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SummaryCompaniesJet fuel surge upends airline profit forecastsAmerican swings from potential raise to cutFare gains lag sudden fuel-cost shocksDifferent fuel dates blur forecast comparisonsCHICAGO, July 24 (Reuters) - A rapid rise in jet fuel prices is forcing U.S. airlines to rewrite earnings expectations, exposing how quickly higher fuel costs can outpace revenue gains from strong travel demand.

American Airlines (AAL.O), opens new tab was prepared to ​raise its 2026 earnings forecast earlier this month. Thirteen days later, after its projected fuel bill for the rest of the year had risen by ‌nearly $1.6 billion, it cut the outlook instead.

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The reversal reflects a fundamental mismatch in the airline business. Fuel markets can move sharply in days, but fare increases take weeks or months to feed through because they apply only to tickets yet to be sold.

Strong demand and restrained capacity have allowed carriers to raise fares without hurting bookings, but higher ticket prices have offset only part of the increase in fuel costs.

As the U.S.-Iran ceasefire ​began to fray, jet fuel spot prices surged nearly 30% between July 2 and July 22, clouding the industry's outlook.

"I think margins are going to be effectively down ​for the industry," American Chief Financial Officer Devon May told Reuters in an interview. "If we had guided on the same day as Delta (July ⁠10), we'd have been guiding up for the year."

In early July, he said, American had expected full-year pretax earnings approaching $1.5 billion, about four times its 2025 result. Instead, American lowered its ​full-year earnings forecast to a range stretching from a loss to a profit, with breakeven at the midpoint.

The stakes are higher at American. Its thinner margins and persistent profit gap with Delta Air ​Lines (DAL.N), opens new tab and United Airlines (UAL.O), opens new tab leave it with less room to absorb higher fuel costs, intensifying scrutiny of CEO Robert Isom's effort to rebuild corporate travel, add premium seats and generate more revenue from the loyalty program.

American cut its outlook despite reporting record quarterly revenue and forecasting strong unit revenue growth in the second half. If fuel remains elevated, weaker cash generation could slow debt reduction, constrain investment and increase pressure to trim less-profitable flying.

Airlines ​have responded differently to the fuel surge, partly reflecting when their forecasts were issued.

Delta, the first major U.S. carrier to report, maintained its annual earnings outlook, while United last week ​raised the lower end of its forecast.

But this week, Southwest Airlines (LUV.N), opens new tab lowered the floor of its outlook and Alaska Air (ALK.N), opens new tab declined to restore full-year guidance.

The forecasts were built on fuel assumptions from different dates, ranging from July ‌2 for ⁠Delta to July 21 for American. Over that period, jet fuel spot prices rose by 78 cents to $3.59 a gallon, making outlooks issued only days apart harder to compare and shortening their useful lives.

RAPIDLY CHANGING ASSUMPTIONSAmerican said higher fares offset nearly half of a $2.2 billion year-over-year increase in second-quarter fuel expense. Delta recovered about 60% of its fuel increase, while United recovered about 50%. Alaska said it recovered very little, and Southwest did not disclose a comparable percentage.

But the renewed surge in fuel prices is testing how quickly carriers can recover the additional costs. May ​said American's projected fuel bill for the rest ​of the year rose by about $550 million ⁠over the past week.

Every one-cent increase in American's average fuel price adds about $46 million to its annual expense and flows largely through to pretax earnings, May said. A 10-cent increase would therefore cost roughly $460 million.

United described a similar last-minute shift.

"At this time last week, I was planning ​to tell you that we had a good line of sight to growing earnings year-over-year," Chief Executive Scott Kirby said on the ​airline's July 16 earnings ⁠call. "But fuel has gone up a lot in the last week."

United said the rise in fuel prices since July 1 added $575 million to its expected third-quarter fuel bill and changed its guidance policy to use the latest available fuel prices.

At Alaska, bookings for September and October remained as strong as summer demand, but its earnings outlook remained highly sensitive to fuel prices.

