Alaska Air Group Q1 2025 Earnings Report

Alaska Air Group EPS Results

• Actual EPS: -$0.77
• Consensus EPS: -$0.72
• Beat/Miss: Missed by -$0.05
• One Year Ago EPS: -$0.92

Alaska Air Group Revenue Results

• Actual Revenue: $3.14 billion
• Expected Revenue: $3.19 billion
• Beat/Miss: Missed by -$52.69 million
• YoY Revenue Growth: +40.50%

Alaska Air Group Announcement Details

• Quarter: Q1 2025
• Date: 4/23/2025
• Time: After Market Closes
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 11:30AM ET

Alaska Air Group (NYSE:ALK), through its subsidiaries, operates airlines. It operates through three segments: Mainline, Regional, and Horizon. The company offers scheduled air transportation services on Boeing jet aircraft for passengers and cargo in the United States, and in parts of Canada, Mexico, Costa Rica, Belize, Guatemala, and the Bahamas; and for passengers across a shorter distance network within the United States, Canada, and Mexico. Alaska Air Group, Inc. was founded in 1932 and is based in Seattle, Washington.

Alaska Air Group Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the Alaska Air Group twenty twenty five First 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.

[Operator]

John.

[Ryan St. John, Vice President - Finance Planning & Investor Relations at Alaska Air]

Thank you, operator, and good morning.

[Ryan St. John, Vice President - Finance Planning & Investor Relations at Alaska Air]

Thank you for joining us for our first quarter twenty twenty five earnings call. 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, you'll 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 our first quarter GAAP net loss of $166,000,000 Excluding special items and mark to market fuel hedge adjustments, Air Group an adjusted net loss of $95,000,000 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.

[Ryan St. John, Vice President - Finance Planning & Investor Relations at Alaska Air]

Lastly, as a reminder, forward looking statements about future performance may differ materially from 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.

[Ben Minicucci, CEO & President at Alaska Air]

Thanks, Ryan, and good morning, everyone. The challenging start to this year was not what we expected as air travel demand diverged from the strength we saw just a few months ago. However, what remains certain at Air Group is our unwavering confidence in our strategy, Alaska Accelerate. We are executing with discipline, focusing on long term value creation, and taking the right steps to strengthen our business through any cycle. Regardless of what's happening today, we believe firmly in our ability to deliver performance and grow profitably, both now and in the years ahead.

[Ben Minicucci, CEO & President at Alaska Air]

Air Group has a proven track record, not just of weathering downturns, but of emerging stronger every time. We're operating from a position of real strength. One of the industry's healthiest balance sheets, a diversified revenue base with nearly 50% generated outside the main cabin, market share leadership in our key hubs, and a substantial 15% cost advantage over our largest competitors. These advantages aren't just meaningful, they're decisive and they position us to outperform in any environment. That said, the current landscape has been challenging to predict.

[Ben Minicucci, CEO & President at Alaska Air]

While we're not updating our full year guidance today, we remain confident in our outlook. Even in the event of a recession, we expect to remain solidly profitable in 2025 and are fully committed to our share buyback plan of $1,000,000,000 over the next four years. In fact, given where our stock price has trended, the current environment has provided a unique opportunity to accelerate our share repurchase program that is already underway. As we outlined at our Investor Day last December, winning in this industry requires scale, relevance and loyalty. That fundamental belief is as relevant today as it was four months ago.

[Ben Minicucci, CEO & President at Alaska Air]

And we have conviction in our ability to deliver $10 of earnings per share by 2027 and do not believe what is happening today jeopardizes that target in any way. Our energy is fully committed to driving Alaska accelerate and unlocking a billion dollars in incremental profit as we continue to strengthen various aspects of our business. Importantly, what's in our control is going according to plan. This is evidenced by our year over year industry leading unit revenue performance that is several points ahead of peers, even those peers who have greater exposure to international markets that are clearly outperforming domestic trends. Integration synergies are tracking slightly ahead of plan through the first quarter and our Hawaiian assets are performing well.

[Ben Minicucci, CEO & President at Alaska Air]

We delivered a seven point margin improvement in our combined Q1 results year over year, including a double digit margin improvement from our Hawaiian assets. Demand to, from and within Hawaii remains strong, especially in premium cabins, supported by continued loyalty growth and the value we're unlocking through a larger, more efficient network. Huukaii by Hawaiian memberships are up 90% since year end and Hawaiian card acquisitions have more than doubled year over year and we are well on our way to building the scale, relevance and loyalty needed to lead as Hawaii's trusted airline in this premium leisure market. As we continue advancing our vision to connect guests to the world, we're just 18 away from launching our first intercontinental flight from Seattle to Tokyo Narita. This marks a major step forward in the evolution of our largest hub as we chart a path to serving at least 12 intercontinental destinations by 02/1930.

[Ben Minicucci, CEO & President at Alaska Air]

It's a bold move that positions Air Group to capture high value international demand while deepening our relevance and loyalty across our network. We know that delivering a seamless end to end premium travel experience is a key differentiator and we're fully committed to investing in every aspect of it. From our lobbies and lounges to premium cabins, food and beverage and onboard service. Even in the current environment, our premium revenues continue to outperform and our premium cabin retrofits are on track to increase our premium seat exposure to 29% by next summer. We're excited to expand our loyalty offerings and we'll be launching our uniquely branded single loyalty platform and our premium credit card later this summer, another exciting step in enhancing our guest experience.

[Ben Minicucci, CEO & President at Alaska Air]

And as we continue to diversify our revenue streams, our cargo operations are ramping to full capacity. We took delivery of two more Amazon A330 freighters for a total of eight and our cargo revenue is up 36% year over year. In terms of execution, our integration milestones remain on schedule. Our teams are working through the process to achieve a single operating certificate by the fourth quarter of this year. Work is underway to bring both passenger service systems together by early twenty twenty six and we're starting joint bargaining negotiations across our union groups.

