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Alaska Air Group is a U.S. company operating Alaska Airlines, Hawaiian Airlines, and Horizon Air. The company’s fleet includes a mix of more than 300 planes made by Boeing, Airbus, and Embraer. The company’s 2024 acquisition of Hawaiian Airlines enabled the airline to expand to 141 direct destinations and 29 international markets. In January 2024 the airline played a part in increased scrutiny of Boeing planes after it temporarily grounded its 65 737-9 Max aircraft after a door plug blew off one of its planes minutes after takeoff on a flight departing from Portland International Airport.

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Alaska Air Group (ALK): Company Profile, Stock Price, News, Rankings

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Alaska Air Group

alaska air group

Good morning, ladies and gentlemen, and welcome to the Alaska Air Group twenty twenty five Second Quarter Earnings Call. At this time, all participants have been placed on mute to prevent background noise. Today's call is being recorded and will be accessible for future playback at alaskaair.com. After our speakers' remarks, we will conduct a question and answer session for analysts. I would now like to turn the call over to Alaska Air Group's Vice President of Finance, Planning and Investor Relations, Ryan St. John.

Thank you, operator, and good morning. Thanks for joining us today to discuss our second quarter twenty twenty five earnings results. Yesterday, we issued our earnings release along with several accompanying slides detailing our results, which are available at investor.alaskaair.com. On today's call, we will hear updates from Ben, Andrew and Shane. Several others of our management team are also on the line to answer your questions during the Q and A portion of the call.

Air Group reported a second quarter GAAP net income of $172,000,000 Excluding special items and mark to market fuel hedge adjustments, Air Group reported adjusted net income of $215,000,000 Our comments today will include discussion of Air Group reported results and forward looking guidance compared to prior year pro form a results as if Alaska and Hawaiian were a combined company for the full periods referenced. Lastly, as a reminder, forward looking statements about future performance may differ materially from our actual results. Information on risk factors that could affect our business can be found within our SEC filings. We will also refer to certain non GAAP financial measures, such as adjusted earnings and unit costs excluding fuel. And as usual, we have provided a reconciliation between the most directly comparable GAAP and non GAAP measures in today's earnings release. Over to you, Ben.

Thanks Ryan and good morning everyone. First, I want to acknowledge the operational disruption we experienced earlier this week due to an IT outage. To our guests whose travel plans were impacted, I sincerely apologize. Safety is always our top priority, and upon identifying the issue, we made the decision to pause operations until it was safe to resume. Our teams worked around the clock to restore operations as quickly as possible.

We are actively partnering with our hardware vendor to investigate the root cause and will take appropriate action once the review is complete. Now turning to our earnings, we delivered a strong second quarter result, marking another step forward in achieving our long term ambitions. Our adjusted earnings per share of $1.78 exceeded the high end of our guidance, clear evidence of our team's disciplined execution and unwavering focus on what we can control, delivering a remarkable guest experience, driving operational excellence and unlocking the value of our newly combined network and commercial platform. Alaska Accelerate is working. The powerful combination of these two networks and the changes we've made are already delivering greater utility and choice for Hawaii residents and visitors alike.

These changes drove our Hawaiian assets to its first profitable quarter since 2019 and just ten months post acquisition. We're excited to continue building scale, relevance and loyalty as Hawaii's trusted airline. In total, Air Group generated a record $3,700,000,000 in revenue with year over year unit revenue performance that we are confident will lead the industry. As we continue to implement our initiatives, our sights are set on diversifying our revenues even further from the 50 we generate outside the main cabin today. A key driver of this growth is premium revenue, which continues to outperform.

We've now retrofitted nearly 90 of our seven thirty seven aircraft, expanding our ability to deliver a more premium experience as part of a seamless end to end journey for our guests. Next month, we're launching our newly branded loyalty program and premium credit card, Uniting Alaska Mileage Plan and Hawaiian Miles. This will better reflect the expanded reach of our combined networks, strengthen loyalty and connect with more guests. In May, we launched our inaugural intercontinental flight from Seattle to Tokyo Narita, marking the first step in establishing an international gateway at our hometown hub. As Andrew will share shortly, the route has gotten off to a very successful start.