"You've got to choose a fuel ⁠price," Ryan ​St. John, Alaska's vice president of finance, planning and investor relations, told Reuters. "You can guess at whatever you think ​fuel is, but the reality is none of us know."

A 25-cent change in Alaska's average fuel cost could shift quarterly earnings by about 50 cents per share, he said.

May said American aims to pass on as much of ​any fuel-cost increase as possible. But the share it can recover remains a moving target.

"It depends on the day for spot prices," he said.

Reporting by Rajesh Kumar Singh; Editing by Jamie Freed

Our Standards: The Thomson Reuters Trust Principles., opens new tab

Rajesh Kumar Singh is the U.S. Aviation Correspondent at Reuters, based in Chicago, where he reports on airlines, aircraft manufacturers, and regulatory developments that shape the global aviation industry. Prior to this role, he covered U.S. manufacturing and trade policy, including the U.S.–China trade wars, where his work delved into the disruption facing American businesses and the strategic responses of major corporations. He began his career with Reuters in India, where he reported on a wide range of issues covering the country's economic complexities—from its recovery after the global financial crisis to the challenges of inflation and governance.

Alaska Air Group (ALK - Free Report) reported $4.07 billion in revenue for the quarter ended June 2026, representing a year-over-year increase of 9.8%. EPS of -$0.92 for the same period compares to $1.78 a year ago.

The reported revenue represents a surprise of -0.73% over the Zacks Consensus Estimate of $4.09 billion. With the consensus EPS estimate being -$0.97, the EPS surprise was +5.16%.

While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance.

As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately.

Here is how Alaska Air performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts:

Passenger Load Factor: 82.3% versus 84.1% estimated by five analysts on average.Total revenue per ASM (RASM): 16.72 cents versus the four-analyst average estimate of 16.87 cents.Available seat miles (ASM): 24.31 billion compared to the 24.28 billion average estimate based on four analysts.Revenue passenger miles (RPM): 20.01 billion compared to the 20.45 billion average estimate based on four analysts.Fuel Expenses: $1.31 billion versus $1.32 billion estimated by four analysts on average.Economic fuel cost per gallon: $4.43 versus the four-analyst average estimate of $4.46.Passenger Yield: 18.21 cents compared to the 18.18 cents average estimate based on three analysts.Fuel gallons: 295.00 Mgal versus the three-analyst average estimate of 296.06 Mgal.Operating expenses per ASM, excluding fuel and special items: 11.4 cents versus 11.55 cents estimated by three analysts on average.Total Passenger Revenue: $3.64 billion compared to the $3.71 billion average estimate based on five analysts. The reported number represents a change of +8.6% year over year.Revenue- Loyalty program other revenue: $258 million versus the four-analyst average estimate of $224.08 million. The reported number represents a year-over-year change of +22.9%.Revenue- Cargo and other: $163 million compared to the $163.01 million average estimate based on four analysts. The reported number represents a change of +17.3% year over year.View all Key Company Metrics for Alaska Air here>>>

Shares of Alaska Air have returned -5.7% over the past month versus the Zacks S&P 500 composite's -0.6% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term.

1 in the industry in year-to-date on-time performance

Expanded international service to include transatlantic flights from Seattle to Rome, London, Reykjavík

Achieved single passenger service system for Alaska and Hawaiian and recognized employees with 75k Atmos Points for major integration milestone

Q3 RASM expected to have double digit growth year-over-year

, /PRNewswire/ -- Alaska Air Group (NYSE: ALK) today reported financial results for the second quarter ending June 30, 2026.

"Our second quarter results were defined by a fuel spike outside our control - but underneath it, this company is executing better than ever," said CEO Ben Minicucci. "We led the industry in on-time performance for the first half of the year, completed the last major technical 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."

Quarter in Review:

Air Group reported second quarter Generally Accepted Accounting Principles (GAAP) pretax margin of (5.3)% and GAAP net loss of $76 million, or $0.68 per share. Air Group's second quarter adjusted pretax margin was (4.3)% and adjusted net loss was $102 million, or $0.92 per share.

