Earnings: Costs drag Alaska Air Group’s flight in Q2

Alaska Air Group (ALK) reported a 34% drop in earnings for the second quarter due to an increase in aircraft fuel, aircraft maintenance, and wages despite lower income tax expenses. The airlines’ stock fell 3.16% in the pre-market trading after the top line missed analysts’ expectations.

Earnings dropped 34% to $193 million or $1.56 per share. The results included special items such as merger-related costs, and adjustments to mark-to-market fuel hedge accounting.

The bottom line was hurt by higher operating expenses, which rose 17% during the quarter. Excluding special items, net income for the second quarter was $206 million or $1.66 per share, down 33% from the previous year quarter.

Operating revenue increased by 3% to $2.16 billion, helped by an increase in passenger revenues, and higher cargo and other revenue.

Related: Alaska Air Group reports 5% hike in revenue

The company said it paid a $0.32 per share quarterly cash dividend in Q2 2018, an increase of 7% over the Q2 2017 dividend. Share repurchases totaled approximately $25 million during the first half of 2018.

Operating cash flow amounted to about $725 million, including merger-related costs and other special items. The company has $1.6 billion in unrestricted cash and marketable securities as of June 30, 2018.

The airlines reported a 6.9% increase in traffic and a 7.8% increase in capacity during the quarter, while load factor decreased by 0.8 percentage points. Revenue per available seat mile (RASM) declined 4.8% during the second quarter of 2018. Revenue passengers rose 6%, while economic fuel cost per gallon grew 34.5%.

During the second quarter, the company added two Boeing 737-900ER aircraft and two Airbus A321neo aircraft to the mainline operating fleet. The airlines added four Embraer 175 (E175) regional jets to Horizon Air’s fleet in the second quarter of 2018 and four E175 aircraft operated by SkyWest Airlines.

Shares of Alaska Air Group ended Wednesday’s regular trading session up 0.17% at $59.11 on NYSE. The stock had been trading between $57.53 and $88.45 for the past 52 weeks.

Related Infographics: Q1 Earnings