[Ben Minicucci, CEO & President at Alaska Air]

We know we have a good playbook in place and we're focused on executing every step of the way. I also want to take a moment to thank our incredible employees. Their hard work and dedication are what make the Alaska Accelerate vision possible. We're currently wrapping up our annual employee engagement survey and I'm thrilled to share that engagement scores are at record levels, higher than at any point since we began the survey fourteen years ago. That speaks volumes about the alignment and energy across our company.

[Ben Minicucci, CEO & President at Alaska Air]

Our employees believe in our vision and they're already helping us bring it to life. We are all energized by the opportunities ahead. Pair Group is on a clear path to build scale, relevance and loyalty, laying the foundation for strong long term returns. I'll say this with complete confidence. Our company is significantly undervalued relative to where we're headed and the strength we're already showing in the areas fully within our control.

[Ben Minicucci, CEO & President at Alaska Air]

And with that, I'll turn it over to Andrew.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Thanks, Ben, and good morning, everyone. My comments today will focus on first quarter performance, but more importantly, the successful trends we're seeing that underpin our Alaska Accelerate strategy. In the first quarter, total revenues reached $3,100,000,000 up 9% year over year and capacity growth of 3.9%. Unit revenues finished strong, up 5%. First Class, Premium Class and importantly Main Cabin all delivered positive unit revenues year over year.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Loyalty continues to show strength. We generated $550,000,000 in Q1 from our co brand cards up 12% year over year. Importantly, new cards across the Alaska and Hawaiian networks increased 26% with flown segments by our elites up 34%. These statistics demonstrate the power of our combined network and incredible value that accrues to guests enrolled in our loyalty programs. Turning to premium, our revenues grew 10% and represent approximately 34 of our total revenues.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Our continued investment in premium cabins are coming to life. By July of this year '80 '4 of our 900s and -9s will have been retrofitted with six more premium class seats with all 159 aircraft completed by year end. In the next several weeks we will receive our first three MAX 8s configured with a 161 seats including four more first class seats. The conversion of our existing 50 nine-800s into the same configuration begins this summer as we look to improve guest comfort while reducing costs and increasing revenues. Taking a step back, more than 200 of our Boeing seven thirty seven aircraft will have additional premium seats by the summer of twenty twenty six and that's without removing any seats from these aircraft.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

This will add one point three million first and premium class seats per year and bring our premium seat mix to 29% further strengthening our position in what we believe is a long term driver of guest satisfaction and revenue and well suited to our network's long stage length. Our synergy and revenue initiatives are on track despite near term economic volatility. I want to share with you three leveraged commercial initiatives that illustrate Alaska Accelerate is working and why this deepens our conviction in our positioning over the next several years to deliver results. In Seattle and Portland where we have leading market shares and the number one brand preference, our scheduled banking strategy is yielding significant positive results. We are increasingly more relevant to more guests and driving more connecting traffic through these two hubs.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

In the first quarter connecting passengers were up 15% in Seattle compared to last year and we see similar trends as we look forward. Our banking schedule in Portland rolled out this month and connecting bookings for May and June are up more than 200%. In Hawaii, our recently acquired Hawaiian Airlines operations are producing strong results including West Coast to Hawaii and Neighbor Island flying as we unlock the power behind a combined network, better utilization and more connections. Unit revenues of our Hawaiian Airlines assets were up 9% year year, nearly twice that of system average. And not surprisingly as a premium leisure market, we saw strength in premium revenues that were up 17%.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Furthermore, we're continuing to grow our loyalty with State of Hawaii card acquisitions up nearly 40% making it one of our highest percentage growth markets. And as Ben mentioned, Kokaiba Hawaiian memberships for our exclusive Hawaii resident travel program are up 90% since December and we now have well over 200,000 members in just five months since launch. And in San Diego, a key focus marker for us. We just announced a 30% increase in flights starting this fall including new nonstop service to Chicago, Denver and Phoenix. With these investments we will have the highest network utility in San Diego by a wide margin and offer nonstop service to 44 destinations 26% more than any other carrier.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Credit card growth surpassed our San Diego capacity growth which is evidence that our network investments are driving outsized loyalty. In fact San Diego now has the highest average card spend of any city we serve within the state of California. Our product and offerings are well suited for San Diego and we are excited to see San Diegans respond positively to our continued expansion and differentiated premium service. Now turning to our outlook, we expect our capacity to be up approximately 2% to 3% in the second quarter. Importantly, this growth is all driven by our Hawaiian Airlines assets which are performing exceptionally well.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Hawaiian asset growth is slated to be up double digits as we implement network changes and increase utilization while our Alaska assets are not expected to grow at all this quarter. We still expect our full year capacity growth to be approximately 2% to 3%. That said, we are currently evaluating certain off peak capacity adjustments this fall as we continue to monitor the demand environment. Unit revenues are expected to be flat to down low single digits in the second quarter. Overall bookings have stabilized as we look forward albeit at lower yields than originally planned.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Hawaii continues to book well with flat to positive loads and yields despite double digit increases in capacity. Managed corporate revenue after posting a record January ended the quarter up 3% and has also stabilized. We've seen material improvements from two of our largest accounts in the last several weeks after a meaningful step back in February and March and total forward bookings are up low single digits improved from where they seem to have bottomed out in March. Although the year has not started off as we'd envisioned, we remain focused on building scale, relevance and loyalty through our commercial initiatives for long term success. Our revenues are more diversified than ever and this will only continue to grow as we execute our plan over the coming years adding strength and resiliency to Air Group.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Our yields, loyalty, traffic and revenue growth all point to a strong foundation that will bring additional revenue upside as the environment further stabilizes and ultimately recovers. And with that, I'll pass it over to Shane.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Thanks Andrew. For the first quarter, we reported an adjusted loss per share of $0.77 which was $07 or just $10,000,000 of profit below our guide. This was a strong result given our more than 90% domestic exposure and the rapidly changed demand backdrop the entire industry experienced in the quarter. More importantly, execution of the very early stages of our 2027 Alaska Accelerate vision we shared at Investor Day last year is going extremely well. The only disappointment in the first quarter was the softening macro environment.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Our synergy ramp, our commercial initiatives and our cost performance were right on or better than our plan, and our domestic unit revenue led the industry. These are strong initial steps on our path to achieve at least $10 in earnings per share. Moving to our balance sheet and liquidity. Our total liquidity, inclusive of on hand cash and undrawn lines of credit, stood at $3,300,000,000 at quarter end. Scheduled debt repayments for the quarter were $155,000,000 and are expected to be approximately $100,000,000 in the second quarter.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Our debt to cap stood at 58% with our net leverage at 2.1 times. Share repurchases have totaled $149,000,000 year to date and nearly $400,000,000 in the last six months or approximately 5% of our market capitalization. We plan to continue to execute repurchases aggressively at our current low market valuation, given our conviction and our ability to drive future earnings. And we'll do so while maintaining our commitment to a healthy balance sheet. First quarter unit costs were up 2.1 year over year, coming in better than expected and reflecting the new contract we ratified with our Alaska flight attendants in February.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Our cost expectations remain unchanged and on track for the year with the largest areas of year over year increases in wages and real estate costs as we've discussed before. Also as indicated last call, the second quarter will be the most pressured this year with improving unit cost trends in the second half of the year. For the second quarter, unit costs are expected to be up mid to high single digits consistent with our original plan and on capacity growth of just 2% to 3%. Our fuel price averaged $2.61 per gallon, consistent with our original expectation. While crude prices came down recently, West Coast refining margins spiked in the last three weeks of the quarter to well above $0.70 due to unplanned refinery maintenance events.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Margins have since come back down over the past two weeks. For the second quarter, we expect EPS of $1.15 to $1.65 reflecting approximately six points of revenue impact from the demand backdrop. Absent this softer outlook, the areas of our business within our control are performing well and remain in line with our prior expectations. While we've started to see stabilization, the environment remains challenging to predict and for now we will pause on providing an update to our full year expectations. To provide some context to the rest of the year however, we have seen a five point deterioration of revenue for the first half And if this continued throughout the rest of the year, we still expect to be solidly profitable and expect to continue to outperform on a domestic unit revenue basis.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Demand fluctuations and uncertainty are not new for our industry or our team. We are well versed in navigating these environments and we will again continue to focus on building strength into Alaska. So when demand returns to more robust levels, we are poised to capitalize on it and outperform our peers. We have an exciting future ahead of us with many unique drivers of value and are pleased with the initial stages of delivering on both integration and our Alaska Accelerate commercial and synergy initiatives this quarter. We believe we have a business model that can outperform in any industry backdrop and have the best domestic setup for the long term.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