Q2 2026 Results

Prior Expectation

Actual Results

Capacity (ASMs) % change versus 2025

Up ~1%

Up 1.0%

RASM % change versus 2025

Up high single digits

Up 8.6%

CASMex % change versus 2025

Up high single digits

Up 6.5%

Economic fuel cost per gallon

$4.50

$4.43

Adjusted loss per share

~($1.00)

($0.92)

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.   

Q3 2026 Expectation

Capacity (ASMs) % change versus 2025

Up 2% to 3%

RASM % change versus 2025

Up low double digits

CASMex % change versus 2025

Up low to mid single digits

Economic fuel cost per gallon

$3.75

Adjusted earnings (loss) per share(a)

$0.00 to $1.00

(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. A conference call regarding the second quarter results will be streamed online at 11:30 a.m. EDT/ 8:30 a.m. PDT on July 22, 2026. It can be accessed at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.

References in this update to "Air Group," "Company," "we," "us," and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified.

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by our forward-looking statements, assumptions or beliefs. For a discussion of risks and uncertainties that may cause our forward-looking statements to differ materially, see Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Some of these risks include competition, labor costs, relations and availability, general economic conditions, increases in operating costs including fuel, uncertainties regarding the ability to successfully integrate operations following the acquisition of Hawaiian Holdings, Inc. and the ability to realize anticipated cost savings, synergies, or growth from the acquisition, inability to meet cost reduction and other strategic goals, seasonal fluctuations in demand and financial results, supply chain risks, events that negatively impact aviation safety and security, cybersecurity risks, and changes in laws and regulations that impact our business. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed in our most recent Form 10-K and in our subsequent SEC filings. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements made today to conform them to actual results. Over time, our actual results, performance or achievements may differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, assumptions or beliefs and such differences might be significant and materially adverse.

Alaska Airlines, Hawaiian Airlines and Horizon Air are subsidiaries of Alaska Air Group, and McGee Air Services is a subsidiary of Alaska Airlines. We are a global airline with hubs in Seattle, Honolulu, Portland, Anchorage, Los Angeles, San Diego and San Francisco. We deliver remarkable care as we fly our guests to more than 140 destinations throughout North America, Latin America, Asia, the Pacific and Europe. Guests can book travel at alaskaair.com and hawaiianairlines.com. Alaska and Hawaiian are members of the oneworld alliance. With oneworld and our additional global partners, guests can earn and redeem points for travel to over 1,000 worldwide destinations with Atmos Rewards. Learn more about what's happening at Alaska and Hawaiian at news.alaskaair.com. Alaska Air Group is traded on the New York Stock Exchange (NYSE) as "ALK."

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Alaska Air Group, Inc.

Three Months Ended June 30,

Six Months Ended June 30,

(in millions, except per share amounts)

2026

2025

Change

2026

2025

Change

Operating Revenue

Passenger revenue

$    3,644

$     3,355

9 %

$    6,564

$     6,163

7 %

Loyalty program other revenue

258

210

23 %

485

417

16 %

Cargo and other revenue

163

139

17 %

316

261

21 %

Total Operating Revenue

4,065

3,704

10 %

7,365

6,841

8 %

Operating Expenses

Wages and benefits

1,239

1,165

6 %

2,481

2,292

8 %

Variable incentive pay

65

61

7 %

95

123

(23) %

Aircraft fuel

1,305

700

86 %

2,101

1,381

52 %

Aircraft maintenance

256

240

7 %

472

460

3 %

Aircraft rent

64

64

— %

125

126

(1) %

Landing fees and other rentals

305

278

10 %

596

520

15 %

Contracted services

158

146

8 %

309

291

6 %

Selling expenses

115

105

10 %

214

205

4 %

Depreciation and amortization

207

199

4 %

411

393

5 %

Food and beverage service

107

97

10 %

202

182

11 %

Third-party regional carrier expense

68

69

(1) %

124

133

(7) %

Other

302

247

22 %

605

508

19 %

Special items - operating

42

56

(25) %

77

147

(48) %

Total Operating Expenses

4,233

3,427

24 %

7,812

6,761

16 %

Operating Income (Loss)

