Alaska Air sees clear skies despite 737 MAX woes as business travel rebounds

Alaska Air expects earnings to beat analyst estimates this spring, a sign that the carrier is recovering from the Jan. 5 near-disaster on one of its planes that led to the temporary grounding of a major Boeing model.

Optimistic forecasts suggest the SeaTac-headquartered carrier is bouncing back after regulators temporarily grounded a Boeing 737 MAX 9 after a fuselage panel tore off one of the planes during a flight in Alaska on Jan. 5.

Boeing reimbursed Alaska $162 million for lost first-quarter profits related to the mishap. The airline said it expects additional compensation, without revealing the amount.

More about Alaska Airlines and the Boeing 737 MAX 9

Alaska expects to receive between 10 and 20 Boeing 737 Max planes this year, down from a previous plan of 23 planes, the carrier said. Deliveries of new Boeing aircraft have slowed this year as the company works to strengthen quality controls and regulators inspect its factories in the wake of the plate explosion in January.

The business travel rebound that began in the first quarter is expected to continue through the rest of the year, Chief Financial Officer Shane Tackett said in an interview. Passenger volume from technology companies has returned to about 85% of 2019 levels, while overall business travel has fully recovered.

Tackett said these numbers represent a “huge step up from last year.” Alaska expects second-quarter capacity to increase 5% to 7%.

Federal aviation regulators grounded all MAX 9 planes after the January accident until inspections are completed. Most aircraft resumed flying in late January or early February. Alaska previously confirmed that some passengers chose to fly on other airlines for a period after the incident.

A panel that flew off an Alaska Airlines plane appears to have left the Boeing factory without four screws necessary to hold the part in place, National Transportation Safety Board investigators said. No one was seriously injured in the accident. The Justice Department is also investigating.

Alaska raised its full-year earnings forecast to $3.25 to $5.25 per share, up from $3 to $5 previously. The midpoint of this range is just below the $4.36 that analysts estimate.

Like other airlines, Alaska expects to see delays in new aircraft deliveries by Boeing. As a result, the carrier now expects capital spending of $1.2 billion to $1.3 billion, down from $1.5 billion previously.

The airline’s adjusted loss in the first quarter was 92 cents per share, compared with an average deficit of $1.09 that analysts had expected. Alaska said the grounding of MAX 9 resulted in a 95-cent reduction in earnings. Revenues of $2.23 billion beat estimates of $2.18 billion.

Alaska chose not to immediately recognize Boeing’s compensation in its first-quarter results, but rather consider it a write-down of aircraft assets.

Adjusted second-quarter earnings will range between $2.20 and $2.40 per share in the current period, helped by an increase in travel by technology companies and increased demand for premium tickets, the carrier said in a statement Thursday. That’s higher than the average analyst estimate of $2.12 compiled by Bloomberg.

“Overall, the carrier’s results and guidance look very good,” Citi analyst Stephen Trent said in a note. Revenue trends appear to be “driving strength into the second quarter and full year.”

Alaska shares rose 4% on Thursday after earlier rising 7.1%, the most in more than two years. Other airline stocks also rose, pushing the Standard & Poor’s 500 index, which includes nine airlines, up 3%.

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