Snapshot
Alaska Air Group, Inc. reported $3.30B of revenue in Q1 2026, up 5.2% year over year, with diluted EPS of $-1.69 and an operating margin of -8.5%.
- Revenue
- $3.30B
- YoY growth
- +5.2%
- Diluted EPS
- $-1.69
- Operating margin
- -8.5%
What management said
- •Yesterday, we issued our earnings release, along with several accompanying slides detailing our results, which are available at investor.alaskaair.com.
- •We will also refer to certain non-GAAP financial measures, such as adjusted earnings and unit cost excluding fuel.
- •As usual, we have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings release.
- •Most recently, following the COVID pandemic, we acquired Hawaiian Airlines, secured more than 50% market share in Hawaii, and launched long-haul international travel out of Seattle.
- •That represents approximately a $0.70 impact to earnings per share in Q1 and over $3 in Q2.
- •Offsetting some of that pressure is a strong demand backdrop with fare increases holding.
- •Importantly, our position of strength allows us to manage through environments like this while continuing to build long-term earnings power.
- •Premium retrofits on our 737 fleet are now more than 90% complete, increasing our share of premium seats across the network and driving higher premium revenue.
- •The challenges we're navigating today do not change our longer-term trajectory, our ability to achieve a $10 EPS target, or remain a top margin-producing airline.
- •Today, I'll walk through our first quarter financial performance, our perspective on the near-term demand and revenue environment, and the significant progress we're realizing on the core initiatives that underpin Alaska Accelerate.
- •Total Q1 revenues reached $3.3 billion, up 5% year-over-year on capacity growth of just 1.7%.
- •From a demand and revenue perspective, performance in the first quarter was resilient despite the volatile macro backdrop and material demand headwinds uniquely impacting our spring break revenue, given our network.
What went well
- •First quarter adjusted loss per share of $1.68 came in better than the midpoint of the company's revised guidance, reflecting resilient demand and disciplined management.
- •Total Q1 revenues reached $3.3 billion, up 5% year-over-year on capacity growth of just 1.7%, with unit revenues up 3.5% in line with initial expectations.
- •The company completed preparations for its single passenger service system cutover, its final major guest-facing integration milestone, with systems moving to a single platform and Hawaiian Airlines officially joining Oneworld.
- •Premium demand outperformed the system and was up 8% year-over-year, with 737 premium retrofits more than 90% complete and the entire regional fleet retrofitted with free Starlink Wi-Fi.
- •The company agreed to a multi-year Bank of America extension securing an additional $1 billion of total cash remuneration through 2030, generated $615 million of co-brand card cash remuneration (up 12%), and grew Atmos membership 13% year-over-year.
- •Managed corporate travel was exceptionally strong, up 19% in the first quarter, with held revenue over the next 90 days up almost 30%, and the company delivered the industry's number one on-time performance.
- •Seattle-to-Tokyo reached profitability in March less than a year after launch, with load factors for both Tokyo and Seoul exceeding 90%.
What went wrong
- •Air Group reported a first quarter GAAP net loss of $193 million and an adjusted net loss of $192 million, with an adjusted loss per share of $1.68.
- •Fuel costs were more than $100 million higher in the first quarter (about $0.70 of EPS pressure), driven by geopolitical events, with incremental fuel costs of $600 million or more expected in Q2 (over $3 of EPS impact).
- •Unprecedented storms in Hawaii (rainfall up to 3,000% of normal in March) and civil unrest in Puerto Vallarta -- together about 30% of system capacity -- drove cancellations and book-away, reducing Q1 unit revenues by nearly one point.
- •First quarter unit costs were up 6.3% year-over-year, lapping the final quarter of the new flight attendant CBA and absorbing winter weather and Hawaii storm pressure.
