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. While there was no way around the overwhelming fuel headwind, we saw an extremely positive earnings trajectory throughout the quarter that only deepens our confidence in our long-term strategy.
Unit revenues strengthened, unit cost improved, and we returned to profitability in June with a double-digit pre-tax margin despite fuel prices up nearly 70% year-over-year. On fleet, cabin retrofits across our 737s are now complete, adding 1.3 million incremental first and premium class seats, and demand is absorbing them well, with premium revenues up 15% in the quarter. After restructuring our Amazon flying under a more profitable contract, we're now moving into the next phase of growth, adding four additional 737-800 freighters deployed across Hawaii and Alaska. Our new Rome, London, and Reykjavik routes are each carrying 50% or more of Atmos members, an early signal of the loyalty demand behind this expansion.
Demand is holding firm, and our integration milestones are increasingly behind us. Shane is a 25-year veteran of the company and has been instrumental in guiding us through the Hawaiian acquisition and execution of Alaska Accelerate. Today, I'll walk through our second quarter financial performance, our perspective on the near-term demand and revenue environment, and the step change in the results and performance of core levers that underpin Alaska Accelerate. In the second quarter, revenue grew to $4.1 billion, a 10% increase year-over-year on capacity that grew 1%.
| Metric | Period | Current guidance |
|---|---|---|
| Earnings per share | Q3 2026 | Breakeven to $1 per share (at ~$3.75/gal fuel) |
| Fuel price per gallon | Q3 2026 | ~$3.75 (July $3.60, Aug/Sep $3.85 at recent spot) |
| System unit revenue (RASM) | Q3 2026 | Improving sequentially to low double digits year-over-year (above June) |
| Capacity growth | Q3 2026 | ~2%-3% (entirely intercontinental) |
| Capacity growth | FY2026 | ~2% (low end; pulled ~1 point from both Q3 and Q4) |
| Non-fuel unit costs (CASMex) | H2 2026 | Step down to low-to-mid single-digit growth |
| RASM-to-CASMex spread | H2 2026 | Improve several points |
| Full-year earnings guidance | FY2026 | To be updated at the September 29 Investor Day (fuel/fare volatility) |
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +10% to $4.1B | Unit revenue up 8.6% on only 1% capacity growth, driven by commercial activation of Alaska Accelerate; included a ~3-point Hawaii storm drag. |
| Unit revenue (RASM) | +8.6% (June +11%) | Material month-over-month acceleration from single-PSS activation, loyalty, premium, corporate share gains, and international launch. |
| Premium revenue | +15% | Strong demand for domestic and new international long-haul premium; now 35% of total revenue (up 1.5 points), completed 737 cabin retrofits adding 1.3M premium seats. |
| Co-brand (loyalty) remuneration | +19% to $663M | Atmos Rewards flywheel: active members +15%, attrition down 30%+, Hawaii new cardholders +73%, higher top-tier spend and redemption activity. |
| Cargo revenue | +21% | Restructured, more profitable Amazon contract and expansion; adding four 737-800 freighters for Hawaii and Alaska in early 2027. |
| GAAP net loss | -$76M ($102M adjusted loss) | Overwhelmed by fuel up ~70% year-over-year; underlying business healthy with a double-digit June pre-tax margin. |
| Non-fuel unit costs (CASMex) | +6.5% | Included transitory 787 crew-training, PSS-completion employee recognition, and 2025 aircraft-sale-gain comparisons; core growth was low-to-mid single digits. |
| Economic fuel cost | $4.43/gal (up ~70%) | Crude volatile between $70-$90/barrel; refining-margin volatility normalized through the quarter. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Alaska Accelerate commercial activation | Building integration foundation | Q2 marked the 'full commercial activation' -- single PSS, single loyalty program, and Europe/Asia launch from Seattle -- producing an immediate step change in unit revenue, corporate share, loyalty, premium, and cargo, reinforcing the path to $10+ EPS and double-digit margins. | — |
| Hawaii franchise | $1B franchise pre-acquisition; Maui-fire context | Management framed the storm impact as temporary 'blips' (unlike the catastrophic Maui fires), reiterated commitment to the $8 billion premium market where Alaska holds ~50% share, with September yields accelerating above system and recovery expected in coming quarters; announced 717 fleet retirement (from 2028) in favor of 737s. | — |
| Fuel and second-half inflection | ~70% fuel spike drove H1 loss | With fuel easing to a ~$3.75 Q3 assumption, June's return to profitability, durable demand (Q3 RASM low double digits, forward corporate bookings +37%), and prudent capacity, management expects the second half to be a 'mirror image' of the first-half loss. | — |
| Revenue diversification | Main-cabin-heavy legacy model | More than half of every revenue dollar now comes from outside the main cabin, spanning premium (35% of revenue), loyalty, cargo (+21%), and international -- building more durable, resilient earnings power across cycles. | — |
| International long-haul expansion | Domestic-focused network | Rome, London, and Reykjavik launched strongly (Rome would have been profitable on normalized fuel), with 50%+ Atmos-member loads; U.K. point-of-sale just turned on and Asia (Incheon/Narita) booked load factors up year-over-year, moving toward becoming Seattle's largest international carrier. | — |
| Balance sheet and capital allocation | Strong balance sheet as strategic asset | Raised $1 billion (first-ever unsecured bond plus a term loan) to hold liquidity at the top of the 15-25% range amid fuel volatility, backed by ~$20 billion of unencumbered assets; intends to aggressively pay down debt and reduce leverage once one or two quarters of stable fuel and healthy cash flow return. | — |