Alaska Airlines reports 1Q loss, uncertainty

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Alaska Airlines reported it’s first quarter earnings, with a loss of $193 million, or ($1.68) per share, amid localized disruptions and sharply higher fuel prices. The carrier was impacted by civil unrest in Puerto Vallarta just ahead of the spring break travel season and historic rainstorms in Hawaii, representing about 30% of the group’s capacity.

First quarter revenues were $3.3 billion, with RASM up 3.5% year-over-year, despite the aforementioned headwinds. Premium demand remained robust, up 8% YOY, and international long-haul expansion has been successful, with Seattle-Tokyo reaching profitability in less than a year, and load factors over 90% on Seattle-Tokyo and Seattle-Seoul routes. Nonetheless, with a significant rise in CASM, the carrier fell short of street expectations. A consolidated statement of operational earnings is shown below:

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Operating costs rose year over year, with CASM up 6.3%. This was driven by the average fuel price rising to 2.98 per gallon during Q1 2026, compared with $2.61 in 2025. Prices have continued to rise during April with the Iran War and associated uncertainties in the Gulf region. Those uncertainties have resulted in management suspending full year guidance due to fuel price volatility and macro-economic conditions. Guidance for the second quarter indicates an adjusted loss in the range of $1 per share.

The company generated $421 million in operating cash flow during the first quarter, repurchased 4.7 million shares of stock in the first quarter for $203 million, has $20 billion in unencumbered assets, made $340 million in debt payments, including $113 million in prepayments during the quarter, and increased its revolving credit line, bringing total liquidity to $2.9 billion.

A new international business class service was introduced on 787-9 aircraft that includes enclosed suites, upgraded menus and amenities, and forthcoming Starlink connectivity, which is already in place for the regional fleet, with installations progressing on the mainline fleet. The Alaska-Hawaiian mobile app was also introduced as the carriers transition to a dual-brand but single-passenger service arrangement.

President and CEO Ben Minicucci stated on the conference call that two external events along with sharply higher fuel prices created uncertainty, along with once in a generation rainstorms in Hawaii and civil violence in Puerto Vallerta. Management remains excited about their Alaska Accelerates strategy, which they are executing despite high fuel costs. They have reduced PuertoVallerta capacity by 30% in the second quarter in reaction to the demand drop, and continue to see strength across the network as a whole.

Fuel costs were $100M higher in the first quarter and are expected to be $600 million higher in the second quarter, an impact of $.70 per share and $3.60 per share respectively. Fuel volatility has put pressure on the entire industry.

Alaska is focused on implementing the Alaska Accelerates strategy. Tomorrow the carriers will integrate into a single passenger service system. Alaska Airlines has now fully joined the OneWorld alliance. The Alaska Airlines international network continues to grow, with Rome beginning next week, and other routes on target for later new service later this year.

The loyalty program continues to grow, with Bank of America as a credit card partner for the Atmos loyalty program showing a 12% revenue increase over 2025. Despite historic rainstorms in Hawaii, the carriers delivered the highest on-time performance in the industry. Today more than half of revenues come from outside the main cabin, including premium, cargo, loyalty, and ancillary fees.

Despite the external uncertainties, demand has remained resilient at Alaska, with the second quarter outlook remaining robust. April fuel will be $4.45 per gallon all in, and a quarterly average of $4.50, resulting in an EPS estimate of a $1.00 per share loss. Absent the fuel price spike, the quarter would be strong.

The Bottom Line

Alaska’s progress with its merger integration and growth strategy appear to be moving forward well, despite numerous headwinds and the impact of higher fuel prices. Alaska will continue to be aggressive with its growth strategy internationally, and appears to be well positioned despite the high fuel costs to further optimize performance. Absent fuel, the company appears to be “executing on all cylinders.”