Andrew R. Harrison
Chief Revenue Officer, Chief Commercial Officer & Executive Vice President at Alaska Air Group
Thanks, Ben, and good morning, everyone.
Today, my comments will focus on third quarter results, recent trends and our outlook for the rest of the year. Third quarter revenues reached $2.8 billion, up four-tenths of a percent year-over-year on 13.7% more capacity, which was approximately one point below our revenue guidance midpoint. Unit revenues were down 11.7% versus 2022, and up 12.2% versus 2019.
We had three sources of headwinds impacting third quarter revenue performance. First, the strong close-in revenue performance we saw from April through most of August moderated as we moved into September. Close-in demand for leisure looks to have normalized and without further return of business demand shoulder periods are more challenged than they have been in the past couple of years. Second, we planned our network for relatively strong demand from summer into September as we had experienced last year. However, that did not fully materialize. This led to modest load factor weaknesses in areas of our network where we deployed more capacity than we normally would during the shoulder.
Third, the devastating Maui wildfires impacted third quarter revenue and therefore profit by approximately $20 million. For reference, Hawaii represents nearly 12% of our capacity with one-third of that deployed to Maui. Following the wildfires in early August, bookings turned negative with high rates of cancellation. This reversed at the end of August as bookings to Maui began recovering. However, September bookings were still down 45% versus last year. As we move into the fourth quarter, we are seeing continuing recovery in Maui. However, we expect revenues to be negatively impacted by approximately $18 million and anticipate it will be several quarters before demand returns to normalized levels. Having cut a full frequency from Seattle and trimmed capacity from other hubs, we will continue capacity adjustments to match supply with demand, while serving the people of Maui during the recovery process.
Lastly, although not a part of our baseline, we saw no upside benefit from corporate travel, as revenue continues to hold at about 85% of 2019 levels. Having covered our headwinds though, there were several positive results in the quarter as well. With respect to product, our premium cabins continue to materially outperform the main cabin with first and premium class revenues up 10% and 6% year-over-year, respectively. Alaska is the only primarily domestic carrier to have both first-class and premium economy across 100% of our mainline and regional fleets. These premium seats represent 25% of our total seats and continue to be an area of opportunity for us in sustaining higher yields in other domestic-focused competitors, especially as travel preferences continue to move in a more premium direction.
Total premium paid load factor was up three points year-over-year but has increased over 10 points on 12% more seats versus 2019. Today, premium revenue represents 31% of our total revenue contributing to the 45% of total revenue we generate outside main cabin. Putting aside premium for a moment, we have also seen success with more guests buying out from saver into our main cabin product. This buyout has occurred at 22% higher fares versus last year. Loyalty remains a strong driver of revenue performance as well. Bank cash remuneration was up 11% versus the third quarter of 2022 outpacing system revenue that was only up four-tenths of a point.
We continue to make solid progress on our strategy of being able to directly sell our oneworld and other partners on alaskaair.com. We launched 13 partners this year, bringing our total to 18 partners with over 500 destinations worldwide now being sold direct on our website. These efforts will continue as we enable selling all cabins on our partners and continue to upgrade the digital guest experience on our website and within our native app. This is another area where we are clearly differentiated from other domestic focus carriers. We are the only primarily domestic carrier that offers access to a portfolio of global partners where we offer elite status recognition, accrual and redemption and airport lounge access.
This capability along with our premium cabin offerings gives me confidence that we will have built the right commercial offerings to meet our guests preferences and drive long-term value to Air Group. As we shared on our last call, we have continued to see our guests take advantage of our global partner network, with total accrual and redemptions on our long-haul partners up 26% for the third-quarter versus last year.
Taking a step back, as illustrated in the supporting slides we published today, when comparing our unit revenue performance versus a 2019 baseline, it's clear that the differentiation of our products including our premium offering and international connectivity is a very positive story, which has resulted in unit revenues up 12% on capacity growth of 6%. This is a testament to the soundness of our business model and the success of changes we've made since 2019.
Now turning to fourth quarter guidance, we expect revenue to be up 1% to 4% on capacity that is up 11% to 14% year-over-year. In terms of bookings, holidays are in line with our expectations with load factors up a couple of points and yield up double-digits versus 2019. As I mentioned, non-peak shoulders a weaker than 2022 historic demand levels, in part driven by a return to more normal seasonality and a continued but we believe temporary demand shift towards international travel. Today, we have approximately 58% of November and 35% of December revenue booked.
Given our fourth quarter outlook and current demand backdrop, we are narrowing our full-year revenue guide up 7% to 8%. Our guide implies that our unit revenue trajectory is improving sequentially in the fourth quarter versus 2022, up three points. And we believe the gap to legacy unit revenue performance is also closing sequentially. Our most significant step-up in capacity occurred during the third quarter as we work to restore our pre-pandemic network. However, in the fourth quarter and into the first quarter of 2024, our growth follows more in line with normal seasonal patterns. After growing 6% above 2019 levels in Q3, our growth moderates to less than 3% above 2019 levels from the fourth quarter through February of 2024, which we believe should better support supply and demand dynamics in our market versus the industry.
Looking ahead, we remain confident in our commercial plan and cognizant of our environment. Our team has taken a hard look at our first quarter network amidst high fuel prices as part of our commitment to improving Q1 profitability. We are focused on managing capacity prudently including capitalizing on leisure destinations, including 15 new routes such as Seattle and Los Angeles to Nassau, which will bring in new revenue while also constraining our total capacity growth to low levels and reducing business heavy routes and frequencies, for example, we've trimmed our higher frequency Pacific Northwest and California business seats 22% versus January and February of last year.
To wrap up, we have a solid commercial plan that is producing results. Our combination of premium products, valuable loyalty program and global offerings through our partnerships in oneworld allows us to provide guests with what they want while producing strong financial results. And we're looking forward to building on that moving forward. And with that, I'll pass it over to Shane.
