Alaska Air Lowers Q1 RASM View Mainly Due To Weak Pricing

Shares of Alaska Air Group (NYSE:ALK) — the parent company of Alaska Airlines— have lost 12.8% in a year’s time. Multiple headwinds like high costs led to the downturn.

One-Year Price Performance

Adding to the woes, the carrier trimmed its forecast for first-quarter 2019 revenue per available seat mile (RASM: a key unit revenue measure). At an investor update, Alaska Air Group stated that it now expects current-quarter RASM to grow between 1% and 2% on a year-over-year basis. The previous forecast on Feb 19, 2019, had projected the metric to increase in the 2.5-4.5% range.

The carrier attributed its decision to lower the forecast pertaining to this key metric to weak pricing for last-minute bookings primarily on transcontinental flights from California.

Inclement weather due to the February storms in the Pacific Northwest region also affected first-quarter unit revenues at this Seattle, WA-based carrier. Naturally, the Zacks Rank #3 (Hold) carrier witnessed a slowdown in bookings during the period of foul weather and in turn, contributed to the bleak forecast. The carrier added that the pace of recovery in bookings since then has been slow. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Course of Action at JetBlue

Alaska Air Group was not the sole U.S.-based carrier to trim its first-quarter unit revenue view. JetBlue Airways (NASDAQ:JBLU) — based in Long Island City, New York — did the same, mainly due to factors like sluggish demand in off-peak periods and weak pricing for last-minute bookings primarily on transcontinental flights.

Furthermore, restrictions on travel to Haiti following the U.S. travel advisory and the Easter/Passover calendar shift to the second quarter impelled this low-cost carrier to trim its RASM forecast for the January-March period.

Due to the aforesaid factors, JetBlue, which had initially expected first-quarter RASM to either decline 2% or increase up to 1%, now anticipates the metric to decline in the band of 1.5-3.5%.

To combat the near-term RASM weakness, the carrier trimmed its 2019 capacity growth forecast. JetBlue now expects current-year capacity to grow in the 4.5-6.5% band (previous projection had hinted at capacity growth between 5% and 7%).

However, the RASM weakness is likely to diminish in the second and third quarter of 2019. Demand for travel is likely to pick up the pace in the peak summer season, thereby providing a boost to RASM.

Stocks to Consider

Some better-ranked stocks in the Zacks Transportation sector are Azul S.A. (NYSE:AZUL) and Expeditors International of Washington (NASDAQ:EXPD) sporting a Zacks Rank #1.

Azul and Expeditors outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 97.9% and 14.5%, respectively.

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