Alaska Air Group(NYSE: ALK) is a US-based low-cost airline group. It’s flagship airline, Alaska Airlines, is the fifth largest airline in the US with a 6.4% domestic market share. The group has been an investor favorite after growing nearly seven times over the past decade riding the explosive growth of the low-cost consumer aviation segment.
The group has a 233 jetliner fleet under the Alaska Air banner and 65 turboprop aircraft under the smaller Horizon Air banner (AlaskaAir). The company was poised for a stellar year in 2020 as investors expected growth in the segment and the group’s low-cost model to thrive. However, the spread of the coronavirus pushed the entire aviation sector into an unprecedented crisis.
The group’s stock is trading 62% down YTD as demand is 90% down YoY and the outlook of sector looking bleak. The surprise exit of Warren Buffett’s Berkshire Hathaway from the aviation at a substantial loss gave investors another reason to panic.
As the aviation sector reached the edge of collapse, the government stepped in with a $25 billion stimulus package to cover salaries and prevent mass unemployment. Through the stimulus program, the group received $1 billion, most of which does not have to be paid back. Like all competitors, the group is currently just focused on liquidity and cost-saving (NYTimes).
Last week, the company declared it’s Q1 2020 results. The group beat earnings projections but underperformed revenue projections. The company reported a net loss of $232 million or $1.87 per share and revenues of $1.64 billion. The company announced job cuts of 3400 employees in administration and management, 30% of it’s non-ground workforce (MarketWatch).
The company ended the quarter with $2.9 billion in liquidity. They plan to reduce cash-burn to $200 million a month in Q2 and have applied for an additional $1.1 billion loan from the Treasury. (TheStreet)
On Monday, a number of firms downgraded the stock citing poor industry outlook despite early signs of demand recovery. The new projections at revenues of $4.4 billion and losses of $7.37 dollars per share compared to revenues of $5.5 billion and losses of $1.27 per share earlier (Yahoo Finance). The stock is closed 10% down for the week on Thursday.