And with that, let's go to your questions.

[Operator]

Thank you. And our first question will come from Catherine O'Brien with Goldman Sachs.

[Catherine O'Brien, Vice President at Goldman Sachs]

Good morning, everyone. Thanks so much for the time. I just want to dig in on the 2Q guide a little bit, if you'll allow it. Can we just talk about some of the moving pieces underlying that six point headwind in the flat to down RASM guidance? Maybe first just to set the baseline, how much of that quarter is already booked.

[Catherine O'Brien, Vice President at Goldman Sachs]

And and then it sounds like corporate's moved off the bottom, internationally be getting a little bit better, cargo's growing, you've got new premium card launching this summer, Hawaiian synergies are ramping ahead of schedule you noted in the prepared remarks. So a couple of positives as we go into 2Q. Just trying to get a sense of how you're assuming trends in some of these buckets evolve in the second quarter and what's offsetting the positive? I know obviously the macro is a little bit worse, but just how all those pieces fit together would be super helpful.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Hi Katie. Good morning. Thanks for the question. So a couple of things. We're about 62%, sixty three % booked for the quarter.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

I would say a couple of things about the environment. Number one, I think holistically it is about the general environment is where we're seeing all the softness. It's not in any of our synergies, our initiatives. We're seeing all of our hub banking working. We're seeing strong loyalty growth.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

We're seeing strong Hawaiian assets. The industry is growing at 2x domestically than it was in

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

the first

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

quarter and the other important thing is I think we're very excited about we might have reached a new baseline for RASM for the first quarter as we have really worked hard to change the seasonality and get to a better place. So as we sit here today, the macro environment is about the only thing that is weighing us down and on the business side again we're sort of seeing a stabilization there of bookings. There are some sort of in the manufacturing and high-tech that are still soft and then there are others in professional services that are doing well. So overall flat to down mid single digits is sort of what we're seeing today.

[Catherine O'Brien, Vice President at Goldman Sachs]

Okay. Got it. And maybe just to focus on Hawaiian for a moment, 14 margin improvement that's impressive in this environment. Is there some element of a longer booking curve helping in that business in the first quarter? Or are you expecting a similar level of improvement in 2Q?

[Catherine O'Brien, Vice President at Goldman Sachs]

And with Hawaiian being a more premium leisure destination, are you seeing any negative impacts on our bookings? That's holding a little bit better than the system? Thanks so much for the time.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yeah. The Hawaii franchise and this sort of 25% mainland of our ASMs is actually sort of bucking the trend. The neighbor islands are up double digit unit revenues. The international franchise in Hawaii actually margins improved 15 points and the mainland with all the connections, the banking, the selling of each other's metal, it's just been performing very well and we're actually seeing positive unit revenues in that regard. So very, very good place there.

[Ben Minicucci, CEO & President at Alaska Air]

And Katie, it's Ben. And what we're forecasting, and it'll depend again on the macro environment evolves, but the last three quarters for Hawaiian should be close to breakeven. So we're extremely positive about how our acquisition is performing.

[Catherine O'Brien, Vice President at Goldman Sachs]

Thanks for the time.

[Ben Minicucci, CEO & President at Alaska Air]

Thanks, Katie.

[Operator]

And our next question will come from Tom Fitzgerald with Cowen and Company.

[Tom Fitzgerald, VP - Equity Research at TD Cowen]

Hi, everyone. Thanks so much for the time. I'm just wondering, thinking about demand, if we could talk about California for a little bit and maybe comparing and contrasting San Diego with SF and LA and how characterize the competitive environment in those markets?

