Alaska Air Group Tops Estimates in Q2

Key Points

• Adjusted earnings per share reached $1.78, topping analyst expectations.

• Revenue was $3.7 billion, up 2% year over year.

• The comapny is showing early signs of improved profitability.

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Alaska Air Group (NYSE:ALK), the parent company behind Alaska Airlines and now Hawaiian Airlines, reported results for Q2 2025 on July 23, 2025. The company announced adjusted earnings per share of $1.78, well above analyst estimates of $1.54 (non-GAAP), and revenue of $3.70 billion, surpassing consensus expectations on a non-GAAP basis. Successful execution of strategic priorities, even as unit revenue (RASM) remained slightly negative compared to the prior year and operating costs increased, contributed to the quarter's outcome exceeding Wall Street expectations, underscored by growth outside the main cabin and key gains from integrating Hawaiian Airlines.

Source: Alaska Air Group. Note: Analysts' consensus estimates provided by FactSet. Q2 2024 Pro Forma results for EPS and adjusted EPS do not include Hawaiian Air results; therefore, year-over-year comparisons are not applicable. CASMex = Cost per ASM, ex-fuel, special, freighter.

Business Overview and Strategic Focus

Alaska Air Group operates passenger and cargo airline services throughout North America and, after acquiring Hawaiian Airlines, across transpacific and interisland Hawaii routes. It manages three segments: Alaska Airlines, Hawaiian Airlines, and regional operations, serving millions of passengers each year. Its strategic model emphasizes efficiency, network scale, and customer-focused features, such as an extensive loyalty program and premium cabin offerings.

In recent years, the business has focused intensely on integrating Hawaiian Airlines—a move aimed at expanding its domestic and international reach. Key success factors include operational reliability, strong cost management, and leveraging alliances like the oneworld partnership. Investments in fuel-efficient aircraft and premium cabins have also supported Alaska's efforts to improve profitability and passenger appeal in a competitive market.

Quarter Highlights: Integration, Revenue Trends, and Operational Metrics

The period stood out for the progress made integrating Hawaiian Airlines. The acquisition marked a defining move, contributing meaningfully to the company’s financial results. On a pro forma basis, Hawaiian’s adjusted pretax margin improved by 11 percentage points from the prior year, with Hawaiian’s adjusted pretax margin surpassed breakeven for the first time since 2019. Work to combine operating platforms and loyalty programs has begun, with full integration planned, with a target of $1 billion in incremental profit from the acquisition by 2027.

Network expansion continued, highlighted by the announcement of Alaska Air Group’s first transatlantic route (Seattle–Rome, starting May 2026) and the launch of Seattle–Tokyo, the airline’s first international long-haul flight from Seattle. These steps complement expanded commercial partnerships: for example, a new agreement with Philippine Airlines and expanded benefits with Qantas. Notably, 49% of revenue came from outside the main cabin, reflecting both the premium product’s 5% year-over-year revenue growth and cargo revenue grew 34% year-over-year. The loyalty program continued to generate strong results, with a 5% year-over-year increase in cash remuneration and accolades such as being ranked the best U.S. airline rewards program.

Financially, total operating revenue of $3.70 billion (GAAP) rose 2% year over year on a pro forma basis. Passenger revenue (GAAP) reached $3.36 billion, up 1% versus pro forma Q2 2024, and loyalty program revenue climbed 3% to $210 million. On the cost side, operating expenses excluding fuel increased 6%, Wages and benefits increased 49% year-over-year. Aircraft maintenance costs increased 86% year-over-year. The fuel cost per gallon dropped to $2.39. The company repurchased 8.7 million shares for $428 million.

No major operational disruptions were reported during the quarter. Hawaiian Airlines experienced a cybersecurity incident, but operations were unaffected.

Alaska Air Group’s cost per available seat mile, excluding fuel and special items—a key airline efficiency metric known as CASMex—was 10.90¢, up 10.2% from the prior year, matching the company's forecast. This increase was driven by union labor agreements and increased expenses from fleet and real estate. The company’s adjusted pretax margin fell to 8.0%, compared to 10.3% in Q2 2024, reflecting these cost challenges as well as slight pressure on revenue yields despite strong sales in premium and cargo operations.

The period also marked significant gains in labor relations. Alaska Air Group ratified a four-year collective bargaining agreement with Horizon mechanics and reached a tentative agreement covering other employee groups.

Looking Ahead: Guidance and Strategic Priorities

Looking to the third quarter, management provided guidance for adjusted earnings per share in the range of $1.00 to $1.40, which includes an expected negative impact of $0.10 on adjusted earnings per share from an IT outage in July. Capacity, measured in available seat miles, is anticipated to decrease around 1% from the prior year on a pro forma basis, reflecting careful management as demand trends are monitored. Revenue per available seat mile (RASM) is expected to be generally flat to up a low-single-digit percentage. For fiscal 2025, Alaska Air Group expects capacity growth of about 2% for fiscal 2025, with revenue per available seat mile (RASM) is expected to be flat to up low single digits and CASMex is expected to rise by a mid-single-digit percentage. The company reaffirmed full-year adjusted earnings per share guidance of greater than $3.25.

Looking forward, investors will be watching continued execution on integration milestones with Hawaiian Airlines, progress toward the corporation’s $1 billion profit expansion target by 2027, and trends in operating costs—especially labor and maintenance. Management reports a recent improvement in demand and bookings and expects cost performance to improve in the fourth quarter. Additionally, ongoing share repurchase activity and the health of the balance sheet, including $2.1 billion in unrestricted cash and marketable securities as of June 30, remain central components of the outlook. ALK does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Alaska Air Group. The Motley Fool has a disclosure policy.