(168)

277

(161) %

(447)

80

NM

Non-operating Income (Expense)

Interest income

21

22

(5) %

40

48

(17) %

Interest expense

(86)

(66)

30 %

(162)

(132)

23 %

Interest capitalized

13

9

44 %

23

21

10 %

Other - net

6

(4)

NM

15

(12)

NM

Total Non-operating Expense

(46)

(39)

18 %

(84)

(75)

12 %

Income (Loss) Before Income Tax

(214)

238

(531)

5

Income tax expense (benefit)

(138)

66

(262)

(1)

Net Income (Loss)

$       (76)

$       172

$     (269)

$          6

Basic Earnings (Loss) Per Share

$     (0.68)

$      1.45

$     (2.39)

$      0.05

Diluted Earnings (Loss) Per Share

$     (0.68)

$      1.42

$     (2.39)

$      0.05

Weighted Average Shares Outstanding used for computation:

Basic

111.127

118.847

112.702

120.979

Diluted

111.127

120.930

112.702

123.183

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

Alaska Air Group, Inc.

(in millions, except share amounts)

June 30,
2026

December 31,
2025

ASSETS

Cash and cash equivalents

$     1,064

$       627

Restricted cash

33

28

Marketable securities

1,598

1,496

Receivables - net

681

565

Inventories and supplies - net

253

203

Prepaid expenses

261

278

Other current assets

46

69

Total Current Assets

3,936

3,266

Property and equipment - net of accumulated depreciation and amortization of $5,205 and $4,945

12,009

11,857

Operating lease assets

1,345

1,268

Goodwill

2,723

2,723

Intangible assets - net of accumulated amortization of $102 and $74

787

815

Other noncurrent assets

446

432

Total Noncurrent Assets

17,310

17,095

Total Assets

$    21,246

$    20,361

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable

$       403

$       324

Accrued wages, vacation and payroll taxes

727

881

Air traffic liability

2,398

1,689

Other accrued liabilities

1,217

1,055

Deferred revenue

1,778

1,722

Current portion of long-term debt and finance leases

452

721

Current portion of operating lease liabilities

217

197

Total Current Liabilities

7,192

6,589

Long-term debt and finance leases, net of current portion

5,783

4,834

Operating lease liabilities, net of current portion

1,164

1,141

Deferred income taxes

739

1,004

Deferred revenue

1,752

1,711

Obligation for pension and post-retirement medical benefits

349

369

Other liabilities

597

595

Total Noncurrent Liabilities

10,384

9,654

Shareholders' Equity

Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or outstanding

—

—

Common stock, $0.01 par value, Authorized: 400,000,000 shares, Issued: 2026 - 147,087,872 shares; 2025 - 145,115,659 shares, Outstanding: 2026 - 111,566,970 shares; 2025 - 115,530,889 shares

1

1

Capital in excess of par value

1,034

961

Treasury stock (common), at cost: 2026 - 35,520,902 shares; 2025 - 29,584,770 shares

(1,951)

(1,701)

Accumulated other comprehensive loss

(175)

(173)

Retained earnings

4,761

5,030

Total Shareholders' Equity

3,670

4,118

Total Liabilities and Shareholders' Equity

$    21,246

$    20,361

SUMMARY CASH FLOW (unaudited)

Alaska Air Group, Inc.

