Alaska, Southwest see modest cargo revenue growth

Alaska Air Group and Southwest Airlines bucked the trend of other carriers and yesterday reported modest revenue growth for the fourth quarter, including in their cargo divisions. [caption id="attachment_57131921" align="alignright" width="300"] (Courtesy/Alaska Air Cargo)[/caption] Alaska Air Group reported $10.4 billion in operating revenue for 2023, an increase of 8% year over year, and a 2% YoY increase in “cargo and other revenue” to $252 million. The carrier reported $2.6 billion in operating revenue for Q4, up 3% YoY, and a 7% YoY increase in cargo and other revenue to $62 million. The carrier placed its first 737-800 freighter into operation last year, with another expected to be delivered in Q1. Alaska repurchased approximately 2 million shares of common stock for $75 million in Q4, bringing total repurchases to about 3.5 million shares for $145 million in 2023. Shares of Alaska Air Group (NYSE: ALK) opened at $36.80 and rose to $37.42 as of market close Jan. 25, after earnings were released. Shares were down 1.7% from market open to $36.77 as of market close today. Alaska has a market capitalization of $4.7 billion. Alaska merger with Hawaiian Alaska Airlines announced in December that it would acquire Hawaiian Airlines for $1.9 billion, including $900 million in debt. Hawaiian was heavily affected last year by a wildfire outbreak in Maui in August; Hawaiian flew 54,000 tonnes of cargo to aid victims in Maui, but lost $25 million in profit, or about 22% of its system revenue, due to cancellations, the company reported during its Q3 earning call . The Alaska-Hawaiian merger, which is expected to take 12 to 18 months to complete, could boost Alaska’s cargo operations. “I think Hawaiian is interesting because air cargo is a bigger percentage of their business because of their exposure to Asia historically,” Derek Lossing , founder and senior adviser at Cirrus Global Advisors , previously told Air Cargo Next . Some analysts have questioned whether the deal will go through after a judge blocked the merger between JetBlue Airways and Spirit Airlines on antitrust grounds this month. Nevertheless, Alaska executives remain confident the Alaska-Hawaiian merger will be completed. “We initiated the process of obtaining antitrust clearance by submitting our HSR [antitrust] filing this month,” Alaska President and Chief Executive Ben Minicucci said in a Jan. 25 earnings call. “We’ve held initial conversations with the [ Department of Justice ] and the process will continue. We believe we have a stronger and differentiated case from JetBlue and Spirit.” Alaska’s Max 9 woes The FAA grounded 171 Boeing 737 Max 9 aircraft this month after a door partially blew off of Alaska Flight 1282 mid-air on Jan. 5. The plane returned to Portland International Airport (PDX) immediately and no serious injuries were reported. Alaska is “preparing to complete the final inspections” of its 65 Max 9s and will return the aircraft to service once that process has ended and “any findings resolved,” according to an earnings report. The planes must also be cleared by regulators before being flown again. “We remain committed to working diligently alongside the [ National Transportation Safety Board ], FAA and Boeing to return our aircraft safely to service and ensure this never happens again,” Minicucci said. “As a longtime valued partner, we remain fully committed to our relationship with Boeing, but we also intend to hold them accountable.” Southwest sees stable cargo figures Southwest Airlines reported a record $26.1 billion in operating revenue for 2023, an increase of 9.6% YoY, though cargo revenue fell 1.1% YoY to $175 million. The carrier reported a record $6.8 billion in operating revenue for Q4, up 10.5% YoY, and a 2.3% YoY increase in cargo revenue to $44 million. [caption id="attachment_22158" align="alignright" width="300"] (Courtesy/Southwest)[/caption] Full-year net income was $986 million, or $1.57 per diluted share, and Q4 net income was $233 million, or 37 cents per diluted share. Southwest focused this past year on creating a winter weather action plan, prompted partially by the effects of Winter Storm Elliott, which hit in late December 2022 and led Southwest to cancel more than 15,000 flights in the final two weeks of the month. Southwest’s plan “has already been successfully tested in multiple winter weather events, including the extended nationwide winter storms we experienced this month, but also with other types of disruptions such as hurricanes, severe [snowfall] in Chicago and the Maui fires,” President and Chief Executive Bob Jordan said in a Jan. 25 earnings call. When listing advancements, Jordan mentioned that Southwest signed a multiyear contract with Madrid-based Amadeus IT Group for its network revenue management solution in April 2023. The solution uses machine learning to produce forecasts and insights into demand and fare elasticity, according to a release from Amadeus. Shares of Southwest (NYSE: LUV) opened at $32.50 and fell to $30.39 as of market close Jan. 25, after earnings were released. Shares were down 0.99% from market open to $30.09 as of market close today. Southwest has a market capitalization of $17.8 billion.

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