ALASKA Airlines on Tuesday unveiled a plan to generate US$1 billion in additional profits by 2027 by leveraging its acquisition of Hawaiian Airlines and booming demand for premium travel, sparking a rally in its shares.
The Seattle, Washington-based carrier also raised its fourth-quarter and full-year profit forecasts, citing stronger holiday travel bookings and lower interest costs.
Its shares were up about 12 per cent at US$60.81 in afternoon trade.
Alaska, which completed the US$1.9 billion acquisition of Hawaiian Airlines in September, said the deal is not expected to dilute its profit margin and is estimated to unlock at least US$500 million in savings.
To expand its global presence, the company announced new non-stop flights to Tokyo and Seoul from Seattle next year using Hawaiian’s widebody aircraft. It plans to serve 12 international destinations from Seattle by 2030, which is estimated to contribute US$1.5 billion in revenue.
The company said the Hawaiian deal has opened access to 1200 destinations worldwide and enabled it to fly almost 6 million passengers per year without adding capacity.
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“What could have taken us decades to build is at our fingertips today,” CEO Ben Minicucci told investors. “The Hawaiian acquisition has allowed us to accelerate our future.”
In the domestic market, Alaska plans to add seats in Seattle, Portland and San Diego – some of the fastest-growing markets on the US West Coast.
Premium travel boom
The airline is also capitalising on booming demand for high-end travel by ramping up the share of premium seats on its flights by 3 percentage points to 29 per cent by 2027. Alaska expects the investments in premium seats would produce US$100 million in additional profit.
The company said passengers are willing to pay more for more comfortable and bigger seats on longer flights, helping its high-margin revenue outpace the growth in premium seats.
“Premium is the profit differentiator,” said chief commercial officer Andrew Harrison.
Alaska will also launch a premium credit card as it revamps its loyalty programme. The measures are estimated to increase frequent flyer members by 50 per cent and generate US$150 million in incremental pretax profit by 2027.
Loyalty programmes have become a cash-generator for US carriers through sale of miles to third-party partners, mostly credit card-issuing banks that award the miles to their own customers. The more customers spend, the more miles they earn and the more partners pay airlines.
Alaska expects to earn at least US$10 per share in 2027, more than double the US$4.25 to US$4.50 estimated for 2024. It forecast a pretax margin of between 11 per cent and 13 per cent.
In 2025, it expects a profit of at least US$5.75 per share, compared with analysts’ average expectation of US$5.50, according to data compiled by LSEG.
Its fourth-quarter profit is now estimated at 40 cents to 50 cents a share, compared with the previous forecast of 20 cents to 40 cents.
The company also announced a US$1 billion share buyback. REUTERS