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yeah. Thanks Tom. I think as you can see publicly in the tape there's been a very significant increase in ASMs in San Francisco as major carrier there gets back and above pre COVID levels. So I think we're sort of seeing pressure there but I will say that in San Diego and that's why you see us leaning into that. It's just performed very, very well on our growth.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

It's performed very, very well. So that's a place that we're going to continue to invest in.

[Tom Fitzgerald, VP - Equity Research at TD Cowen]

Okay. Okay. That's really helpful. And then, guess, I don't know, has there been any change in how you're thinking about just the premium product overhaul and that the retrofits just given the softening in demand given there's been a lot of growth in that market, just your latest thinking there, just given all the change in the macro?

[Tom Fitzgerald, VP - Equity Research at TD Cowen]

Thanks again for the time.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yes, thanks. If anything, I'm actually very excited that we actually did that for a couple of reasons. Number one, just looking at our first class cabin, it's sort of been uninfected by the macro environment right now. We've seen very strong double digit increases in revenue. We've also had given the acquisition a very big change as well as some program changes, big step up in our elites and so we need to make sure we continue to have premium class seats available for our top elites that they can upgrade into.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

And again overall as I shared in my prepared remarks, we've not removed any seats from our aeroplanes and in fact on the 800s we've increased the seats. So we feel very well positioned with how we're rolling out our premium product.

[Ben Minicucci, CEO & President at Alaska Air]

Thank you, Tom.

[Operator]

And our next question comes from Connor Cunningham with Melius Research.

[Connor Cunningham, Analyst at Melius Research LLC]

Everyone, thank you. Just on the $10 earnings number by 2027, surprised you guys kind of have so much capability. It sounds like you have a ton of conviction around. So I'm just curious if you could just unpack what you're seeing that will bridge us from here till then. It just seemed obviously, the macro is different, but you've had more time to integrate the two companies.

[Connor Cunningham, Analyst at Melius Research LLC]

You're seeing how the competition is responding to your long term plan. So if you could just talk about why you feel so confident in the outlook come 2027. Thank you.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Hey Connor, this is Shane. Thanks. Appreciate the long term oriented question which we love to talk about. Look I think and you heard a lot of this on the script. All of the things that we laid out at Investor Day in terms of commercial initiatives, the synergy ramp, integration milestones, cost management we delivered on in the first quarter.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

In fact each one of those things was on plan or better than plan. And, you know, we tend to be very focused on delivering the things that we set the company down a path to go and execute. And we're really, really happy with how we performed in the first quarter. So if you look at the billion dollars of incremental profit from initiatives and from synergies there's no reason to think that we can't go deliver all of those. We're also going to buy a lot of shares back if the price remains undervalued like it is today.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

So look we're not going to predict a three year recession that's super deep. If we believe that the macro environment will come back, it'll rebound. I don't know when. If it's in the second half of this year or if it's sometime next year. But when it does there's no airline better positioned domestically to ultimately capitalize on that and that will be happening while we're still executing on this billion dollar ramp up of initiatives and synergies.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

So no reason for us to believe we can't go get at least $10 of EPS by '27.

[Connor Cunningham, Analyst at Melius Research LLC]

Okay. Love that. And now I'm going to ask you a really short term question. So I'm sorry. Can you just talk maybe to Katie's original question.

[Connor Cunningham, Analyst at Melius Research LLC]

I'm just trying to I think we're all trying to understand how the booking curve and pricing in general is moving throughout the quarter. From what I think about like March, you guys probably had a lot of that booked in February before things really started to change. So like as you sit here today, are people discounting in June more aggressively than they are in April? And I mean, I'm just trying to understand like what's contemplated within the near term outlook as you try to manage through things in general. Thank you.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Yeah, Andrew will answer it. One just piece of context, think we said it, we had a three point revenue sort of headwind from macro in Q1 we believe it's six points in Q2. That is really what's driving the short term. I think it's consistent on a domestic basis with what we've heard from other airlines. So I don't think we're in any different situation but Andrew can maybe say more about sort of where we were booked a few weeks ago for Q2 and what we're seeing in terms of stabilization and fare environment.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yeah, I think just on the sequential, I think April's going to be a little bit stronger and I think we've seen some good close in demand just to be frank as we move into April and a little bit softer in May and June where ASMs are up a bit more and have been more fully exposed to the fullness of this downturn that sort of happened in February. So that's really what's going on and I think again we sit here today, if you look at our load factor in the first quarter, what we believe our loads are going be in the second quarter, volume we're not concerned about. I think we've got good solid demand for our product. It's just working out where the industry pricing is going and what we need to do to fill those seats.

[Connor Cunningham, Analyst at Melius Research LLC]

Appreciate the detail. Thank you.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Thanks, Thanks,

[Operator]

Your next question comes from Andrew Didora with Bank of America.

[Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch]

Hi, good morning everyone. So Shane, I guess you and Ben have spoke several times about the potential for accelerating your buybacks. Just curious like how should we think about the potential size of what you could accelerate here? Or I guess kind of your comfort level of how that could be like are there any kind of balance sheet or liquidity guardrails that we should be aware of that could be somewhat limiting factor in the near term? Just trying to think about what the buyback potential could be kind of very near term here.

[Ben Minicucci, CEO & President at Alaska Air]

Hey, great question, Andrew. I'll start and then I'll give it to Emily to provide some context on the liquidity questions you had. Look, I said in my script, I think we're significantly undervalued. You know, we announced our billion dollar share buyback at Investor Day. And we were again in the $60.70 dollars range.

[Ben Minicucci, CEO & President at Alaska Air]

So this is just a significant opportunity for us to accelerate. So we've done some math and I'll just hand it over to Emily just to give you some context on how we're thinking about it here in the next few months.

