VA Virgin America Inc.

Alaska Air Group Inc., in the middle of its tie-up with Virgin America Inc., said its profit rose 11% in its latest period, helped by lower fuel costs and solid passenger traffic.

The earnings topped Wall Street estimates.

The Justice Department has asked Alaska and Virgin America for more information on the proposed transaction, which if blessed by regulators would make the combined company the fifth-largest airline in the U.S. by traffic. Alaska Air announced the plans to acquire Virgin America in April. The airline said it expects the transaction to close in the fourth quarter this year.

The results Thursday extend the trend for U.S. airliners of strong financial performance amid cheaper fuel costs. Seattle-based Alaska Air reported its aircraft fuel expenses, including hedging gains and losses, had declined 23% to $201 million.

In the quarter ended in June, Alaska's unit revenue—the amount it takes in per seat flown a mile—fell 7.7% compared with the year-earlier quarter. The metric is a closely watched sign of demand and how well an airline is generating sales. Unit revenues have been declining across the industry because of relatively rapid expansions.

Overall, Alaska Air earned $260 million, or $2.10 a share, compared with $234 million, or $1.79, in the year-ago quarter. Per-share earnings were helped in part by a lower share count compared with the prior quarter. Excluding special items, such as $14 million for merger-related costs, earnings were $2.12 a share. Analysts surveyed by Thomson Reuters projected $2.09 in per-share earnings.

Revenue rose 4% to $1.5 billion, meeting analysts expectations.

The airline said it increased capacity by 11.2%, and traffic also rose 11.2%. Meanwhile, load factor—or the percentage of seats filled—remained flat at 84.9%.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

July 21, 2016 07:35 ET (11:35 GMT)

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