(in millions)

Six Months Ended
June 30, 2026

Three Months Ended
March 31, 2026(a)

Three Months Ended
June 30, 2026(b)

Cash Flows from Operating Activities:

Net Loss

$               (269)

$               (193)

$                (76)

Adjustments to reconcile net loss to net cash provided by operating activities

453

229

224

Changes in working capital

422

385

37

Net cash provided by operating activities

606

421

185

Cash Flows from Investing Activities:

Property and equipment additions

(523)

(338)

(185)

Other investing activities

(112)

169

(281)

Net cash used in investing activities

(635)

(169)

(466)

Cash Flows from Financing Activities:

472

(428)

900

Net increase (decrease) in cash and cash equivalents

443

(176)

619

Cash, cash equivalents, and restricted cash at beginning of period

684

684

508

Cash, cash equivalents, and restricted cash at end of the period

$              1,127

$                508

$              1,127

Reconciliation of cash, cash equivalents, and restricted cash:

Cash and cash equivalents

$              1,064

$                451

Restricted cash

33

27

Restricted cash included in Other noncurrent assets

30

30

Total cash, cash equivalents, and restricted cash at end of the period

$              1,127

$                508

(a) As reported in Form 10-Q for the first quarter of 2026.

(b) Cash flows for the three months ended June 30, 2026 can be calculated by subtracting cash flows from the three months ended March 31, 2026 from the six months ended June 30, 2026.

OPERATING STATISTICS (unaudited)

A manual recalculation of certain figures using rounded amounts may not agree directly to the actual figures presented in the table below.

Three Months Ended June 30,

Six Months Ended June 30,

2026

2025

Change

2026

2025

Change

Consolidated Operating Statistics:(a)

Revenue passengers (000)

15,056

15,234

(1.2) %

28,388

28,393

— %

RPMs (000,000) "traffic"

20,011

20,179

(0.8) %

37,311

37,436

(0.3) %

ASMs (000,000) "capacity"

24,306

24,058

1.0 %

45,876

45,277

1.3 %

Load factor

82.3 %

83.9 %

(1.6) pts

81.3 %

82.7 %

(1.4) pts

Yield

18.21¢

16.62¢

9.6 %

17.59¢

16.46¢

6.9 %

PRASM

14.99¢

13.94¢

7.5 %

14.31¢

13.61¢

5.1 %

RASM

16.72¢

15.39¢

8.6 %

16.06¢

15.11¢

6.3 %

CASMex(b)

11.40¢

10.70¢

6.5 %

11.85¢

11.14¢

6.4 %

Fuel cost per gallon(c)

$4.43

$2.39

85.4 %

$3.74

$2.49

50.2 %

Fuel gallons (000,000)(c)

295

293

0.7 %

562

556

1.1 %

ASMs per gallon

82.4

82.0

0.5 %

81.6

81.5

0.1 %

Departures (000)

139.0

139.6

(0.4) %

264.5

263.5

0.4 %

Average full-time equivalent employees (FTEs)

31,726

31,299

1.4 %

31,596

30,536

3.5 %

Operating fleet(d)

422

409

13 a/c

422

409

13 a/c

(a) 

Except for FTEs, data includes activity under a capacity purchase agreement with a third-party regional carrier.

(b) 

See a reconciliation of this non-GAAP measure and Note A for a discussion of the importance of this measure to investors in the accompanying pages.

(c) 

Excludes operations under the Air Transportation Services Agreement (ATSA) with Amazon.

(d) 

Includes owned and leased aircraft as well as aircraft operated under a capacity purchase agreement with a third-party regional carrier.

GAAP TO NON-GAAP RECONCILIATIONS (unaudited)
Alaska Air Group, Inc.

We are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. Amounts in the tables below are rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to the amounts presented. These reconciliations include adjustments intended to improve comparability and provide a clearer view of the Company's core operating performance.

Losses (gains) on foreign debt and other primarily reflect unrealized and realized gains or losses resulting from changes in foreign currency exchange rates on certain debt. In 2025, these expenses also included mark-to-market fuel hedge adjustments.

Special items - operating primarily relate to costs associated with the integration of Hawaiian Airlines, including employee-related costs, technology costs, and other merger-related expenses. In 2025, these expenses also included costs related to changes in Alaska flight attendants' sick leave benefits pursuant to a collective bargaining agreement ratified in the first quarter of 2025.

