Alaska Air's Q3 Guidance Improves Again

Back in July, Alaska Air (NYSE: ALK) reported stellar results for the second quarter. Adjusted earnings per share soared 31% to $2.17, thanks to a 5.2% increase in revenue per available seat mile (RASM) and solid cost control.

Investors didn't celebrate this strong earnings report, because at the same time, management provided guidance implying that earnings growth would slow dramatically in the third quarter. Fortunately, Alaska Airlines has raised its forecast twice since then. This has put it on track to report another excellent quarter later this month.

Alaska's initial forecast for the third quarter called for a solid 2% to 5% increase in RASM. However, the airline also projected that nonfuel unit costs would rise by about 5%. Management did expect fuel costs to fall to $2.21 per gallon from $2.33 per gallon in the prior-year period, but that benefit was to be partially offset by a decrease in fuel efficiency (related to the growth of Alaska Air's regional jet operations). As a result, this initial outlook implied only modest margin expansion.

Source Fool.com