Lower fuel costs and careful management paid big benefits for SeaTac-based Alaska Air Group in the second quarter, with profits some 46 percent greater than the same quarter in 2014, the airline holding company reported Thursday.
The air group, parent of Alaska Airlines and regional carrier Horizon Air, reported record profits of $230 million during the quarter. On a per share basis, that amounted to $1.76 a share, a 56 percent increase and 3 cents more per share than the average of analysts’ predictions. The per share increase percentage was greater than the overall 46 percent increase because Alaska repurchased 4.1 million shares during the first half of 2015.
“This is our 25th consecutive quarter of profitability, and it’s the highest quarterly profit in our history,” noted Alaska CEO Brad Tilden in an earnings conference call.
Like most airlines, Alaska benefited from substantially lower fuel costs in the second quarter this year. Alaska figures show the airline’s cost of fuel in the April through June period this year was $2.12 per gallon versus $3.20 in the same period last year.
But other costs also declined and contributed to the higher profits. The cost per available seat-mile for the airline group in the second quarter excluding fuel was 8.08 cents compared with 8.73 cents in the same quarter in 2014. Greater fuel efficiency also contributed to better results. In the second quarter of 2015, a gallon of fuel could carry 79 passengers one mile. A year earlier, Alaska could carry 77.5 passengers one mile on a gallon of jet fuel.
Those better profits came despite a slight decrease in the percentage of seats filled by paying passengers on each flight from 86.3 percent in 2014’s second quarter to 84.9 percent in the same quarter of 2015.
Tilden said the airline’s profitability doesn’t depend on cheap fuel alone.
“While fuel is low and the economy is generally strong, we believe that this is still a cyclical business. Being flexible is important for producing strong results throughout the cycle. Alaska is the only US airline that has net interest income, and this, combined with the 80 aircraft that we own free and clear, gives us great flexibility should we see fluctuations in fuel prices or a downturn in the economy,” he told analysts.
