Shares of Alaska Air Group ALK gained 3.4% at the close of business on Mar 24 following its improved first-quarter 2022 outlook.

For the first quarter, ALK expects capacity to decline approximately 11-12% from the first quarter of 2019 compared with the previous expectation of a 10-13% decrease. Revenue passengers are estimated to fall 17-18% from the comparable period in 2019 (previous guidance: decrease of 19-21%).

Alaska Air predicts load factor (percentage of seats filled by passengers) to be 76-78% in the current quarter (previous guidance: 71-74%). Total revenues are now expected to decline 11-12% from the 2019 level compared with 14-17% decrease estimated earlier.

Alaska Air Group, Inc. Price

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Cost per available seat miles, excluding fuel and special items, is forecast to increase 18-19% in the first quarter from the comparable period in 2019 (previous expectation: increase of 15-18%). Economic fuel cost per gallon is now estimated to be $2.62 in the first quarter (previous expectation: $2.60-$2.65). Non-operating expenses are expected to be $6-$8 million compared with $8-$10 million anticipated previously. Adjusted tax rate is forecast to be 24-25% in the first quarter.

Alaska Air’s raised first-quarter guidance is due to improved demand and yields. The company said that Omicron-induced woes caused softness in bookings in January, following which, demand in the first quarter has been trending above 2019 level. Expectations of benefits from the extension of ALK’s co-branded credit card agreement with Bank of America have also boosted the company’s guidance. The two companies have extended their co-branded partnership through 2030. Besides enhancing benefits for guests, the partnership is expected to improve profitability for the airline. On a separate note, the airline plans to expand its network by 4-8% per year through 2025.

Alaska Air has also announced plans to accelerate its transition to a single mainline fleet. To this end, the company plans to retire all Airbus A320 aircraft by early 2023. It also plans to shift to a single regional fleet by retiring all Q400 aircraft by 2023 end.

For the full year, Alaska Air expects capacity to increase 1-3% from the 2019 level compared with the previous expectation of an increase of 2-6%. Cost per available seat miles, excluding fuel and special items, is estimated to increase 3-5% from the 2019 level compared with an increase of 1-3% forecast earlier. Adjusted pre-tax margin is predicted to be 6-9%. Economic fuel price per gallon is expected to be $2.80 for the full year. Capital expenditures are expected to be $1.6-$1.7 billion for the full year.