Can Alaska Air Group Continue Growing Its Revenue in 2016?

Why Alaska Air Group's Upbeat 1Q16 Results Left Investors Flat

(Continued from Prior Part)

Revenues grew more than expected

Strong operational performance has helped Alaska Air Group (ALK) record healthy revenue growth, higher than analysts’ estimates. For 1Q16, Alaska Air Group’s passenger revenues grew by 4% year-over-year (or YoY).

ALK’s total revenue growth stood at 6.1% YoY in contrast to the industry’s revenue decline of 1%. This was made possible due to Alaska Air Group’s aggressive capacity growth and corresponding demand.

Unit revenues decline

Unit revenue is a measure of passenger revenue earned by the airline (passenger revenue per available seat mile), known as PRASM. Like other airlines, Alaska Air Group’s unit revenues continued to decline in 1Q16. Its PRASM declined by 7.7% to ~10.8 cents for 1Q16 and RASM declined by 6.1% to ~12.9 cents.

Foreign currency fluctuations and lower fuel surcharges in the international market resulted from lower oil prices. Both factors adversely impacted Alaska Air Group’s unit revenues.

Outlook

Although Alaska Air Group (ALK) does not give any future unit revenue guidance, the management does expect load factors to remain flat for the second quarter. This could help ease some pressure on its revenues.

Among Alaska’s peers, Southwest Airlines (LUV), JetBlue (JBLU), and Spirit Airlines (SAVE) expect unit revenues to flatten or grow toward the second half of 2016.

Alaska Air Group forms ~4.0% of the DWA Consumer Cyclicals Momentum ETF’s (PEZ) holdings.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Alaska Air Group Stock on a Losing Streak after Its 1Q16 Results

• Part 2 - How Has Alaska Air Group Performed on Key Indicators in 1Q16?

• Part 4 - Can Alaska Air Group’s Margin Continue to Expand in 2016?