- •Singapore refining margins spiked more than 400% during the quarter, turning historically the lowest-cost portion of supply into the most expensive, affecting roughly 20% of total consumption.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Adjusted EPS | Q2 2026 | None | loss of approximately $1 per share | new guidance, driven by fuel |
| Unit revenue (RASM) | Q2 2026 | None | path to up 10% | assuming continued demand strength at observed yields |
| Unit costs (CASMex) | Q2 2026 | None | about 1.5 points above Q1 result | given a close-in reduction of one point of capacity |
| Capacity growth | Q2 2026 | None | up approximately 1% year-over-year | trimmed nearly a point in May/June; all from long-haul Seattle international |
| Fuel price | Q2 2026 | $2.98 Q1 actual | approximately $4.50 per gallon (April ~$4.75) | sharply higher; recovering ~one-third of incremental fuel costs |
| Tax rate | Q2 2026 | None | assumed 32% | could change meaningfully with performance and full-year outlook |
| Full-year guidance | FY 2026 | $3.50-$6.50 | suspended | withdrawn until conditions stabilize |
| Long-term EPS target | 2027 | $10 | $10 | reaffirmed |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Adjusted loss per share | -$1.68 | better than guidance midpoint despite fuel and transitory Hawaii/Puerto Vallarta events |
| Total revenue | +5% to $3.3 billion | capacity growth of 1.7% and unit revenue up 3.5% |
| Unit revenue (RASM) | +3.5% | resilient demand and fare increases, reduced nearly a point by Hawaii and Puerto Vallarta |
| Premium demand | +8% | premium retrofits over 90% complete; first-class revenue positive even as capacity rose 5% |
| Managed corporate travel | +19% | international expansion increasing corporate relevance, especially US point of sale |
| Co-brand card cash remuneration | +12% to $615 million | Atmos membership up 13% with double-digit Hawaii loyalty growth |
| Unit costs (CASMex) | +6.3% | lapping the final quarter of the flight attendant CBA plus winter weather and Hawaii storms |
| Fuel price | $2.98 per gallon | initial fuel cost increase beginning in late February |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Fuel costs | $100 million-plus headwind in Q1 (~$0.70 EPS) | $600 million-plus incremental expected in Q2 (over $3 EPS); prices ranged $4.45-$5.15 in past week | worsening |
| Demand environment | resilient with fare increases holding | strong backdrop, bookings returned to last year's level with strong fare increases | stable/resilient |
| Integration / PSS | PSS cutover scheduled April | preparations complete, single platform live beginning tomorrow; peak friction now behind | improving |
| Loyalty / Bank of America | $150 million loyalty profit targeted by 2027 | new BofA deal adds $1 billion cash through 2030, ~0.5 point of margin this year and 1 point next year | improving |
| International network | Tokyo and Seoul launched | Seattle-Tokyo profitable in March, Rome launching next week, London and Reykjavik this spring | improving |
| Guidance / outlook | full-year $3.50-$6.50 | full-year guide suspended; reverting to more detailed unit revenue/cost disclosure for Q2 | more uncertain |
| Capacity discipline | low-growth plan | Q2 capacity ~1%, Puerto Vallarta cut ~30%, North America down slightly | tightening |
Q&A summary
What would the Q2 path-to-10% RASM look like on a same-store basis without synergies and initiatives?
Andrew Harrison said it would be a couple of points lower, noting some items like loyalty are now embedded in the core of revenue, but estimated the synergy/initiative contribution at roughly a couple of points.
Can you unpack the second-half cost trajectory and how the near-term headwinds roll off?
Shane Tackett said Q2 carries 3-4 points that are not structural (close-in capacity cut, 787 crew build-up, employee recognition, asset-sale lapping); core structural growth is closer to 4-5% on low growth, with unit wages exiting the year at or below Q4 2025 rates and productivity, maintenance, and third-party costs improving in the second half.
What gives you so much conviction on the $10 figure long-term given cost headwinds?
Ben Minicucci said absent fuel the company is firing on all cylinders and executing every Alaska Accelerate initiative; the new Bank of America deal adds a point of margin in 2027 and the Amazon deal moved from losses to no losses, so if fuel moderates and fare increases stick he sees a strong chance of hitting the target.
Are you seeing demand elasticity or pushback on higher pricing in any markets?
Andrew Harrison said there is absolutely elasticity, evidenced when revenue management had to manage buckets down after fare increases, but the current environment can absorb double-digit fare increases because people want to fly and airplanes are full; network growth is concentrated in San Diego, Portland, and international gateways.
Is the new co-brand deal included in the Q2 RASM guide or ramping later?
Andrew Harrison said the agreement is reflected in second quarter results as it ramps in, contributing half a point of margin this year and ramping to a point of margin on the structural changes, with potential to do even better.
How long can the West Coast/Singapore fuel disruption persist before causing jet fuel availability problems?
Shane Tackett said the company does not foresee any supply disruption across its network, is not sourced from Asia or Singapore into its markets, and could supply Hawaii domestically; long-term the West Coast Jet A supply issue needs pipeline/refinery infrastructure work that will take time.