Alaska Air Group reports first quarter 2026 results

Summary

Even in a volatile quarter, we're seeing clear evidence that our long-term Alaska Accelerate plan is working. We're leading the industry in on-time performance, achieving a significant integration milestone with a single reservation system, generating incredible loyalty growth with Atmos Rewards and driving strong international demand as we launch service to Europe. I'm confident in our people, our plan, and our future."

Air Group began the year with solid operating momentum, though first quarter 2026 results were impacted by sharply higher fuel prices and localized demand disruptions as a result of historic rainstorms in Hawaiʻi and civil unrest in Puerto Vallarta ahead of the peak spring break travel season. These markets represent approximately 30% of Air Group capacity. Despite these headwinds, demand remained resilient and the company continued to execute against integration priorities and Alaska Accelerate initiatives.

First quarter revenue totaled approximately $3.3 billion, with unit revenue up 3.5% year-over-year despite a nearly 1 point headwind from Hawaiʻi and Puerto Vallarta. Premium demand continued to outperform as fleet retrofits and Starlink installations progressed. Managed corporate travel increased 19% year-over-year, supported by an expanding global network. Our international long-haul expansion continues to perform strongly with Seattle-Tokyo reaching profitability less than one year after launch and load factors exceeding 90% on both Seattle-Tokyo and Seattle-Seoul routes.

Atmos Rewards membership and co-brand credit card remuneration both grew double digits year-over-year, with particularly strong momentum in Hawaiʻi. Further, our new long-term extension and expansion of our co-brand partnership with Bank of America improves economics and will drive incremental growth in cash remuneration for Air Group in 2026 and beyond.

Unit costs increased 6.3% year-over-year, in-line with expectations, reflecting the final quarter of normalization for Alaska's 2025 flight attendant contract, as well as temporary impacts from weather-related disruptions. The quarter also delivered progress in core cost performance, including improvements in aircraft utilization, productivity, and maintenance execution, while returning to industry-leading operational reliability.

First quarter fuel costs increased materially due to elevated crude and refining prices, averaging $2.98 for the period. Excluding higher fuel costs and the one-time disruptions in Hawaiʻi and Puerto Vallarta, results would have exceeded the midpoint of original first quarter expectations.

Second quarter forecast information

For full year 2026, our visibility to earnings is limited due primarily to ongoing fuel price volatility. Until conditions stabilize and we have better sight to earnings beyond the current quarter, we have suspended full-year guidance. Similarly, for the second quarter, the range of potential financial outcomes remains wide and difficult to predict, as recent geopolitical factors have resulted in sharp and unpredictable changes in fuel prices. As a result, we're providing detailed assumptions on unit revenue and unit costs, in lieu of our traditional EPS guidance range.

Second quarter capacity is expected to be up approximately 1% year-over-year, down nearly a point from original expectations, reflecting proactive trimming of capacity in May and June. Second quarter unit revenues are trending to be up high single digits year-over-year, with a path to increasing 10% year-over-year, assuming demand strength and yield trends sustain the rest of the period. This expectation is despite a 2-point headwind from storms in Hawai'i that have impacted near term demand.

Second quarter year-over-year unit cost performance is expected to be approximately 1.5 points higher than the first quarter, driven by close-in capacity reductions and several transitory factors. These include crew training costs associated with the ramp-up of international widebody flying, a year-over-year headwind from prior aircraft sale gains, and a planned employee recognition expense tied to achieving a single passenger service system - an important integration milestone. Unit costs are expected to inflect downward in the second half of the year to low single-digit growth.

Fuel remains the largest source of near-term uncertainty. April fuel is expected to be approximately $4.75 per gallon, and we expect the quarter to average approximately $4.50 based on the forward curve today. This assumption adds approximately $600 million of expense to the second quarter, equivalent to an earnings per share headwind of $3.60. We expect to consume approximately 297 million gallons of fuel in the quarter based on our current capacity plan.

Our assumed tax rate is 32%, though this could change dependent on the full year outlook as we exit the quarter. Any tax accrual changes are not expected to have cash flow impacts, as we do not expect to incur cash taxes in the near term. Taken together, the revenue, cost, and fuel assumptions result in an adjusted loss per share estimate of approximately ($1.00). Absent the fuel price spike, we would have guided to a solidly profitable quarter.

Despite the challenging near-term backdrop, Air Group continues to operate from a position of strength, supported by a healthy balance sheet, strong liquidity, approximately $20 billion in unencumbered assets, and disciplined capital allocation. Our continued focus on Alaska Accelerate initiatives to build scale, relevance and loyalty position us well to build a higher-quality, more durable revenue mix, while maintaining focus on cost discipline and operational excellence.

Financial results

• Generated $421 million of operating cash flow in the first quarter.
• Repurchased 4.7 million shares of common stock for $203 million in the first quarter, with year-to-date repurchases totaling $250 million as of April 20, 2026.
• Had approximately $20 billion of unencumbered assets, including 124 aircraft and our loyalty program, at March 31, 2026.
• Made $340 million in total debt payments, including $113 million in prepayments in the first quarter
• Ended the quarter with a debt-to-capitalization ratio of 61%, and trailing twelve months adjusted net leverage of 3.3x.
• In April, the Company exercised the accordion feature of its revolving credit facility, increasing total available commitments under the agreement from $850 million to $1.1 billion and increasing total liquidity to $2.9 billion.

Operational updates

• Led the industry in on-time performance in the first quarter.
• First airline to install Starlink high-speed Wi-Fi on full Regional fleet, with the first equipped Mainline aircraft now in service and fleetwide completion expected by the end of 2027.
• Completed more than 90% of Boeing 737 cabin retrofits, with full completion expected by this summer.
• Alaska, Hawaiian, and Horizon maintenance teams earned the FAA's Diamond Award of Excellence, recognizing industry-leading teamwork and dedication to aviation safety, marking 25 years for Alaska and Horizon, and 5 years for Hawaiian.

Commercial updates

• Premium revenue increased 8% year-over-year.
• Loyalty program cash remuneration increased 12% year-over-year.
• Managed corporate revenue increased 19% year-over-year.
• Our Seattle-Tokyo route reached profitability in March with load factors exceeding 90%, less than one year after its launch.
• Launched Alaska's new International Business Class on 787-9 aircraft with enclosed suites, elevated dining, and upgraded amenities, alongside refreshed Premium and Main Cabin offerings and planned Starlink connectivity.
• Launched a single Alaska-Hawaiian mobile app, simplifying booking, check-in, and day-of-travel management as part of the transition to a single passenger service system.

Other highlights

• Announced the election of Lindsay-Rae McIntyre as Chief People Officer of Alaska Airlines, Inc. effective April 1, 2026.
• Supported the Hawaiʻi Community Foundation - Stronger Hawaiʻi Fund and the Hawaiian Council - Kāko'o O'ahu to aid with immediate and long-term relief efforts related to the historic floods in Hawaiʻi.
• Atmos™ Rewards received multiple industry accolades, including Best Innovation in Airline Loyalty and Best New Personal Credit Card from The Points Guy, Best Airline Rewards Program of 2026 from NerdWallet, and Best Frequent Flyer Program of 2026 from WalletHub.
• Named to Glassdoor's 2026 list of Best Places to Work, highlighting our people-first, inclusive culture, career-growth pathways, and benefits.
• Named to TIME Magazine's 2026 list of America's most iconic companies.