Alaska Air Group Cuts Profit Outlook Due to Rising Labor Costs

         

Summary: Alaska Air Group has revised its full-year profit outlook downward due to increasing labor expenses, which has become a burden for major airlines. The company plans to moderate capacity growth and expects a minimal increase over pre-pandemic levels. Concerns loom over softened demand, particularly for domestic routes, as consumers struggle with depleted pandemic savings and high interest rates. Alaska Air now forecasts a lower full-year profit range and has trimmed its annual revenue growth forecast.

Alaska Air Group has adjusted its full-year profit outlook downwards, attributing the change to the rising labor expenses faced by the airline industry. This comes as major U.S. airlines are already grappling with the impact of higher fuel prices on their financial prospects. To align with pre-pandemic levels, Alaska Air has decided to moderate its capacity growth for the next two quarters. As for the long-term forecast, the company expects a less than 3% increase in capacity growth by February 2024 compared to 2019 levels.

Industry experts are expressing concerns over a potential softening in demand, especially for domestic routes. Consumers’ reduced tolerance for higher airfare, resulting from depleted pandemic savings and high interest rates, is expected to have a negative effect on the airline industry. In light of these uncertainties, Alaska Air has revised its full-year profit outlook, slashing its expected range from $5.50 to $7.50 per share down to $4.25 to $4.75 per share.

Moreover, Alaska Air has also made adjustments to its annual revenue growth forecast. The company now anticipates a growth rate of 7% to 8% for the year, down from the previously expected range of 8% to 10%. These revisions reflect the challenges faced by the airline industry and the need for adjustments in order to maintain financial stability and adapt to changing market conditions.

In the third quarter, Alaska Air reported a quarterly profit of $1.83 per share, falling short of analysts’ average estimate of $1.87. The company’s third-quarter revenue stood at $2.84 billion, slightly below Wall Street expectations of $2.87 billion. With the uncertain future of the industry in mind, Alaska Air will need to carefully navigate the ongoing challenges of rising labor costs and the potential impact on consumer demand.

Tags: Alaska Air Group, profit outlook, labor costs, capacity growth, demand, domestic routes, revenue growth, financial prospects, airline industry

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