This September, we'll begin service from Seattle to Sol in Chan, followed by the launch of our first Transatlantic route to Rome next May. To support this international growth, we've also ordered five additional Boeing seven eighty seven's, bringing our future fleet total to 17 aircraft. With the Boeing seven eighty seven crew base established in Seattle, we're laying the foundation to expand our international operations to at least 12 destinations from Seattle in the coming years. Beyond our targeted initiatives at Air Group, the broader industry is also making necessary and meaningful changes. Capacity adjustments continue to align more closely with current demand trends, creating a more favorable setup for the second half of the year and providing further upside.

Although demand remains softer than initially expected, it has stabilized and consumer sentiment is gradually improving amid the broader macroeconomic environment. We're also encouraged by the recent uptick in bookings, early signs of positive demand momentum and the potential for easing fuel prices. All factors that position us well for stronger performance in the latter half of the year. Given this improving outlook, we expect to deliver at least $3.25 in adjusted earnings per share in 2025, an important step on our path to reaching $10 in earnings per share by 2027, a target we remain fully confident in. Our focus remains on executing Alaska Accelerate and unlocking $1,000,000,000 in incremental profit over the next two years.

Early results are promising with synergies and key initiatives tracking ahead of plan. In closing, there's a renewed sense of energy and purpose across our company, driven by our shared vision to transform Alaska Air Group into a larger global airline. With the Alaska Accelerate Plan as our guide, our people are moving forward with clarity, confidence, and a deep commitment to what we're building together. I want to thank all our incredible employees for their dedication and hard work on this journey. The opportunities ahead are significant and we're eager to capitalize on them and position Air Group for long term growth, success and value creation. And with that, I'll turn it over to Andrew.

Thanks Ben and good morning everyone. Today, my comments will focus on second quarter results, continued progress on our Alaska Accelerate vision and demand trends we're seeing for the third quarter. For the second quarter, revenues reached a record $3,700,000,000 up 2% year over year on capacity growth of 2.7%. We expect that our unit revenue performance will meaningfully lead the industry, finishing on the better end of our prior guidance down less than 1%. As we had expected, the industry capacity backdrop pressured monthly yields sequentially throughout the quarter, but our planes flew full with a second quarter load factor of 84%.

This performance, despite softer than anticipated main cabin demand across the industry, highlights the strength of our loyalty program and continued guest preference for the Alaska and Hawaiian experience. Not surprisingly, outperformance of first and premium class revenues have persisted. Second quarter premium revenues were up 5% year over year, led by our Hawaiian assets with premium up nearly 19%. As Ben highlighted, we're making strong strides in expanding our premium offerings. We've now completed 40% of our seven thirty seven retrofits, increasing premium seat share from 26% to 27%, a segment that already drives 35% of our total revenue.

We're targeting 29% premium seat share by next summer when all two eighteen Boeing narrow body aircraft retrofits will be complete. We will also be elevating the guest experience by upgrading our Airbus three thirty fleet with refreshed interiors and enhanced amenities. These strategic investments are not only meeting a structural growing demand for premium travel, they're diversifying our revenue base and reinforcing our long term competitive edge. Touching on loyalty, we generated $558,000,000 in cash remuneration from our co brand cards, up 5% year over year. Card spend and acquisitions remain robust with active cards in the portfolio up 10% year over year.

And just this week, Alaska Mileage Plan was named US News Best Airline Rewards program for the eleventh year in a row. We're gearing up for the mid August launch of our newly branded unified loyalty program along with our new premium credit card with unique benefits targeting global travelers on the West Coast with an international companion award certificate, shareable lounge passes, and three times points on foreign spend. This card is strategically positioned to attract a high quality mix of new cardholders across broader geographies and drive greater engagement from our most loyal members, especially our high value elites, which we believe will accelerate significant program growth in the back half of the year. Turning to synergies and revenue initiatives, these are on track and continue to deepen our conviction in our path forward. Hawaii has continued to produce strong network leading results with robust bookings and high single digit yield growth throughout the quarter.

Neighbor Island has improved significantly, posting double digit margin improvements. Our bank schedules are also performing well in Seattle and Portland. In Seattle, this has supported strong load factors with connecting passengers up mid single digits for the quarter. There is opportunity to further optimize our Seattle banks in 2026 to leverage the seasonality of our business, winter versus summer, as well as feed our growing international gateway. In Portland, we carried over 130% more connecting passengers year over year, and future connecting bookings are over 200% higher.