Pretax Income (Loss), Net Income (Loss), and Earnings (Loss) per Share, adjusted

Three Months Ended June 30,

2026

2025

(in millions, except per share amounts)

Loss
Before
Income
Tax

Income
Tax

Net
Loss

Per
Share

Income 
Before
Income
Tax

Income
Tax

Net
Income

Per
Share

GAAP

$         (214)

$  (138)

$    (76)

$  (0.68)

$ 238

$     66

$    172

$   1.42

Adjusted for:

Losses (gains) on foreign debt and other

(4)

1

Special items - operating

42

56

Total adjustments

$   38

$     64

$    (26)

$  (0.24)

$   57

$     14

$     43

$   0.36

Adjusted

$         (176)

$    (74)

$  (102)

$  (0.92)

$ 295

$     80

$    215

$   1.78

GAAP pretax margin

(5.3) %

6.4 %

Adjusted pretax margin

(4.3) %

8.0 %

Six Months Ended June 30,

2026

2025

(in millions, except per share amounts)

Loss
Before
Income
Tax

Income
Tax

Net
Loss

Per
Share

Income
Before
Income
Tax

Income
Tax

Net
Income

Per
Share

GAAP

$         (531)

$  (262)

$  (269)

$  (2.39)

$    5

$     (1)

$      6

$   0.05

Adjusted for:

Losses (gains) on foreign debt and other

(7)

3

Special items - operating

77

147

Total adjustments

$   70

$     95

$    (25)

$  (0.22)

$ 150

$     36

$    114

$   0.92

Adjusted

$         (461)

$  (167)

$  (294)

$  (2.61)

$ 155

$     35

$    120

$   0.97

GAAP pretax margin

(7.2) %

0.1 %

Adjusted pretax margin

(6.3) %

2.3 %

CASMex Reconciliation

Three Months Ended June 30,

Six Months Ended June 30,

(in millions, except unit metrics)

2026

2025

2026

2025

Total operating expenses

$        4,233

$        3,427

$        7,812

$        6,761

Less the following components:

Aircraft fuel

1,305

700

2,101

1,381

Freighter costs

52

48

104

89

Performance-based pay

64

49

92

101

Special items - operating

42

56

77

147

Adjusted operating expenses

$        2,770

$        2,574

$        5,438

$        5,043

ASMs

24,306

24,058

45,876

45,277

CASMex

          11.40¢

          10.70¢

          11.85¢

          11.14¢

Adjusted Capital Expenditures Reconciliation

Six Months Ended June 30,

(in millions)

2026

2025

Aircraft, aircraft purchase deposits, and other flight equipment

$            415

$            613

Other property and equipment

108

128

Capital expenditures

523

741

Adjusted for:

Property and equipment acquired through the issuance of debt

48

69

Proceeds from sales of aircraft and other equipment

(7)

(62)

Adjusted capital expenditures

$            564

$            748

Debt-to-capitalization, including leases

(in millions)

June 30, 2026

December 31, 2025

Long-term debt and finance leases, net of current portion

$                 5,783

$                 4,834

Operating lease liabilities, net of current portion

1,164

1,141

Adjusted debt, net of current portion

6,947

5,975

Shareholders' equity

3,670

4,118

Total Invested Capital

$               10,617

$                10,093

Debt-to-capitalization ratio, including leases

65 %

59 %

Adjusted net debt to earnings before interest, taxes, depreciation, amortization, fixed portion of operating lease expense, and special items

(in millions)

June 30, 2026

December 31, 2025

Long-term debt and finance leases

$                    6,235

$                    5,555

Operating lease liabilities

1,381

1,338

Adjusted debt

7,616

6,893

Less: Total unrestricted cash and marketable securities

2,662

2,123

Adjusted net debt

$                    4,954

$                    4,770

(in millions)

Twelve Months Ended
June 30, 2026

Twelve Months Ended
December 31, 2025

Operating Income (Loss)(a)

$                     (224)

$                      303

Adjusted for:

Special items - operating

180

250

Gains on foreign debt and other

(13)

(3)

Depreciation and amortization

813

795

Fixed portion of operating lease expense

279

279

EBITDAR

$                    1,035

$                    1,624

Adjusted net debt to EBITDAR

4.8x

2.9x

(a) 

Operating income (loss) can be reconciled using the trailing twelve month operating income as filed quarterly with the SEC.