[Catherine O'Brien, Vice President at Goldman Sachs]

What the opportunity is to accelerate this program this year and the balance sheet impact that that would have, it really will be de minimis in terms of where we're at today with debt to cap and our net debt to EBITDAR metrics. So we could do up to half the program and have essentially no change in trajectory for those metrics.

[Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch]

Got it. Very helpful. And then, Shane, maybe a little bit of a longer term question, though you may not like it. I know you're not guiding to '25, but I guess I'll ask the '26 question. The flattish CASM that you put in your slide deck in 4Q, should we think of that as a good exit rate into 2026 or any puts and takes you would like to add right now?

[Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch]

Thank you.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Thanks Andrew. If you're asking if we're going to have a flat CASM Ex in 2026 I can't answer that question. Although our head of FP Day was just setting up the budget review calendar already for later this year, yesterday. But I think look we'd

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

like to grow a little

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

bit more. Obviously we're planning to take a good number of Boeing aircraft at the end of the year. We've got some more 787s coming. You know we continue to look forward to expanding international out of Seattle next year. And I think we've got to get into that growth range we talked about at Investor Day somewhere around three or 4% to have more of a flattish mindset around unit costs.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

But the thing and you guys I know we talk about this all the time. We will always talk about this. Our relative cost performance I think even this year will be amongst the best in the industry if not the best on one of the lower growth rates. Lots of synergy opportunities. Lots of opportunities to get productivity out of the aircraft assets from Hawaiian and all of our folks as well.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

And we're going go execute on those. So I think from a cost competitive position we're going to be really, really well positioned over the next few years. And that's going to serve us well ultimately in terms of driving earnings.

[Ryan St. John, Vice President - Finance Planning & Investor Relations at Alaska Air]

And I would just add, this is Ryan. Some of our cost synergies really ramp up in the fourth quarter. So, a lot of that annualizes in 2026. So, I do think we'll have a pretty good tailwind on at least the cost synergy side next year, which will obviously help offset sort of any core inflation.

[Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch]

That's great. Thanks everyone.

[Ben Minicucci, CEO & President at Alaska Air]

Thanks Andrew. Thanks Andrew.

[Operator]

And we'll move next to Jamie Baker with JP Morgan.

[James Baker, Managing Director & Investment Specialist at JP Morgan]

Hey, good morning everybody. So obviously not air groups, first downturn ever, but obviously one difference to this downturn is that several of your competitors are already struggling with profitability. So ordinarily, I might be thinking about Alaska coming out the other side even stronger than if the downturn hadn't happened. Never let a good crisis go to waste, all that kind of stuff. But your plate seems pretty full at the moment.

[James Baker, Managing Director & Investment Specialist at JP Morgan]

So I guess my question to Ben is, if

[James Baker, Managing Director & Investment Specialist at JP Morgan]

one

[James Baker, Managing Director & Investment Specialist at JP Morgan]

of your lieutenants came to you with an incremental idea, and I'm not talking M and A, I'm thinking more from a network perspective, taking advantage of OA pressures, do you think you'd execute? Or is the preference just to kinda keep your head down and and power through? I'm just trying to decide if the downturn structurally helps you longer term and it it's not clear to me if it does.

[Ben Minicucci, CEO & President at Alaska Air]

Know, Jamie, I love your questions because I think

[James Baker, Managing Director & Investment Specialist at JP Morgan]

Thanks, Ben.

[Ben Minicucci, CEO & President at Alaska Air]

You know, they're actually very thoughtful. Look, think if you were deeper in our team, our team mindset is we never look a great idea away. And we will make tradeoffs to what is best, you know, long term for Alaska Air Group. So if we saw an opportunity and we needed to make a tradeoff and move something off to the right so we can put another initiative in that we think would have greater value to the company, we would do that. We would, you know, we weigh all the possibilities and make a move.

[Ben Minicucci, CEO & President at Alaska Air]

We are nimble. We are decisive. And I think we have, you know, the team to go pull it off. So that's how that's just how we think.

[James Baker, Managing Director & Investment Specialist at JP Morgan]

Okay. And then my follow-up, what would be the avgeekiest thing you've ever done? Oh, wait, sorry, you were asked that at the Wings Club. On Slide 10, progress underway with the FAA on the single operating certificate in fourth quarter. It seems, and I'm not in the weeds, but it seems that everything involving the FAA takes longer these days than anticipated.

[James Baker, Managing Director & Investment Specialist at JP Morgan]

So if that timing slips, does it push the other two milestones to the right? Could see maybe it would do that for the res system, it wouldn't preclude the collective bargaining momentum. Is that the right way to think about it if the second milestone does shift to the right?

[Ben Minicucci, CEO & President at Alaska Air]

Yeah. I think that's the right way to think about it. Right now, what I'll say is single operating certificate, we just completed our second submission. The third one is going in, sorry, the second submission was accepted by the FAA, the third submission is in. Single operating certificate is really tracking the plan, so we're really confident by the October date.

[Ben Minicucci, CEO & President at Alaska Air]

Our PSS, as you know, we did it last time. That is really well in hand with our team. And the joint marketing's are just beginning right now. They really are not interrelated. We're starting those independently of the other milestones.

[Ben Minicucci, CEO & President at Alaska Air]

And, you know, we've done this before, so we know how to go do this. The playbook is clear for us. So I have a lot of comments. The team really knows how to go do this. And the other thing I'll say is our employees are excited, like I mentioned in my script.

[Ben Minicucci, CEO & President at Alaska Air]

They want this integration to happen. They want to get it behind us and look forward to, you know, a combined company who's going to go do big things.

[James Baker, Managing Director & Investment Specialist at JP Morgan]

Okay, perfect. Thanks for the answers Ben. Appreciate it. Take care.

[Operator]

Your next question will come from Scott Group with Wolfe Research.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Hey, thanks. Good morning. So I think you talked about premium and main cabin unit revenue both positive in Q1. Can you just talk about like directionally the spread between the two and to what extent or how much does that spread widen into Q2?