Our Portland team has done an outstanding job supporting the expanded flight schedule, And we're very excited to open our new and expansive 12,500 square foot lounge in 2026, complementing one of the nation's newest and most impressive terminals and lobbies. I also like to briefly highlight the launch of our global Seattle Gateway. We've commenced Seattle Narita service on May 12, with ticket sales starting only in December. For the month of June, we achieved a load factor of greater than 80% and stage length adjusted RASM was 18% higher than our discontinued Honolulu Narita service for the same period last year. I want to personally recognize both the commercial and operational organizations.

Taking Air Group from zero Seattle long haul capability to announcing and launching long haul operations from Seattle within just eight months is an incredible achievement. We are well positioned to launch Korea in September and Rome in May, with plans to add more destinations at a steady cadence as we build to our fleet of 17 787s, while continually improving our product and commercial selling infrastructure. Our goal remains clear, to serve at least 12 long haul destinations from Seattle by 02/1930. To wrap up our Q2 discussion, cargo revenues are performing extremely well, up 34% year over year. We successfully brought the last two of our 10 Airbus three thirty Amazon freighters into service this quarter and look forward to maturing and growing this relationship.

The launch of our Seattle Tokyo Narita route has rapidly expanded our international cargo capabilities from Asia's third largest market. We've already surpassed our initial cargo volume targets on this route and have effectively backfilled much of the volume we anticipated might shift from Honolulu with the new high value revenue streams. While there's still much more to unlock, our focus this year is on building a strong foundation to accelerate our cargo contribution in 2026 and beyond as we scale and optimize this business as a key profit growth engine for Air Group. Now, turning to our outlook. We expect third quarter capacity to be down about 1%, nearly two points below our prior expectation shared back in April.

This is predominantly driven by deliberate reductions in off peak flying. Similarly, we've reduced fourth quarter flying by approximately two points, bringing our full year capacity growth to around 2% year over year. These adjustments are expected to be margin accretive. Importantly, much of our growth continues to be sourced from increased utilization of our Hawaiian assets, which comes at very low incremental cost. Coupled with domestic industry capacity now expected to be nearly flat in the third quarter, we're confident that our continued commercial momentum will drive sequential improvement throughout the third quarter, resulting in unit revenues flat to up low single digits.

Demand has stabilized following the abrupt pullback we experienced earlier this year, and we're seeing encouraging signs of resilience. Our Q3 builds have seen a strong inflection since late June with our traffic, yield, and total revenue intakes moving from negative to positive. We have experienced this on Alaska and Hawaiian assets alike. Although the strength is mostly close in at this stage, with recent July revenue intakes up low double digits, August low single digits, and September flat, we are seeing positive momentum. In summary, builds have been positive and improving on a year over year basis since late June.

This is the first time all three have been in the black since early Q1. As mentioned earlier, Hawaii continues to book well with high single digit yield growth and solid load factors in the second quarter, momentum that is carrying through year end and supports the region's continued outperformance. Managed corporate revenue declined 5% year over year in Q2, primarily due to lower yields. While large managed corporates, particularly in sectors like manufacturing and technology, remain cautious, small and medium businesses continue to demonstrate resilience. Factoring in small and medium business performance, total corporate revenue was down only 1%.

Encouragingly, July has seen an uptick in closer in managed corporate bookings, a shift from what we saw in early Q2. Most importantly, despite a more challenging corporate setup on the West Coast compared to our peers, we still delivered industry leading unit revenue in Q2, and we're well positioned to do so again in Q3. With greater economic clarity ahead, we're cautiously optimistic about renewed corporate confidence offering potential upside to corporate travel in our geographies. Our second quarter results and outlook reinforce our confidence in our commercial strategy. Alaska Accelerate is working and continues to drive meaningful progress across the network.

The synergies we've targeted are taking hold, validating our strategic direction and operational discipline. Even in a dynamic environment, Air Group's revenue performance reflects the strength of our brands, the loyalty of our guests, and the adaptability of our teams. Importantly, we are not standing still. We are making necessary adjustments to support improvements in overall unit revenues and profits. And as conditions improve and we continue to execute, we're well positioned to build on this momentum and deliver even greater value and resilience over time. And with that, I'll pass it over to Shane.

