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Alaska Air Group faces tough pricing and rising costs in the home stretch of merger integration

Most US airlines have cited some pricing pressure in domestic markets, and Alaska Air Group is no different. The company has endured significant pressure on close-in pricing on its US transcontinental routes and intra-California network in recent months – two strategically important regions for the company as its merger integration with Virgin America continues.  

The pricing pressure, continuing merger integration and cost pressure are coalescing to create angst among analysts and investors about when Alaska’s performance in certain financial metrics will return to more normal levels.

Alaska appears to be asking for some patience as the company works through the heavy lifting of its merger integration, which will be completed by mid-2018. However, the company’s cost pressure is lingering into 2018, which has the potential to create knock-on effects on Alaska’s valuation over the next year.

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