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Thanks, Scott. I think what I would say on that is that the first class cabin and I'm not going to get into specific spreads here but the first class cabin actually is really doing strong and outperforming. Think as you know with the premium class it's undergirded by main cabin seats. So the real opportunity there is the roughly 15% revenues on the sell up. And I think as we go into Q2, again, that's why we're very focused on keeping full aeroplanes results in premium class performing better than it would when they were not full.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

So I would say though that PC is probably a little softer than certainly first class but overall we see the relationship holding as we go in. And just to say it on the saver side, we still have very generous availability on that around 60% but in the first quarter we were able to actually expand our upsell from saver in the main cabin. So we got pricing and yield from that. So we're getting better and smarter about how to manage saver in this downturned environment.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Okay. And then Shane, I know you don't have a full year guide, so maybe there's not much to say. But in that scenario you laid out of, hey, there's a five point revenue headwind in the first half. If we just assume that that continues stabilizes, but that similar five point headwind to revenue in the second half. Is there a reason to think Q3, Q4 are any better than Q2 as synergies ramp?

[Scott Group, MD & Senior Analyst at Wolfe Research]

Or I don't know, maybe seasonality makes that harder? I don't know. How would you think about that?

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Yeah. I

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

think, first of all, the situation we see today persists, we still think we're going to be amongst the top three industry margin producers. So hence the comment in the script that will be solidly profitable still. The synergy ramp is pretty I think firm. We've got a really just to the question Jamie asked on integration and timelines. These things are pretty tight in terms of each of the initiatives we need to execute on for integration.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

As we integrate we unlock some of those synergies. Now like the things that we have done first like coding across each other's network and sort of turning on connectivity those have been working really, really well and maybe even a little better than planned. So there's a chance that we'll find out that the initiatives even as they come in on time are a little bit more valuable than we had thought before. Certainly we hope for that but we won't know until we sort of cross those dates.

[Connor Cunningham, Analyst at Melius Research LLC]

All right. Thank you.

[Ben Minicucci, CEO & President at Alaska Air]

Thanks, Scott.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Thanks, Scott.

[Operator]

And we'll move next to Brandon Oglenski with Barclays Capital.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Hey, good afternoon. Thanks for taking the question. So Ben, maybe if I can just merge Andrew and Jamie's question together and ask it maybe a little bit more directly. I mean, we see a lot of unsustainable airline business models out there and maybe more treacherous balance sheets across the industry. I mean, why accelerate a share repurchase in this environment, especially not knowing where demand is going to end up and potentially like other industry opportunities that could present themselves over the next few years?

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

You guys have been the most acquisitive of anyone, think, in the last decade.

[Ben Minicucci, CEO & President at Alaska Air]

Great question. It's good to push us on this. Look, just think we know where we're going to be with our long term plan in 2027. So we're so confident where that's going to deliver. So we just think it's a significant opportunity.

[Ben Minicucci, CEO & President at Alaska Air]

Everything else we're doing is in our control. We're executing and, you know, we believe that, you know, we're going to get through this turbulence. If you, we look at past downturns, you know, whether it was in 02/2008, the great recession, or before that, these things will last six to twelve months. And we wanna be on the right side of it. And, you know, airlines always make that same mistake, Brandon, that we buy back stock when it's high and then, and don't buy back stock when it's low.

[Ben Minicucci, CEO & President at Alaska Air]

So, we're not going to make that mistake this time. And I think we're convicted that, you know, the company's undervalued. And I think we have enough assets and a balance sheet that if other opportunities were to come up, think we can take advantage of those in addition to what to buying back stock.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Appreciate the message there. And Andrew, know you've gotten a lot of questions on competition, but maybe just specific to Hawaii and a big competitor change with their pricing structure coming up later. I'm not asking to talk to their change, but just how do you see industry competitive dynamics, especially going into peak summer months here?

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Specifically to Hawaii, is that your question?

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Well, yeah, Hawaii but maybe more broadly too.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yeah, I think number one, growth is low and I think the industry right now is in the business of reducing capacity, not increasing it and I think when you see in times of softness people go to their strength and I think the way I look at this right now is that we are playing to our strengths and so I feel pretty good about the macro network landscape as it sits here today. Yeah.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Thank you.

[Operator]

And we'll move to our next question from Duane Pfennigwerth with Evercore ISI.

[Duane Pfennigwerth, Senior MD at Evercore]

Hey, thanks. Most of my questions have been asked, but maybe we could just play back what happened in the March. It feels like and maybe this is a misinterpretation by us, but it feels like your tone was relatively more constructive at that time when some of your peers were guiding down. So what shifted for you? Was it perhaps later?

[Duane Pfennigwerth, Senior MD at Evercore]

Was it more of a corporate or leisure dynamic? Can you just walk us through the timeline since mid March?

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Hey Duane, thanks. Interesting interpretation. I think that wasn't intentional at all. I don't think we feel incrementally worse about the business today than we did in March. In fact we've seen, as we mentioned, a lot of stabilization in the demand backdrop.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

We're going to sell airplanes in the summer. We're going to run load factors consistent I think with historically what we do in the summer. So I'm not sure what the venue was or why we sort of came off that way. We did make a choice to not update guidance in the midst of the quarter. It was we weren't at sort of some of the conferences that others were using to update.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

And maybe we should have. But what we're seeing is like very similar trends to everybody else except we also have unique drivers of value going forward. And so we're feeling as excited about the long term as we were in December and we can't wait for you know the demand environment to get back to the really robust place it was in Q4 and Q1. Whether that happens this year or next we'll be ready for it.

[Duane Pfennigwerth, Senior MD at Evercore]

I appreciate that. And then just for Maui specifically, don't know if you have this data in front of you, but how recovered is your capacity to Maui from maybe the pre wildfire baseline? And what does the booking curve look like into the summer for Maui versus last year? Are you seeing how booked up are you and what do yields look like? Thank you for taking the questions.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yeah, I would say just in Maui specifically, I think the horrific fires and all of that obviously was terrible is really from a demand somewhat behind us. Hawaii never really at that time really pulled down much of their capacity at all and given what we're doing now we've pretty much restored it. As Maui versus Honolulu, it all sits in the same ecosystem. So those things are behind us and I think what we're doing right now is looking to continue to make more connections and grow that.