Thanks, Andrew, and good morning, everyone. We reported earnings per share of $1.78 this quarter exceeding our guidance range and delivering a pre tax margin in the top three of the industry even as we work through integration. Our strategic plan continued to gain traction in the second quarter with strong execution against our commercial initiatives and synergy capture. The momentum we are seeing reinforces our conviction in Alaska Accelerate and the long term value it is designed to create. Turning to our financial position, we ended the quarter with total liquidity of $3,000,000,000 inclusive of on hand cash and undrawn lines of credit.

We made $80,000,000 in scheduled debt repayments during the quarter and expect to repay approximately $150,000,000 in Q3. Net leverage ended the quarter at 2.4 times while our debt to cap ended at 60%. During the quarter we repurchased $428,000,000 in shares bringing our year to date total to $535,000,000 more than double our original repurchase expectations for the year. We executed our repurchases at attractive prices, returning value to shareholders without compromising the strength of our balance sheet. We continue to believe that our equity does not reflect the earnings power of the company and we remain confident in our trajectory towards $10 in earnings per share by 2027.

Turning to our cost performance, second quarter unit costs were up 6.5% year over year, in line with our expectations and prior guidance. The primary drivers of our unit cost profile remain elevated airport real estate cost growth rates as well as maintenance costs and new labor contracts. We also remain disciplined in our capacity deployment and will continue to choose growth rates that focus on maximizing margin over minimizing unit costs. Our absolute non fuel costs remain on plan thanks to strong execution and our team's commitment to cost discipline which is challenging when integrating two companies quickly. We have lowered our third quarter growth by approximately two points from the rate we expected earlier in the year and now expect year over year unit costs in the third quarter will be similar to our second quarter result.

However, this will be on 1% fewer year over year ASMs in the third quarter versus 2.7% more ASMs year over year in the second. Had we not cut capacity as close in as we did, we would have seen a step down in third quarter unit costs. And we still expect to see a meaningful step down in Q4 unit costs setting up a strong exit rate into 2026. As a reminder, we've generally shared that growth of four to 5% would be required to cover normal So I'm pleased that we are on track to deliver full year unit costs up mid single digits on just 2% full year capacity growth which includes roughly two points of cost growth from our four new labor agreements. Our fuel price averaged 2.39 per gallon during the second quarter trending down through June both for crude and West Coast refining margins.

While we did see a temporary spike in refining margins to start the third quarter reaching as high as $0.90 in early July due to supply fluctuations, this volatility should moderate as we move past peak summer demand and we expect our economic fuel cost to remain stable around $2.45 per gallon in the third quarter. We expect to deliver adjusted earnings per share between $1 and $1.4 in the third quarter which incorporates an expected $0.10 impact from the IT outage. We now expect at least $3.25 EPS for the full year. This outlook assumes that we continue to deliver on our synergy and commercial initiative commitments and that the recent inflection in demand and pricing remains through the rest of the year. As we look ahead, we are genuinely excited by the opportunities in front of us.

We have seen strong initial execution against both the commercial roadmap and synergy capture we shared in December at our Investor Day and are encouraged by the setup we see for the rest of 2025. We believe we are uniquely positioned to deliver more value to customers, employees, and owners as we continue execution of the Alaska Accelerate vision and develop deeper loyalty and preference with existing and new customers to Air Group. And with that, let's go to your questions.

At this time, I would like to invite analysts who would like to ask a question to please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q and A roster. And our first question today will come from Connor Cunningham with Melius Research.

Hey, everyone. Thank you. If we were to reflect back a little bit, I think you guys were probably the most accurate in terms of just flagging the issues that kind of presented from an industry level in June and July. Kudos there. But I was curious if you could just talk a little bit about the ramp in your expectations from 3Q to 4Q.

What is underpinning your bullish? Is it an assumption that demand continues to step up from the current booking patterns? Or is it just a combination of that and the competitive capacity environment continue to significantly trend down? Thank you.

Hey, Connor. Good morning. Appreciate kudos. Hey, when we look at the backdrop for the second half of the year, obviously it's going be better in the first. And if you look at what we produced last year for Q4, it was close to a dollar BPS.

