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Flying High: Analyzing Alaska Air Group's Key Operating Metrics

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Part 2
Flying High: Analyzing Alaska Air Group's Key Operating Metrics PART 2 OF 6

Alaska Air: Is the Demand for Air Travel Increasing?

Alaska Air Group’s traffic growth

For November 2016, Alaska Air Group’s (ALK) traffic grew 7% YoY (year-over-year). In a welcome change, it’s significantly higher than capacity growth of 2.8% YoY in November. Alaska’s traffic grew 11% for both 1Q16 and 2Q16. For both of these quarters, traffic growth lagged capacity growth.

Alaska Air: Is the Demand for Air Travel Increasing?

Alaska Air: Is the Demand for Air Travel Increasing?

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YTD (year-to-date) in November 2016, Alaska Air Group’s traffic grew 9.4% YoY. It’s slightly higher than 9.2% YoY capacity growth.

Regional traffic grew 14.2% YoY in November 2016. YTD in November 2016, regional traffic grew 15.5% YoY. Alaska Air Group’s mainline traffic grew 6.3% YoY in November 2016. YTD in November 2016, mainline traffic grew 8.7%.

Passenger travel demand

Passenger travel demand had a great start in 2016. It grew ~7% YoY—the highest since 2012. However, the International Air Transport Association suspects that the industry might be at the end of the traffic boost phase provided by low oil prices. It suggests that travel demand might slow down. It will have a negative impact on airlines.

Outlook

Alaska’s traffic growth outpaced legacy peers in the past. For 3Q16, Delta Air Lines’ (DAL) traffic fell 0.2%, American Airlines (AAL) traffic fell 1.6%, and United Continental’s (UAL) traffic fell 1.8%. Alaska Air Group’s traffic rose 8.1% during the same period.

Its low-cost strategy compared to legacy players will help it see higher traffic growth than its peers. However, increasing competition from ultra-low cost carriers Spirit Airlines (SAVE) and Allegiant Travel (ALGT), especially in its main hubs, will be detrimental to demand.

Alaska Air Group accounts for 2.2% of the Industrials/Producer Durables AlphaDEX ETF’s (FXR) holdings.

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