Samuel)
