Alaska Air cuts Q3 earnings guidance on fuel costs, operational issues

Alaska Air Group (NYSE: ALK) expects third-quarter adjusted earnings per share at the low end of its previously guided range of $1.00 to $1.40, according to a company statement.

The airline cited elevated fuel costs and operational challenges during the summer as primary factors pressuring unit costs. West Coast refining margins remained high due to ongoing refinery disruptions, pushing the company's expected economic fuel price to $2.50-$2.55 per gallon, up from a prior expectation of approximately $2.45.

Irregular operations, including weather and air traffic control issues, led to increased costs from overtime, premium pay and passenger compensation. The July IT outage continues to carry an expected impact of approximately $0.10 per share, now weighted more heavily toward cost than revenue.

Unit revenue is tracking near the high end of the company's prior guidance range of flat to low-single-digit growth. Yields turned positive year-over-year in August, driven by premium cabin strength and corporate revenue growth since the second quarter.

Alaska Air launched its Atmos Rewards loyalty program on August 20. Sign-ups for the associated Atmos Rewards Summit Visa Infinite Card exceeded the company's year-end target within two weeks.

The company expects its third-quarter book tax rate to be approximately 30% while cash taxes remain negligible.

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