[Duane Pfennigwerth, Senior MD at Evercore]

And just on the booking curve?

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yeah, I'm not seeing any in general booking curves are holding out to where they were before. Think the question a little bit is it gets a little complicated because now we're playing a little bit with yield to maintain the bookings coming in on traditional curves. Again, not seeing anything majorly unusual there.

[Duane Pfennigwerth, Senior MD at Evercore]

Okay. Thank you.

[Ben Minicucci, CEO & President at Alaska Air]

And Duane, I think overall what we're seeing is Hawaii is a bright spot for us. That's the big takeaway. It's just a bright spot. Everything we're doing is ahead of expectations.

[Duane Pfennigwerth, Senior MD at Evercore]

Very good. Thanks, Ben.

[Ben Minicucci, CEO & President at Alaska Air]

Thanks, Duane.

[Operator]

And we'll move next to Mike Linenberg with Deutsche Bank.

[Michael Linenberg, Managing Director at Deutsche Bank]

Oh, Hey, good morning for you guys. Andrew, your comments about the San Diego buildup and the network and now being in a position where you sort of offer the most utility to the customer base in that market, I found that interesting. It does look like that it's being funded by pulling down some markets that I would have thought were core to Alaska, like Alaska to D. C. Excuse me, San Francisco to D.

[Michael Linenberg, Managing Director at Deutsche Bank]

C. And San Fran to Chicago. And so it does seem like that San Diego's gain is San Francisco's loss because it does seem like it would reduce the utility of your product in the SFO market. How should I think about it? And are those the types of moves that we should expect from you going forward from a network perspective?

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yeah, Mike. That's a very perceptive question. Thank you for looking at the details behind it. But here's what I would say is number one, we continue to reshape California to make sure that it's in the best place possible. I would say if you're referring to places like Dallas, we fly lucrative DCA markets.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

So we've not really lost the utility there. We have a great partner in American Airlines, Chicago where our leads can earn and accrue miles and all of that. And Nassau, just to be honest with you, was a post COVID market that is more of a cruise stop destination. We couldn't work. So we used those loss making markets.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

We reinvested them in San Diego, which has been more profitable. So net net, we're doing it smart. We're doing it incremental. I think overall, Air Group and our guests are going to benefit from this.

[Ben Minicucci, CEO & President at Alaska Air]

And Mike, just let me be clear. San Francisco and Los Angeles are still a key part of our California strategy and in no way interpret these moves as putting less focus on SFO and LAX. It's SFO, LAX and San Diego as part of the strategy.

[Michael Linenberg, Managing Director at Deutsche Bank]

Great, makes sense. And just my second question, you know, I'm obviously seeing all the you put out a release about the co location and you and Hawaiian coming together, in some of these key airports. Are there any airports in your system where you're going to run into real estate constraints? It looks like San Diego is actually going be a huge opportunity because they're building out. I'm sure you're getting a lot of gates there.

[Michael Linenberg, Managing Director at Deutsche Bank]

But are any of the other key airports in your system, not just California, but like Sea Tac, Portland, where you're going to run into some real estate constraints over the next year or so? Thanks for taking my questions.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

I think just from a network I would sort of say no. I think certainly on the infrastructure we get great economies of scale with the Hawaiian assets flying on all the cities on the West Coast. Just absorb those into our network. I think we're in a really good position in our core hubs and managing capacity and gates. Big picture, I don't see any material issues with bringing the networks together and being able to have adequate space.

[Ben Minicucci, CEO & President at Alaska Air]

And Mike, just to remind you, like at Investor Day we said, Portland is a huge opportunity for us. It's got a ton of capacity and it's a great relief valve for Seattle as we bring international flying into Seattle. And so we're creating a connecting complex in Portland. So Portland, there's a huge investment. There's a phenomenal lobby.

[Ben Minicucci, CEO & President at Alaska Air]

If you haven't seen it, I think it's the nicest lobby in the country. And we've invested heavily in it. So see us invest more in Portland is what in creating that connecting complex as an opportunity to help offload Seattle a little bit.

[Michael Linenberg, Managing Director at Deutsche Bank]

Great. Thanks everyone.

[Operator]

And we'll move next to Tom Wadewitz with UBS Financial.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Yes. Thank you for giving me some questions here on the call. I wanted to get your maybe higher level in a lot of the questions you've had on kind of premium. How do you think about the, I guess, macro backdrop that would give you greater concern on weakening in premium and first class and that kind of broader category. I think we were thinking that big step down in the equity market could cause some pressure, some risk, could be going into a mild recession.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

But I guess you could say, well, maybe that income cohort is so well protected that you could do a mild recession, you could go into a mild recession and maybe it would still be resilient. So just wanted to see if you could offer some thoughts about how do you think about how premium would go through a downturn and an economic downturn and how resilient it might be?

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

I think, Tom, the question I know has been asked a few ways. I think we're just not seeing it. I'll just be clear about that. We are not seeing any pressure certainly in the front cabin and I think as we've shared in Investor Day, we have the long, if not the longest domestic stage length of any carrier in The United States. So when you look at a quarter of our capacity, Hawaii alone is flying six hours, let alone everything else.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

There is a real demand for our premium and first class product where most of our network is flying four, five hours on any given day.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

So then, I guess my question was more if you had further weakness, not what you're currently seeing. But it sounds like you think even if you saw an actual recession, you think it would still be resilient.

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Well, I think at some point, there may be a softness in those fares but again as I've shared, it's not like we've removed any seats from our aeroplane and our unit costs went up and we're banking on that. We still have the same amount of seats so yeah, there will probably be yield pressure if we saw that turn But I think we're very well positioned versus other carriers who are just literally taking seats off airplanes.

