Alaska Air Group ALK upped their fuel cost projection for the first quarter of 2022 due to fluctuating fuel costs caused by the European crisis and the Russia-Ukraine war. Because of higher fuel prices, the firm has decreased its capacity forecast for the year.
According to an investor report dated March 8, Alaska Air anticipates first-quarter economic fuel costs of $2.60-$2.65 a gallon, up from the previous estimate of $2.45-$2.50. As a result, capacity is likely to fall 3-5 percent from its current level in the first half of 2022.
“Alaska is protected from possibly higher gasoline costs since it has hedged about half of its estimated fuel usage this year”, according to CFO Shane Tackett at the Raymond James Institutional Investors Conference on Tuesday.
According to the US Energy Information Center, the average price of jet fuel in the United States was $2.86 a gallon at the end of last week, up from $2.16 at the end of 2021, as the war in Ukraine continues to drive up crude oil costs.
Coronavirus fears had hampered Alaska Air’s operations in 2020, owing to a sharp decline in air-travel demand. In response to the lackluster demand conditions, the carrier considerably cut its capacity. The airline began to recover in 2021 and it increased its capacity as activities ramped up. It anticipated returning to pre-pandemic capacity levels by the summer of 2022. However, the earlier calculations may have taken a hit due to the current war and the resulting volatile fuel price situation.