So when you look at all the and a lot of that goodness came late in the fourth quarter where we saw things pick up. Right now we're seeing a positive momentum starting late June, early July. We're seeing that momentum start early. And if it continues into the fourth quarter, we believe that we're going have more tailwinds than we did last year. If you add synergies on top of that, I think we can easily beat Q4 of last year.

So that's why we're confident. It's not a big stretch for us when we look at the numbers going from a buck to a buck 5. I think it's a buck 5 that we need to get to $3.25. So we feel pretty good based on that just comparing to last year.

Okay. Helpful. And then your conviction level around the $10 in earnings power by by 2027 is still really high, and then and it's obviously a pretty impressive just given what's kind of happened, out there. But can you just talk about a bit about the buyback? Like, if if you are again right, on that on that assumption, it just seems like you should be incredibly aggressive here given where the stock is, and I just don't think it reflects your potential power overall.

So just thoughts on the buyback and how that could play out going forward.

Thanks Connor. It's Shane. I appreciate that. We agree that stock doesn't reflect the earnings power of the company. I think we mentioned that in the script.

I think we were really pleased with the rate that we were able to buy ALK back in the first half of the year and we can have Emily share some of that detail. We want to be balanced though as we look forward. We do want to see some of the earnings come back which we expect that they will in the second half before we continue to show the level of aggression we did in the first half of the year. We're not going to ultimately finance large share repurchases. We were able to do the first half of the year really comfortably with the balance sheet and we're just going to continue to balance that.

But you should expect if the stock is undervalued in our mind and we see the earnings coming back, we'll continue to be aggressive on the capital allocation front.

next question will come from Tom Fitzgerald with TD Cowen.

Hi, everyone. Thanks so much for the time. I was wondering if you could talk about some of the outperformance in the Hawaiian franchise and maybe unpack a little bit like how much was merger synergies, how much was maybe just the overall competitive dynamic in that market getting better?

Thanks, Tom. It was actually across the board. We had revenues were up 17% on the franchise, unit revenues were up 4%, capacity up 13%, unit costs down. So overall, I think a lot of it was the synergies, connecting of the networks, bringing everything together and just the joint brand of Hawaiian and Alaska is just really performing well. And of course industry capacity is stable and that's also helped as well.

Yes, Tom, just to add on that. Mean, are all sorry. I just want to say this was all part of our due diligence when we acquired Hawaiian. So this is exceeding our expectations. I mean to have Hawaiian produce a quarterly profit for the first time in 2019, I just want to underscore that achievement and really the power of connecting these two networks.

The other thing Andrew didn't mention was just moving assets around. We have 330s flying to Anchorage. We repositioned more 330s flying from Seattle to Hawaii. These are all maximizing the assets, the Hawaiian assets in a way that really improves the bottom line. So it's just been a great work by the entire team.

Thank you so much. That's really helpful, Ben and Andrew. And then just as a follow-up, should investors be looking for similar or better performance as we move into 2026 out of the Hawaiian franchise as synergies ramp as the network? Just get that start picking all the low hanging fruit. Thanks again for the time.

Yeah for sure Tom like that's our absolute expectation that the Hawaiian assets will continue to improve in the profit side of the business. All the same reasons. We've got lots of synergies still to unlock on the commercial and on the cost side. And then we still have things to do like get to a single operating certificate, get to a single passenger service system, get the planes in the exact right places that we want them to be in. So I think there's just a lot of upside yet to come.

And we'll move next to Scott Group with Wolfe Research.

Hey, thanks. So I just want to follow-up on just like the Q3 to Q4. Shane, is your view, is this just like the new seasonality where Q4 and Q3 are a lot more similar than they've used to be? Or would you maybe say it differently that maybe Q3 is just an under earning quarter? And then maybe just with that, did I hear $245 is the average for jet fuel for Q3 in the guide?

Is that where you think you sort of end the quarter?

$245 is the average, Scott, just to take that first. I think your question is a good question. If I had to bet I would think that Q3s of the future should be stronger than they have been the last couple of years. I think there's a lot of demand. Like people want to go out and travel and we saw that our planes are relatively full this summer and I think they're going to be full into the back half of the year.

