Alaska Air Group reports third quarter 2026 results

Summary

At Investor Day, we laid out a clear strategy for building a stronger, more diversified business, and we're executing it: growing premium, international, cargo and Atmos Rewards, and investing in the guest experience. Those are the things that earn guest loyalty, diversify our revenue and ultimately drive stronger earnings. While we're not satisfied with this quarter's result or the $1.8 billion fuel headwind this year, we are confident in our ability to execute on the things we can control, including increasing the spread between unit revenue and unit costs excluding fuel."

Third quarter results were driven by strong underlying commercial momentum despite a significant fuel headwind. Revenue increased 14% year-over-year to $4.3 billion on 2.4% capacity growth, resulting in unit revenue growth of nearly 12%, despite Hawaiʻi headwinds, pressure from strategic growth markets investments, and rapid international expansion. Yield improved through the quarter, with September yield increasing approximately 17% year-over-year.

Air Group's diversified revenue, which represents operating revenue outside the main cabin, has grown to 54% of total revenue, reflecting progress against our strategic initiatives as we shift towards a more structurally resilient business. Premium revenue grew approximately 25% and represented more than 36% of total revenue, loyalty program cash remuneration grew 21% to $721 million, and managed corporate revenue increased 30%. Air Group continued to expand its international network, with the additions of Paris, Athens, Osaka, and Papeete, bringing our Seattle international network to nine routes.

During the third quarter, the Company reduced its estimated annual effective tax rate (AETR) following a change in its full-year outlook from pretax income to a pretax loss, driven primarily by elevated fuel prices. As a result, the Company recorded a cumulative catch-up adjustment related to tax benefits recognized on first-half losses, which reduced third quarter adjusted earnings per share by ($0.67). Excluding this adjustment, third quarter adjusted earnings per share were $0.36.

Fourth quarter forecast information

Looking ahead, demand remains healthy, with commercial momentum continuing into the fourth quarter. Air Group expects capacity to grow approximately 1% to 1.5% year-over-year, with the increase concentrated in international flying. Unit revenue is expected to increase in the low double digits year-over-year and improve sequentially on a gross basis, supported by continued yield strength. Non-fuel unit costs are expected to increase in the mid-single digits, reflecting lower capacity growth.

Elevated fuel costs are expected to remain a significant headwind to near-term profitability, with our guidance assuming a fourth quarter economic fuel cost of $4.65 to $4.85 per gallon, or $650 million higher than our initial plan. For the full year, we now expect an adjusted loss per share between ($5.50) and ($5.00), inclusive of $1.8 billion in fuel expense above our plan.

(a) Q4 loss per share guidance assumes non-operating expense of approximately $70 million, a tax rate of approximately 20%, and shares outstanding of approximately 112.5 million.

Commercial updates

• Announced intent to join the Atlantic and Pacific Joint International Businesses with oneworld and global partners, broadening international connectivity for guests and increasing access to premium worldwide travel opportunities.

• Unveiled Aurora and Leihōkū by Alaska and Hawaiian, new premium guest experiences designed to elevate travel, featuring spacious lie flat suites, access to exclusive check-in and concierge services, and elevated dining options. Aurora will be featured on Alaska's Boeing 787 fleet and select transcontinental routes operated by new 737-10 MAX aircraft, while Leihōkū will be featured on Hawaiian's A330 fleet.

• Introduced Premium Reserve, a new premium economy product set to debut in 2028 on Alaska's 787-9, 787-10 and select 737-10 MAX aircraft and on Hawaiian's A330 fleet, offering guests enhanced comfort, space, and choice on longer flights.

Loyalty updates

• Loyalty program cash remuneration grew 21% to $721 million in the third quarter.

• Beginning in October, Atmos Rewards members can choose how they earn points and status points - by distance traveled, price paid, or segments flown - on flights departing on or after January 1, 2027.

• Announced enhancements to Atmos Rewards, including expanded card offerings with the launch of an Atmos debit card in early 2027, four new Atmos communities, and additional program partnerships.

• Launched new and improved benefits for Huakaʻi by Hawaiian members, including two free checked bags for Neighbor Island travel and additional ways to earn Atmos Rewards points.

Network updates

• Announced new nonstop service from Seattle to Athens, Paris, Osaka, and Papeete beginning in spring 2027, further strengthening our position as Seattle's largest international carrier.

• Announced domestic route expansions, including new routes from Portland to Steamboat Springs, San Diego to Loreto, Mexico and Paine Field to San Jose, alongside increased service from Paine Field to Portland, San Diego and Los Angeles.

Liquidity updates

• Generated $755 million of operating cash flow during the first nine months of 2026.

• Held $3.3 billion in available liquidity, including unrestricted cash, marketable securities, and undrawn credit facilities.

• Had approximately $20 billion of unencumbered assets at September 30, 2026, including 134 aircraft and the unencumbered portion of our loyalty program assets.

Other highlights

• Amaresh Siva named Alaska's Chief Information Technology Officer, joining the company from CVS Health. Siva will serve on the company's Executive Committee.

• Alaska Airlines and Hawaiian Airlines were recognized with the 2026 APEX Five Star Major Airline Award.

• Alaska Airlines recognized by the Skytrax World Airline Awards as the #1 Cleanest Airline in North America and the #2 Best Regional Airline in North America.

• SVP of Merchandising and Innovation Charu Jain was recognized as one of Time's 2026 Tech and Data Executives of the Year.