Note A: Pursuant to Regulation G, we provide reconciliations of reported non-GAAP financial measures to the most directly comparable GAAP financial measures. We believe these non-GAAP measures provide meaningful supplemental information to investors for the following reasons:

Pretax income (loss), net income (loss), and earnings (loss) per share are presented on an adjusted basis. Adjustments are made for special charges that are unusual or nonrecurring in nature, as well as for gains and losses on foreign debt, as these adjustments enhance comparability of our core operations to prior periods and to the rest of the airline industry. CASMex is a key measure used by management and the Air Group Board of Directors to evaluate cost performance. It is also commonly used by industry analysts to compare airlines. Because U.S. carriers are generally similarly affected by changes in jet fuel prices over the long run, aircraft fuel costs are excluded to focus on more controllable, company-specific cost drivers. Costs related to freighter aircraft operations, including those incurred under the ATSA with Amazon, are excluded to enhance comparability with carriers that do not operate freighter aircraft. Performance‑Based Pay (PBP) expense is excluded as it is dependent on the Company's achievement of annually established financial and operational goals. Certain special charges are excluded as they are unusual or nonrecurring in nature. Adjusted capital expenditures includes certain amounts that are not classified as investing cash outflows within our consolidated statements of cash flows, but are viewed by management and other stakeholders as significant long-term investments in the business. Management believes these adjustments provide a more complete view of capital expenditures during the year. Liquidity and leverage measures, including debt-to-capitalization and adjusted net debt to EBITDAR, are presented to provide insight into the Company's financial position and flexibility. In 2026, we made adjustments to the calculation of these metrics to enhance comparability with our peers. The debt-to-capitalization ratio now excludes the current portion of operating and finance lease liabilities, with prior periods recast for consistency. Additionally, EBITDAR was adjusted to reflect the fixed portion of operating leases rather than total aircraft rent to better reflect performance, with prior periods recast accordingly. GLOSSARY OF TERMS

Adjusted debt - long-term debt, plus operating and finance lease liabilities

Adjusted net debt - long-term debt, plus operating and finance lease liabilities, less unrestricted cash and marketable securities

Adjusted net debt to EBITDAR - represents adjusted net debt divided by EBITDAR (trailing twelve months earnings before interest, taxes, depreciation, amortization, fixed portion of operating leases, and special items)

ASMs - available seat miles, or "capacity"; represents total seats available across the fleet multiplied by the number of miles flown

CASMex - operating costs excluding fuel, freighter costs, Performance-Based Pay (PBP), and special items per ASM, or "unit cost"

Debt-to-capitalization ratio - represents adjusted debt, net of current portion, divided by total equity plus adjusted debt, net of current portion

Diluted Earnings per Share - represents earnings per share (EPS) using fully diluted shares outstanding

Diluted Shares - represents the total number of shares that would be outstanding if all possible sources of conversion, such as stock options, were exercised

Freighter Costs - operating expenses directly attributable to the operation of B737 freighter aircraft and A330-300 freighter aircraft exclusively performing cargo missions

Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with revenue passengers

PRASM - passenger revenue per ASM, or "passenger unit revenue"

RASM - operating revenue per ASMs, or "unit revenue"; operating revenue includes all passenger revenue, freight & mail, loyalty program revenue, and other ancillary revenue; represents the average total revenue for flying one seat one mile

RPMs - revenue passenger miles, or "traffic"; represents the number of seats that were filled with revenue passengers; one passenger traveling one mile is one RPM

Yield - passenger revenue per RPM; represents the average passenger revenue for flying one passenger one mile

SOURCE Alaska Air Group