Alaska Air Swings to Loss as Fuel Costs Nearly Double
Second-quarter revenue rose 10% to $4.065 billion as unit revenue increased 8.6%.
Alaska Air Group (ALK), the parent of Alaska Airlines and Hawaiian Airlines, swung to a second-quarter loss as higher fares failed to offset a sharp increase in fuel expense. The company reported a GAAP loss of $76 million, or $0.68 a share, compared with income of $172 million, or $1.42 a diluted share, a year earlier.
The quarter ended on firmer footing. Alaska returned to profitability in June, when unit revenue and pretax profit margins both posted double-digit gains, after Hawaiian demand weakness reduced quarterly system unit revenue by about 3 percentage points, worse than the roughly 2-point drag the company had expected.
Passenger revenue increased 9% to $3.644 billion, while loyalty-program other revenue rose 23% to $258 million and cargo and other revenue climbed 17% to $163 million. Pricing drove the top-line gain: yield rose 9.6% as revenue passengers declined 1.2% and load factor fell 1.6 percentage points to 82.3%.
Premium revenue grew 15%, managed corporate revenue increased 30% and loyalty cash remuneration rose 19%, each outpacing system revenue growth. Those gains came as Alaska limited capacity growth to 1%, helping revenue per available seat mile rise 8.6%.
Fuel overwhelmed that revenue performance. Economic fuel cost increased 85.4% to $4.43 a gallon, adding about $600 million of expense, while consumption edged up 0.7%. Total operating expense rose 24% to $4.233 billion, and operating results reversed to a $168 million loss from income of $277 million a year earlier.
Adjusted results swung to a loss of $102 million, or $0.92 a share, from income of $215 million, or $1.78 a share. The loss was slightly narrower than Alaska's forecast of roughly $1.00 a share. Nonfuel unit cost rose 6.5%, below the company's prior expectation for a high-single-digit increase.
For the third quarter, Alaska expects unit-revenue growth to accelerate to the low double digits and nonfuel unit-cost growth to slow to the low-to-mid single digits. It projects adjusted earnings between breakeven and $1.00 a share as economic fuel cost declines sequentially to $3.75 a gallon.
Alaska raised $1 billion of financing during the quarter, lifting available liquidity to $3.8 billion, and announced four additional 737-800 freighters that are expected to effectively double cargo-fleet capacity in 2027. Adjusted net debt rose to 4.8 times trailing-12-month EBITDAR from 2.9 times, leaving the anticipated third-quarter recovery to unfold against higher leverage.