Alaska Airlines Eyes US$1 Billion Profit Boost by 2027 After Hawaiian Deal

On Tuesday, Alaska Airlines announced plans to generate an additional US$1 billion in profits by 2027, thanks to its acquisition of Hawaiian Airlines. The airline also benefits from the growing demand for premium travel, which has driven a rise in its share price. Alaska's shares surged by around 12%, reaching US$60.81 in afternoon trading.

The Seattle-based airline completed its US$1.9 billion acquisition of Hawaiian Airlines in September. Alaska noted that the deal would not reduce its profit margin and is expected to deliver at least US$500 million in savings. To further boost its global presence, Alaska plans to launch non-stop flights to Tokyo and Seoul from Seattle next year using Hawaiian's widebody aircraft. The airline aims to serve 12 international destinations from Seattle by 2030, generating an estimated US$1.5 billion in revenue.

The Hawaiian acquisition has also given Alaska access to 1,200 destinations worldwide, enabling it to fly nearly 6 million passengers annually without adding new capacity. "What could have taken us decades to build is at our fingertips today," said CEO Ben Minicucci. "The Hawaiian acquisition has allowed us to accelerate our future."

Domestically, Alaska plans to expand its operations by adding seats in Seattle, Portland, and San Diego, three of the fastest-growing markets on the US West Coast. In response to the booming demand for premium travel, Alaska intends to increase the proportion of premium flight seats from 26% to 29% by 2027. This move is expected to contribute an additional US$100 million in profit.

Alaska's investments in premium seating come as passengers are increasingly willing to pay for larger, more comfortable seats on long-haul flights. "Premium is the profit differentiator," explained the airline's chief commercial officer, Andrew Harrison.

Alaska will introduce a new premium credit card and revamp its loyalty program as part of its strategy. These changes are expected to increase its frequent flyer membership by 50% and generate US$150 million in additional pretax profit by 2027. Loyalty programs have become a significant revenue stream for US airlines, with the sale of miles to third-party partners like credit card companies.

Looking ahead, Alaska projects that it will earn at least US$10 per share by 2027, more than double the estimated US$4.25 to US$4.50 per share for 2024. It forecasts a pretax margin of 11% to 13%. In 2025, the airline expects a profit of at least US$5.75 per share, surpassing the analysts' average estimate of US$5.50.

For the fourth quarter, Alaska now expects a profit of 40 to 50 cents per share, up from its previous forecast of 20 to 40 cents. The airline also announced a US$1 billion share buyback.

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