Alaska sees $1 billion jump in profit after merger with Hawaiian Airlines

By Rajesh Kumar Singh and Shivansh Tiwary

(Reuters) -Alaska Air on Tuesday unveiled a plan to generate $1 billion in additional profits by 2027 by leveraging its acquisition of Hawaiian Airlines and booming demand for premium travel, sparking a rally in its shares.

Ahead of its 2024 investor day on Tuesday, the Seattle, Washington-based carrier also raised its fourth-quarter and full-year profit forecasts, citing stronger holiday travel bookings and lower interest costs.

Its shares were up about 13% at $61.1 at midday.

Alaska, which completed the $1.9 billion acquisition of Hawaiian Airlines in September, said the deal is not expected to dilute its profit margin and is estimated to unlock at least $500 million in savings.

To expand its global presence, the company announced new non-stop flights to Tokyo and Seoul from Seattle next year using Hawaiian’s widebody aircraft. It plans to serve 12 international destinations from Seattle by 2030, which is estimated to contribute $1.5 billion in revenue.

“The combination with Hawaiian gives us the scale to be stronger than either of us could have been on our own – giving guests what they want, where and when they want it,” Alaska’s Chief Financial Officer Shane Tackett said.

The airline is also capitalizing on booming demand for high-end travel by ramping up the share of premium seats on its flights by 3 percentage points to 29% by 2027. Alaska expects the investments in premium seats would produce $100 million in additional profit.

It will also launch a premium credit card as it revamps its loyalty program. The measures are estimated to increase frequent flyer members by 50% and generate $150 million in incremental pretax profit by 2027.

Loyalty programs have become a cash-generator for U.S. carriers through sale of miles to third-party partners, mostly credit card-issuing banks that award the miles to their own customers. The more customers spend, the more miles they earn and the more partners pay airlines.

The programs of Delta, United and American were each valued more than $20 billion last year, according to consulting firm On Point Loyalty.

Alaska expects to earn at least $10 per share in 2027, more than double the $4.25 to $4.50 estimated for 2024. It forecast a pretax margin of between 11% and 13%.

In 2025, it expects a profit of at least $5.75 per share, compared with analysts’ average expectation of $5.50, according to data compiled by LSEG.

Its fourth-quarter profit is now estimated at 40 cents to 50 cents a share, compared with the previous forecast of 20 cents to 40 cents.

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