I just think the industry dynamics were the principal issue in Q2 and Q3 this year. And I think that probably fixes itself over time. That would be my guess.

Okay. And then maybe just a little bit of help on the three and change this year going to ten and two years. I mean, that's a big lift. And what how much of that is market dependent versus just company specific and how to think about that's a big lift. Just any more help to get there?

Sure. Look, we in December we answered a lot of these questions then like our level of confidence dollars was never 100% but it was incredibly high and as close to that level of confidence as I think we could have gotten. The missing demand in the first half of the year, that obviously is something that we've got to recover over the next couple of years. But I'll tell you the $10 there was more upside to the potential of the business than we put into the number we announced. And we've talked openly about that. We're not going to give the absolute highest amount we think we can earn as a company.

There's a lot of gyrations, as you guys know, that happen in this industry. So we thought we could get to an even higher number than 10. We didn't think we needed a lot of macro help to get there. I still don't think we need a lot of macro help now. It can't continue to go backwards.

So I like the trajectory that it seems to be on here in late June and early July. We've got a billion dollars ultimately of net profit like bottom line profit from our initiatives. They're all tracking on or above plan. We're executing all of those things really, really well. And then we bought back a bunch of shares that we hadn't anticipated at all in that number last December either.

So we're going to work all sides of the formula, the denominator and certainly the profit side of the business. And I think as we look forward we remain absolutely confident and committed to that number.

Our next question will come from Jamie Baker with JPMorgan.

Hey, good morning, everybody. So a couple of my questions have already been asked. One clarification, I missed the premium comment earlier. Did you indicate when premium is expected to overtake the 50% mark of total revenue? And how does that compare with what you were thinking when you held your post merger Investor Day?

Hey, Jamie, it's Andrew. Just to clarify the 50% is our revenues coming from the premium outside of other areas like bag fees and all the rest of it. But as we shared in our prepared remarks about 35% of our revenues right now are premium based on 26%, 27%. We're very confident just given the I think we expanded the revenue premium over the main cabin between Q1 and Q2. And we're well on our way of adding premium class seats to our Dash 9s and Max's.

So we feel really good about that trajectory. We're also seeing continued strong first class cabin and we're already working on the Airbus 330s and the seven eighty seven front cabins as well.

Well, just to go back to where our expectations were last December, I think we still have an open question about how much of the revenue can be generated outside of the main cabin. But we certainly think it's above 50 and into the mid-50s. It's why we're doing things like adding more premium seats to the fleet. I think you'll continue to see us do that. And we've got lots of other potential sources of new revenue like cargo.

So we'll continue to diversify the revenue streams. I think ultimately, we'll get close to the mid-50s to high-50s outside of the main cabin.

Okay, helpful. And then I thought you did a good job articulating the response to Connor's question on the fourth quarter demand lift. But just to be clear, does your industry capacity forecast assume that we see as much capacity come out October through December as we are in the months prior to that? Because again, I think you gave a good answer as to why it can accelerate, but I didn't hear any supply commentary. And the fact of the matter is, there's no guarantee that year on year capacity in the fourth quarter is going to tighten as much as it did sort of August and into September.

Yeah. Thanks, Jamie. The most important part of that question for us is where capacity ultimately ends up in our markets. And I think as we look forward, we think that that setup looks pretty good and it's probably going to get better. And so Q3 in our markets looks better than last year and I think Q4 could be improved again.

Certainly relative to last year it would appear that the set of bunk capacity is really constructive for us. Yes, I do think we view it as any good position today and likely to get better as schedules get firmed up going forward.

We'll move next to Kathryn O'Brien with Melius Research.

Hey everyone. I'm Katie O'Brien with Goldman actually. Good to see you guys. Good to hear from you. A question for maybe for Shane.

This year, I believe more than a typical year, you have some fixed costs, you know, you can't take out because of the ongoing integration efforts, even as you cut capacity, just investments in merging the two operations. Can you help us think about how much of a drag that is to 2025 outlook?

Yes. Thanks Katie. Yes, I appreciate the question. Just to get a couple of the facts out there. We essentially grew as we thought we were going to grow in the first half of the year and we've pulled two points of growth out of the back half of the year.

