After A Year Of Heavy Lifting, Alaska Air Looks To Get Back To Business

This was a challenging, and likely frustrating, year for Alaska Air (ALK) management, as the company still had a lot of the heavy lifting to do in integrating the Virgin acquisition, but didn’t really get to see the benefits yet. At the same time, competitive actions from other airlines like Delta (DAL), United (UAL), and Southwest (LUV) have made managing capacity in the company’s key West Coast markets a little more challenging. All told, then, it’s been a challenging year for the stock (down about 15%), though Alaska Air has fared better than the sector as a whole.

I was lukewarm on Alaska Air back in June mostly due to sentiment and the risk of further negative earnings revisions. The shares are down slightly since then, while EBITDA expectations have fallen about 10%. I believe that sets the stage for a better 2019, and I believe Alaska Air is poised to generate some of the best growth in earnings spread (the difference between RASM, or revenue per available seat mile, and CASM, or cost per available seat mile) in the sector, as Alaska Air gets back to its normal operating prerogatives. A weaker economy and a less disciplined sector are still threats, but I believe Alaska Air should be trading in the $70s today.

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After A Year Of Heavy Lifting, Alaska Air Looks To Get Back To Business