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Will Alaska Air Group’s Capacity Expand More in 2016?

Ally Schmidt - Author

Sep. 8 2016, Updated 8:05 a.m. ET

Alaska Air Group’s capacity growth

For August 2016, Alaska Air Group’s (ALK) capacity increased by 10.3% YoY (year-over-year). After average growth of 13% in 1Q16, its growth slowed down to 11% in 2Q16. It’s slowing down more in the third quarter.  YTD (year-to-date) in August 2016, Alaska Air Group’s average capacity growth was 11.5% YoY.

Alaska’s mainline capacity has tracked the group’s performance. For August 2016, Alaska Air Group’s mainline capacity grew by 9.9% YoY. For 2Q16, the mainline capacity growth averaged 12%, while capacity growth averaged 10% for 1Q16. YTD in August 2016, Alaska Air Group’s mainline capacity grew by 10.6% YoY—slightly slower than its capacity growth.

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Alaska Air Group’s regional capacity, mainly operated by subsidiary Horizon Air, has grown at a much higher rate in 2016. The pace has slowed down since July. For July and August, the regional capacity grew by 11.3% YoY and 13.1% YoY, respectively. YTD in August 2016, the regional capacity has grown by 19.2% YoY.

What to expect

Alaska Air Group expects its capacity growth to slow down for the rest of 2016. This would take its fiscal growth to ~8% YoY.

Although this growth is slower than Alaska Air Group’s 2015 growth, it’s still higher than the capacity growth guidance for its legacy peers American Airlines (AAL), Delta Air Lines (DAL), and United Continental Holdings (UAL). These three carriers are expected to grow their 2016 capacity by ~2%.

Alaska Air Group forms 1.4% of the iShares S&P Mid-Cap 400 Growth ETF’s (IJK) holdings.


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