Alaska Airlines Loses $20 Million Due To Historic Winter Storms
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While it’s easy to see the immediate impact of winter weather on commercial aviation, as airlines cancel flights and issue travel waivers, it’s not always as easy to see the long-term cost. February was a tough month for airlines, as dueling winter storms Maya and Nadia cancelled hundreds of flights from US coast to coast. At Alaska Airlines’ main hub of Seattle Tacoma International Airport, a record-breaking 14.1 inches of snow fell, making this the snowiest February in Seattle history.
Alaska just released a guidance update for investors, including a detailed analysis of the losses suffered due to the storm. Over a 10-day period, Alaska had to cancel 1,100 flights leading to a loss of about $20 million. This includes $15 million in lost revenue and $7 million in expected incremental costs, offset by a $2 million savings in fuel costs. Airlines measure their profits and costs against the number of available seat miles (ASMs) flown, and these flight cancellations led to a reduction of 95 million ASMs for the first quarter. All else being equal, this will drop Alaska’s first quarter revenue per ASM growth by .2% and increase its first quarter cost per ASM growth by .5%. The announcement also explains that Alaska’s revenue per available seat mile (RASM) was more heavily affected by the airlines reliance on regional flights:
“Canceled flights were disproportionately higher-RASM regional flights and the direct revenue impact will provide a modest headwind to our RASM for the quarter.”
Alaska’s stock, which is up slightly on the year, was relatively unaffected by the storms themselves, but it dropped 2.65% to $64.56 a share when this investor update was made public. Alaska is still forecasting first quarter revenue per available seat mile growth of 2.5%-4.5% relative to one year ago, though the impact of the storms and rising fuel costs are going to hurt the carrier’s bottom line.
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