Written by Rajesh Kumar Singh and Shivansh Tiwary
(Reuters) – Alaska Airlines on Tuesday announced plans to generate $1 billion in additional profits by 2027 by leveraging its acquisition of Hawaiian Airlines and surging demand for premium travel, sparking a rise in stock prices.
Ahead of Tuesday’s 2024 Investor Day, the Seattle, Washington-based airline also raised its fourth-quarter and full-year profit forecasts, citing strong holiday travel bookings and lower interest costs. .
The company’s stock was up about 13% to $61.1 as of midday.
Alaska Airlines, which completed its $1.9 billion acquisition of Hawaiian Airlines in September, said the deal is not expected to dilute profit margins and is expected to save at least $500 million.
To expand its global presence, the airline announced new nonstop flights from Seattle to Tokyo and Seoul next year using Hawaiian widebody aircraft. It plans to serve 12 international destinations from Seattle by 2030, which is estimated to generate $1.5 billion in revenue.
“Partnering with Hawaiian gives us greater scale than either of us could have achieved alone,” said Shane Tackett, Alaska’s chief financial officer. We can provide it.”
The airline is also capitalizing on strong demand for luxury travel by increasing its share of premium seats on its flights by three percentage points to 29% by 2027. Alaska Airlines expects to generate $100 million in additional profits from its premium seat investment.
Along with the renewal of the loyalty program, the company also plans to launch a premium credit card. This action is estimated to increase frequent flyer membership by 50% and increase pre-tax profits by $150 million by 2027.
Loyalty programs have become cash generators for U.S. airlines through the sale of miles to third-party partners, primarily credit card-issuing banks, which award miles to their own customers. The more customers spend, the more miles they earn and the more their partners pay the airline.
Delta Air Lines, United Airlines and American Airlines’ programs were each valued at more than $20 billion last year, according to consulting firm On Points Loyalty.
Alaska expects to earn at least $10 per share in 2027, more than double the expected 2024 earnings of $4.25 to $4.50. The company expects pre-tax margins to be 11% to 13%.
The company expects earnings per share to be at least $5.75 in 2025, compared with the average analyst estimate of $5.50, according to data compiled by LSEG.
Fourth-quarter earnings are expected to be 40 cents to 50 cents a share, compared with previous expectations of 20 cents to 40 cents.
The company also announced a $1 billion share buyback.