And to go one more click down because I think it's important to understand, we pulled 2.5 points of mainline capacity. We actually added five points of regional capacity. So there is a mix issue that's probably worth a half to a point, call it three quarters of a point of drag for the rest of the year. And then because we pulled the capacity just too close in, we're really not able to get much of the variable cost that's not directly related to departing a flight out of the business. And it's essentially a one for one hit.

So a point of lost capacity is essentially hitting our CASM Ex by one point. That we do intend to not become the norm. We don't like building the company for a certain level of capacity and then not flying it. Although and I was as you might imagine deliberate in my prepared remarks to mention we're going to make decisions about capacity that are margin focused. And so if we view it as a better margin outlook to cut capacity closer we will do that.

But our goal going forward is to ultimately fly what we say we're going to fly. I think we came into the year with a really responsible amount of capacity that we intended to deploy year over year and we're going to have a similar very deliberate growth rate next year.

Okay, clear. And then maybe one for Andrew. Can you just break down how demand has changed in recent weeks, maybe across the different segments? Where are you seeing the biggest turnaround from a geography standpoint? Like, I think you mentioned some corporate uptick. Can you help us think about by maybe by geography, traveler type, like what you've seen over the past couple of weeks if things have accelerated?

Yes. Thanks, Katie. I would say it's across the board. And as Ben well articulated, the various factors, whether it's capacity coming down, our synergies and initiatives really starting to ramp. But I do think when you look at business demand in the last two weeks, it's been up double digit volumes and revenue has been up the same.

We've seen leisure agencies, they're actually up 7%. So all of these factors that we're seeing are continuing to get stronger. I would say that as we said in our prepared remarks, there was this real hard inflection point across the system where yields and volumes all turned positive. So it's very encouraging. We're seeing it on the leisure side, We're seeing it on the business side.

And as already been articulated, the capacity backdrop as we move into the back half of the year, I think is very constructive.

Our next question will come from Brandon Oglenski with Barclays.

Hi, this is John Dorsett on for Brandon. Thanks for the time today and congrats on the second quarter results. Just wanted to follow-up on earlier question on the integration. On Slide four, you kind of have bucketed the synergies initiatives and the quantitative, I guess, targets for the integration. How far along are you with those and what kind of progress should we expect into the fourth quarter?

Hey, John, it's Ryan. Thanks for the question. Yeah, so that Alaska Accelerate slide obviously has, it's a little bit more than just synergies, kinda like we shared back in December. Some of this stuff we were working on even before the merger happened. But this year, we had kinda said we were gonna get probably 200,000,000 of synergies. We sort of said that back in December. We're tracking ahead of that right now, which is encouraging to see.

We've talked about how it's ramping up throughout the year. The first quarter we didn't get as much as we could have had the deal closed a lot sooner last year. The fourth quarter though by far has the most. So, you can sort of back into on a year over year basis, we're gonna see the highest amount in the fourth quarter. If you certainly were to annualize that fourth quarter number, it's gonna be much higher than 200,000,000.

And so, I'd say we're tracking very well and it's been exceeding our expectations. So, going into '26 and as we bridge ourselves to the $10 earnings per share, next year as we annualize a lot of this and add new things to it, it's gonna get even better and better. And we haven't even launched the new loyalty program or premium credit card yet, which we expect a nice uptick in the fourth quarter from as well.

Okay, great. And just a follow-up. How is the progress going along with the single carrier certificate coming along?

Hey, John. What I'll say is it's going extremely well. We're on track for October and not just only on the single operating certificate, but on the single reservation system. We're launching single loyalty next month, and we commence joint collective bargaining with all our unions. So as you guys know, this is not the first time we do this.

And I just a big shout out to all the teams. This is a lot of work while we work on all these initiatives. I'm super proud of our entire Alaska Air Group team for really executing well on all these milestones.

We'll hear next from Andrew Dodora with Bank of America.

Hey, good morning, good afternoon, everyone. First question maybe for Andrew, maybe a point of clarification, Maybe it's just me, but I was a little confused around your revenue intake commentary in your prepared remarks. I think you said July up double digits, August up low single digits and September flat. I guess what exactly does revenue intake represent? And I guess why would it be kind of decelerating as you go further out into 3Q?

Alaska Air Group (ALK) Q2 2025 Earnings Call Transcript

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