For 3Q15, Alaska Air Group’s (ALK) revenue grew by 3% year-over-year to $1.52 billion. The quarter also saw a historical $442 million pretax profit equaling a pretax margin of 29.2% (740 basis points higher than last year). This is the best profit performance in the company’s history.
Southwest Airlines’ (LUV) revenue increased by 10.8%. By contrast, the other three major US legacy carriers reported a revenue decline. Delta Air Lines’ (DAL) revenue remained relatively flat at -0.6%, American Airlines’ (AAL) revenue declined by 4%, and United Continental’s (UAL) revenue declined by 2.4%. Investors can gain broad-based exposure to airlines through the SPDR S&P Transportation ETF (XTN).
Alaska Air Group (ALK) also reported a blockbuster net profit of $277 million (excluding adjustments), which was a 39% year-over-year increase from 3Q14. The airline also reported a strong 47% year-over-year increase in its earnings per share. The company’s EPS stood at $2.16 per diluted share compared to 3Q14’s $1.47 per share, with a net profit of $200 million and a 6% fall in outstanding shares.
Strong operational performance
For 3Q15, Alaska Air Group’s passenger revenues grew by $48 million, driven by a capacity growth of 8.2%. The demand during summers is seasonally high, which worked in the airline’s favor.
Despite growing capacity, ALK maintained strong load factors, also called capacity utilization, due to strong traffic flow at key airports. Its load factor declined slightly to 85.6% from 86% in 3Q14. The airline attained these operational efficiencies despite continued runway construction in Seattle and Los Angeles.
The airline attained an industry-leading on-time percentage of 99.6% for the first nine months of 2015 and 86.4% during 3Q15, made possible by the aggressive block times maintained by the airline.