Alaska Air Group reports second quarter 2026 results

Summary

Our second quarter results were defined by a fuel spike outside our control - but underneath it, this company is executing better than ever. We led the industry in on-time performance for the first half of the year, completed the last major milestone of our Hawaiian integration, launched service to Europe, and returned to profitability in June. Absent the fuel headwind, we would have delivered a solidly profitable quarter. I have never been more confident in our people, our plan, and the long-term earnings power of Alaska Air Group."

Second quarter total revenue grew 10% year-over-year to $4.1 billion on capacity growth of 1%, with unit revenue up 8.6%. Yields strengthened through the quarter, with June producing double digit unit revenue growth and double digit pretax profit margins.

Our revenue performance was impacted by historic rainstorms in Hawai'i in March which had a meaningful impact on April spring break travel and reduced system unit revenue by approximately 3 points in the quarter, modestly above the 2 points originally expected. Outside of Hawai'i, demand remained resilient across the network and our diversified revenue streams continue to outpace system growth: premium revenue increased 15%, cargo revenue increased 21%, and managed corporate revenue accelerated 30% year-over-year respectively. Loyalty performance was also robust, with loyalty cash remuneration up 19%.

Non-fuel unit costs increased 6.5% year-over-year on 1% capacity growth, better than prior guidance. The year-over-year increase reflects 2.5 points of transitory factors, including a one-time employee recognition award tied to achieving a single passenger service system, a year-over-year headwind from prior-year aircraft sale gains, and crew training costs for our international widebody ramp. Outside of these transitory items, core cost management was strong, gaining momentum moving into the second half of the year.

Second quarter economic fuel cost was $4.43 per gallon, an increase of 85% year-over-year, resulting in $600 million of incremental fuel cost for the period. In response to the elevated and unpredictable fuel price environment, we proactively raised $1 billion in financing during the quarter, deliberately bolstering liquidity to the top end of our target range of 15% to 25% of trailing-12-month revenue. As the fuel environment stabilizes and our earnings profile improves, we expect to put excess liquidity towards paying down debt and bring liquidity back to the midpoint of our target range.

Third Quarter Forecast Information

With a strong demand backdrop and an improving unit cost trajectory, we expect a widening spread between unit revenue and unit costs in Q3. Coupled with continued execution on our strategic initiatives, we expect a meaningful inflection in financial performance beginning in Q3.

Third quarter capacity is expected to be up approximately 2% to 3% year-over-year, with nearly all growth coming from long-haul international flying out of Seattle, while capacity within North America will be essentially flat year-over-year.

Unit revenue is expected to improve sequentially from the second to third quarter to low double-digit growth year-over-year, supported by strong yields and demand. While Hawai'i remains a 2-3 point unit revenue headwind in the third quarter, loads are recovering and new bookings are coming in at system level yields, showing demand returning to historical levels in September.

Third quarter non-fuel unit costs are expected to increase in the low to mid single digits year-over-year, a meaningful step-down from the first half of the year, as transitory cost items are behind us and productivity improvements compound. While fuel prices remain volatile, economic fuel cost is expected to come down from second quarter levels as refining margins have recently moderated. Our guidance assumes a fuel price of $3.75 per gallon in the third quarter, reflecting July fuel costs of $3.60 per gallon, and average spot prices of $3.85 for August and September.

(a) Q3 earnings per share guidance assumes non-operating expense of approximately $60 million, a tax rate of approximately 35%, and shares outstanding of approximately 113.5 million.

Operational Updates

• Led the industry in year-to-date on-time performance.
• Transitioned to a single passenger service system (PSS), marking a key integration milestone that consolidates reservation and customer service platforms across Alaska and Hawaiian, and delivers a more streamlined guest experience.
• Launched new transatlantic service from Seattle with flights to Rome, London, and Reykjavik, further expanding our international network and reinforcing our position as the fourth-largest global airline in the U.S.
• Took delivery of six 737-8 aircraft, two E175 aircraft, and added one E175 under CPA with SkyWest.
• Announced agreement to add four 737-800 freighter aircraft to Alaska's cargo fleet, effectively doubling the cargo fleet's capacity. The aircraft are expected to enter service in the first half of 2027.
• Completed the 737 cabin retrofits, adding expanded first and premium class seating and refreshed cabin interiors.
• Announced expansions in our domestic route network, including the addition of new routes from Santa Rosa, the return of service between Seattle and Long Beach, new service from Honolulu to Burbank, Spokane, and Boise, and increased service between Honolulu and Las Vegas.

Commercial Updates

• Hawaiian Airlines joined the oneworld alliance, connecting Hawai'i to over 900 global destinations across more than 170 territories.
• Opened the newest Alaska Lounge at Portland International Airport, which is twice the size of the previous Portland lounge and underscores our continued investment in premium travel.
• Announced plans for a new world-class Alaska Lounge in Seattle. The new lounge is set to open in 2027 and will span across two floors, featuring showers, premium bars, à la carte dining, and chef-curated seasonal menus.

Liquidity Updates

• Generated $606 million of operating cash flow during the first six months of 2026.
• Held $3.8 billion in available liquidity, including unrestricted cash, marketable securities, and undrawn credit facilities. Total liquidity includes $1 billion in financing completed in the second quarter, comprising $500 million of 6.5% senior unsecured notes and $500 million in term loans secured by assets associated with the Atmos™ Rewards program.
• Had approximately $20 billion of unencumbered assets at June 30, 2026, including 131 aircraft and the unencumbered portion of our loyalty program assets.

Other Highlights

• Elected Shane Tackett as President and Chief Financial Officer of Alaska Airlines.
• Appointed Mike Sievert, Vice Chairman and former CEO of T-Mobile, to Air Group's board of directors.
• Celebrated our employees' efforts in achieving a single PSS and dedication throughout the Alaska-Hawaiian integration by awarding 75,000 Atmos Rewards points to all Alaska, Hawaiian, and Horizon employees.
• Opened new premium check-in experience in Seattle for business class Suites guests and Atmos Titanium members.
• CEO Ben Minicucci named Executive of the Year - North America at FlightGlobal's 2026 Airline Strategy Awards.
• Hawaiian Airlines named "Most Comfortable Airline" on WalletHub's 2026 Best Airlines list.
• Alaska Airlines and Hawaiian Airlines were recognized with APEX Best Awards for Best Cabin Service and Best Wi-Fi, respectively.
• Alaska Airlines recognized by the Port of Seattle's Sustainable Century Awards for Environmental Performance and Innovation and Greatest Use of Ground Power and Pre-Conditioned Air Systems.