Alaska Air Group has announced its first profit from its merger with Hawaiian Airlines, marking a significant milestone for the combined entity. The airline’s second-quarter earnings, reported on July 26, 2023, exceeded expectations, driven by lower fuel prices and improved revenue and cost management. This quarter also marked the first time Hawaiian Airlines achieved profitability since 2019.
Ryan St. John, Alaska Air Group’s Vice President of Finance, Planning, and Investor Relations, stated, “We posted a beat of our prior guidance for the second quarter, which is great.” This report is Alaska’s third full-quarter earnings update since its $1.9 billion acquisition of Hawaiian Holdings was finalized on September 18, 2023. Following the merger, Alaska introduced its strategic vision, Alaska Accelerate, aiming to unlock an additional $1 billion in pretax profit by 2027.
Financial Performance and Outlook
For the second quarter ending June 30, Alaska Air Group reported a net income of $172 million, or $1.42 per share, which includes results from Hawaiian Airlines. In comparison, the previous year’s second quarter net income was $220 million, or $1.71 per share, excluding Hawaiian results. Adjusted earnings for the latest quarter, excluding special items, stood at $215 million, or $1.78 per share, reflecting a year-on-year decline from $327 million, or $2.25 per share.
Hawaiian Airlines reported a remarkable 11-point improvement in its adjusted pretax margin within just ten months of the merger. St. John noted the significance of this turnaround, stating, “We just got into the profitable territory for the Hawaiian asset, obviously it was losing a good bit of money at this time last year. If you can get a profit margin between 5% and 10%, that’s pretty good for this industry.”
The airline has also seen increased demand in premium cabins, which have outperformed the main cabin. St. John mentioned that these premium cabins, particularly on longer flights, have driven revenue growth, contributing to Alaska’s total operating revenue of over $3.7 billion in the second quarter.
Strategic Developments and Future Plans
Looking ahead, Alaska Air Group anticipates a crucial step in October when the Federal Aviation Administration is expected to issue a single operating certificate. This will allow Alaska and Hawaiian to operate as one entity. Additionally, both airlines plan to transition to a single reservation system by April. CEO Ben Minicucci expressed confidence in the company’s direction, stating, “The results this quarter are clear evidence of our team’s disciplined execution and unwavering focus on what we can control.”
The combined workforce now exceeds 30,000, with over 6,500 employees based in Hawaii. This year, Hawaiian Airlines has created 522 new union jobs but has also announced three rounds of job cuts that will eliminate 386 noncontract positions in Hawaii.
Alaska’s diversified revenue strategy has resulted in 49% of its earnings coming from sources outside the main cabin, bolstering its financial stability. The airline is also set to launch new international routes, including a daily nonstop service between Seattle and Tokyo, and plans to establish its first trans-Atlantic route connecting Seattle to Rome next year.
St. John remarked on the overall positive trajectory for Alaska and Hawaiian Airlines, despite some lingering challenges in international travel to Hawaii. He noted that the state has been a strong performer since the merger, contributing positively to the overall network. He adjusted Alaska’s 2025 capacity expectations to approximately 2% growth year-over-year, forecasting earnings per share for the full year to exceed $3.25.
As the airline navigates its integration and recovery, it remains focused on enhancing customer experience and operational excellence. Recent challenges, including an IT outage that disrupted operations on July 20, were addressed swiftly. St. John assured that the airline is “working to make it right” with customers affected by the incident, which led to delays and cancellations.
With these developments, Alaska Air Group is positioning itself for long-term success in the competitive aviation market.