[Ryan St. John, Vice President - Finance Planning & Investor Relations at Alaska Air]

Yeah, Tom, this is Ryan. I think our theory based on what we've seen is the relative gaps between first pre PC, main and saver would likely remain. Of course, if the overall environment got worse, everything may come down by some amount. But, I still don't, I think we're gonna see first and PC outperform the Main Cabin even in a downturn.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Yeah, right. Okay. That makes a lot of sense. And then, just a second one would be, how do you think about capacity in second half? It sounds like a maybe more careful approach on it, but are you what would you kind of need to see to really take it down more aggressively?

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Or do you think you're kind of even if you saw some further weakening in Main Cabin, you would kind of stick with the capacity plan for second half?

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

The good thing a little bit is the second and especially the third quarter are our lowest growth quarters already, so we've got a natural hedge there. And as I did share in my prepared remark, we are already looking at some of the fall and beyond and looking at some capacity cuts. I will say that as we have shown and we demonstrated that if there was a continued weakness we would definitely be looking at capacity and how we ensure that we position this airline well for that.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

So if you had further weakness, then you'd be willing to cut a bit more or just Okay. Great.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Thank you for the time.

[Ben Minicucci, CEO & President at Alaska Air]

Yeah, Tom, just our history is we will respond, we'll respond quick. If there is a massive quick downturn, we will take the appropriate action. As you know, Alaska, you know, our growth for the whole year was two to 3%. It was never high and was really baked on utilization. A lot of other airlines have backed down their capacity, which I think will benefit the second half of the year, and we'll see how that pans out based on what happens.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Okay.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

time for one more.

[Ben Minicucci, CEO & President at Alaska Air]

One more question? Okay. Yes.

[Operator]

Thank you. That question will come from Ravi Shanker with Morgan Stanley.

[Ravi Shanker, Managing Director at Morgan Stanley]

Great. Thanks. Morning. Thanks for squeezing me in here. Just a few high level questions on Hawaii, kind of going back to the earlier commentary on the booking curve.

[Ravi Shanker, Managing Director at Morgan Stanley]

There's no speculation that U. S. Travelers may kind of not want to go international as much as maybe the last couple of years. Do you see any potential or evidence that Hawaii may be a natural alternative there? And also there's some talk locally in Hawaii of maybe restricting the number of tourists coming in.

[Ravi Shanker, Managing Director at Morgan Stanley]

Is that an opportunity on mix or a risk on volumes?

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

Hey Robbie, Andrew can jump in too. Look, we've about this a bit over the last twelve months. We think international is doing great right now over the last couple of years and it's certainly helping those folks who have a lot of capacity pointed that way. We've always thought it's going to normalize over time and it's one of the reasons we love the partnership and acquisition of Hawaiian. It's a premium leisure market.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

It fits our network perfectly. I think, you know, folks want to go to Hawaii. Many of us off the West Coast go there regularly and we did before, you know, the acquisition. So I think it's a durable premium market that we're going serve really well. We have over 50% of the market share today.

[Shane Tackett, CFO & EVP, Finance at Alaska Air]

And yes, as folks for whatever reason decide to not travel as much internationally I think Hawaii is a great destination for those folks and will be the people who are carrying them there.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Got it. And I need

[Ravi Shanker, Managing Director at Morgan Stanley]

a quick follow-up on that as well. Kind of good to see the momentum in Hawaii loyalty there. Is that something we should expect to see be really strong out of the gate of this acquisition? Or does that is that something that will accelerate later on once you've completed the operating certificate, PSS, loyalty program combination? That going to add to kind of peak later?

[Ravi Shanker, Managing Director at Morgan Stanley]

Or is that like the most you see now?

[Andrew Harrison, Executive Vice President and Chief Commercial Officer at Alaska Air]

Yeah. I think we're very excited. We just think loyalty is gonna continue to accelerate. We go to a single loyalty program, this summer, and we have, we're making continual changes to our program which we'll be announcing and we also have a premium card and then elites will get full access across the breadth and the depth of both, metal, you know, as we get to single, you know, PSS. So we're just excited that there will be continued momentum on the loyalty side.

[Ben Minicucci, CEO & President at Alaska Air]

And Ravi, if you remember from an Investor Day, one of our big priorities on our Alaska Accelerate vision was be Hawaii's trusted airline. This is the trusted airline that will take people, you know, between neighbor island travel, which is hugely important, that are gonna take them internationally out of Honolulu and will connect people from the islands to the West Coast to our massive network from the West Coast to the rest of the Continental US. So, we're seeing gains. To be honest, I think we just scratched the surface on this. I think we're going to see this accelerate more as the year progresses.

[Ben Minicucci, CEO & President at Alaska Air]

And when we become on one single reservation system, a single loyalty program, which is going to be in place here by August. I think you're going to see this continue to grow and then we'll achieve that vision of being Hawaii's trusted airline.

[Ravi Shanker, Managing Director at Morgan Stanley]

Wonderful. Thank you.

[Ben Minicucci, CEO & President at Alaska Air]

Thanks. I think we're out of time, so I want to thank everyone for joining us. And we'll follow-up with any questions with anybody, and we'll talk to you next quarter. Thank you so much.

[Operator]

And this concludes today's conference call. Thank you for attending.

[Operator]

The host has ended this call. Goodbye.

Participants

Executives

• Andrew Harrison, Executive Vice President and Chief Commercial Officer
• Shane Tackett, CFO & EVP, Finance

Analysts

• Ryan St. John, Vice President - Finance Planning & Investor Relations at Alaska Air
• Ben Minicucci, CEO & President at Alaska Air
• Catherine O'Brien, Vice President at Goldman Sachs
• Tom Fitzgerald, VP - Equity Research at TD Cowen
• Connor Cunningham, Analyst at Melius Research LLC
• Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch
• James Baker, Managing Director & Investment Specialist at JP Morgan
• Scott Group, MD & Senior Analyst at Wolfe Research
• Brandon Oglenski, Director & Senior Equity Analyst at Barclays
• Duane Pfennigwerth, Senior MD at Evercore
• Michael Linenberg, Managing Director at Deutsche Bank
• Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC
• Ravi Shanker, Managing Director at Morgan Stanley