Alaska Air Group (ALK) May Traffic Maintains Growth Trend

Alaska Air Group, Inc. (NYSE:ALK) posted a significant rise in air traffic for the month of May. Traffic – measured in revenue passenger miles (RPMs) – came in at 3.12 billion, up 11.6% from 2.8 billion recorded a year ago.

On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) rose 11.3% to 3.7 billion. Meanwhile, the load factor or percentage of seats filled by passengers increased to 84.7% from 84.5% recorded in May 2015 as traffic growth exceeded capacity expansion.

At the end of the first five months of 2016, Alaska Air Group generated RPMs of 14.7 billion (up 11.2% year over year) and ASMs of 17.8 billion (up 12.1% year over year). Load factor stood at 83% compared with 83.7% in the first five months of 2015.

We believe that increased demand for air travel coupled with continuous expansion of routes and enhanced customer satisfaction supported the impressive operating results. Also, passenger count in May and at the end of the five months period grew 7.7% and 7.4%, respectively.

According to an estimation made by Airlines for America (“A4A”) – the trade organization for leading U.S. airlines – summer 2016 passenger volumes are expected to scale past the all-time high record set in 2015 by 4%. An estimated 231.1 million passengers are expected to fly scheduled U.S. airlines from Jun 1 to Aug 31, 2016 compared with 222.3 million passengers last year. This is a major positive for airlines like Alaska Air Group.

Alaska Air was included in the sought-after S&P 500 index on May 12, 2016. This is a commendable development for the company, which now joins the league of American Airlines Group (NASDAQ:AAL) and United Continental Holdings (NYSE:UAL) , which were included in the benchmark index last year. Alaska Air Group has been added to the S&P 500 GICS “Industrials” sector or Airlines Sub-Industry index.

Alaska Air Group currently carries a Zacks Rank #3 (Hold).

Stock to Consider

Investors interested in the airline space may consider SkyWest Inc. (NASDAQ:SKYW) , which sports a Zacks Rank #1 (Strong Buy).