Alaska Air Group, Inc.

Second quarter revenue was $4.1 billion, up 10% year over year, on capacity growth of 1%. GAAP net loss was $76 million, and adjusted net loss was $102 million. Unit revenues were up 8.6%, including a 3-point drag from Hawaii rainstorms. June revenue increased 13.2% and June delivered a double-digit pretax margin despite fuel prices up nearly 70% year over year. Economic fuel cost averaged $4.43 per gallon, better than the $4.50 guide, and Q2 unit costs excluding fuel rose 6.5% year over year. For Q3, management expects capacity growth of about 2% to 3%, full-year capacity growth around the low end of 2% to 3%, economic fuel of $3.75 per gallon, and earnings between breakeven and $1 per share.

Benito Minicucci framed the quarter as financially disappointing but strategically important, emphasizing that Alaska completed its most complex integration milestone, ran its largest summer schedule ever, and launched Europe service that exceeded expectations. He said unit revenues strengthened, unit costs improved, and the business returned to profitability in June despite a major fuel headwind, which he argued shows Alaska Accelerate is working. His tone was confident and forward-looking, with repeated focus on long-term value creation, scale, relevance, loyalty, and the company’s path to $10 of EPS.

Shane Tackett focused on the financial bridge between the weak first half and a better second half, saying the quarter was fundamentally healthy absent fuel. He cited total liquidity of $3.8 billion after raising $1 billion of financing, a 65% debt-to-capitalization ratio, and 4.8x trailing adjusted net leverage, while noting the weighted average debt interest rate rose to about 5.3%, up 0.4 points from the prior quarter. On costs, he said unit costs excluding fuel were up 6.5% year over year but should step down to low-to-mid-single-digit growth in the back half, and he guided Q3 fuel at $3.75 per gallon and Q3 earnings between breakeven and $1 per share.

Analysts pressed on Q4 revenue/RASM, Hawaii recovery, cargo economics, cost synergies, and when the company might start paying down debt. Management declined to give specific Q4 guidance, but said demand trends remain strong and bookings are tracking at same or better yields than Q3; on Hawaii, they said the storm-driven hit was strongest in March-April and recovery is now visible into fall. They also said the 4 new 737-800 freighters will be Alaska-owned, used in-house, and should ramp quickly to accretive results, while debt paydown will likely wait for a quarter or two of stable input prices and healthy cash flows.