Alaska Air(ALK) - 2025 Q2 - Quarterly Results

Alaska Air Group Second Quarter 2025 Results Performance and Outlook Alaska Air Group reported strong Q2 2025 results with $1.78 adjusted EPS, achieving record $3.7 billion revenue and raising full-year EPS forecast to over $3.25 - Reported adjusted earnings per share of $1.78, surpassing the high end of the previous guidance range ($1.15 to $1.65) and Wall Street expectations[2][6] - Hawaiian Airlines' second quarter adjusted pretax margin expanded by 11 points year-over-year, reaching breakeven for the first time since 2019[7] - Full-year 2025 earnings per share outlook has been raised to greater than $3.25, reflecting positive booking trends and margin-accretive capacity adjustments[9] Q2 2025 Performance vs. Expectation (Pro Forma 2024) | Metric | Prior Expectation | Actual Results | | :--- | :--- | :--- | | Capacity (ASMs) % Change | Up 2% to 3% | Up ~2.7% | | RASM % Change | Flat to down low single digits | Down ~(0.6)% | | CASMex % Change | Up mid to high single digits | Up ~6.5% | | Adjusted EPS ($) | $1.15 to $1.65 | $1.78 | Q3 and Full Year 2025 Outlook (vs. Pro Forma 2024) | Metric | Q3 Expectation | Full Year Expectation | | :--- | :--- | :--- | | Capacity (ASMs) % Change | Down ~1% | Up ~2% | | RASM % Change | Flat to up low single digits | Flat to up low single digits | | CASMex % Change | Up mid to high single digits | Up mid single digits | | Adjusted EPS ($) | $1.00 to $1.40 | >$3.25 | Financial and Operational Updates In Q2 2025, the company repurchased $428 million in stock, expanded its global network, added twelve aircraft, and ratified a labor agreement - Repurchased 8.7 million shares for approximately $428 million in Q2, bringing the year-to-date total to $535 million[15] - Announced its first-ever transatlantic route from Seattle to Rome, starting May 2026, and began new nonstop service to Tokyo[15] - Expanded the combined fleet by twelve aircraft in Q2, including Boeing 737s, 787s, E175s, and A330 freighters, also exercising options for twelve 737-10s[15] - Ratified a four-year collective bargaining agreement with Horizon's AMFA-represented technicians[15] - Loyalty program enhancements include allowing Companion Fare redemption on Hawaiian Airlines flights and expanding partnerships with Qantas and Philippine Airlines[15] Consolidated Financial Statements Consolidated Q2 2025 statements show total operating revenue increased 28% to $3.7 billion, operating expenses up 33%, resulting in $172 million GAAP net income Condensed Consolidated Statements of Operations Q2 2025 statements show total operating revenues of $3.704 billion (up 28%), operating expenses of $3.427 billion (up 33%), resulting in $172 million GAAP net income Q2 2025 vs Q2 2024 Statement of Operations (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Operating Revenue ($ millions) | $3,704 | $2,897 | 28% | | Total Operating Expenses ($ millions) | $3,427 | $2,575 | 33% | | Operating Income ($ millions) | $277 | $322 | (14)% | | Net Income ($ millions) | $172 | $220 | (22)% | | Diluted EPS ($) | $1.42 | $1.71 | (17)% | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $19.885 billion, total liabilities $15.943 billion, and total shareholders' equity $3.942 billion, reflecting share repurchases Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets ($ millions) | $3,507 | $3,760 | | Total Property and Equipment - net ($ millions) | $11,215 | $10,781 | | Total Assets ($ millions) | $19,885 | $19,768 | | Total Current Liabilities ($ millions) | $6,709 | $6,145 | | Total Noncurrent Liabilities ($ millions) | $9,234 | $9,251 | | Total Liabilities ($ millions) | $15,943 | $15,396 | | Total Shareholders' Equity ($ millions) | $3,942 | $4,372 | Summary Cash Flow For the six months ended June 30, 2025, net cash from operations was $835 million, with investing and financing activities using $747 million and $544 million, resulting in a $456 million net cash decrease Cash Flow Summary - Six Months Ended June 30, 2025 (in millions) | Activity | Amount ($ millions) | | :--- | :--- | | Net cash provided by operating activities | $835 | | Net cash used in investing activities | $(747) | | Net cash used in financing activities | $(544) | | Net decrease in cash and cash equivalents | $(456) | Operating Statistics and Segment Information Q2 2025 consolidated operating statistics show 32.2% capacity increase and stable 83.9% load factor, with Alaska Airlines remaining profitable and Hawaiian Airlines achieving $1 million pre-tax profit Operating Statistics Q2 2025 consolidated capacity (ASMs) grew 32.2% and traffic (RPMs) 31.8%, with load factor at 83.9% and CASMex increasing 10.2% to 10.90 cents Consolidated Operating Statistics - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | ASMs (millions) | 24,058 | 18,196 | 32.2% | | Load Factor | 83.9% | 84.1% | (0.2) pts | | RASM (¢) | 15.39¢ | 15.92¢ | (3.3)% | | CASMex (¢) | 10.90¢ | 9.89¢ | 10.2% | | Economic Fuel Cost per Gallon ($) | $2.39 | $2.84 | (15.8)% | Operating Segments Q2 2025 segment results show Alaska Airlines with $2.37 billion revenue and $267 million adjusted pre-tax income, Hawaiian Airlines with $857 million revenue and $1 million pre-tax income, and Regional with $471 million revenue and $7 million pre-tax income Adjusted Income Before Tax by Segment - Q2 2025 (in millions) | Segment | Operating Revenue ($ millions) | Adjusted Income Before Tax ($ millions) | | :--- | :--- | :--- | | Alaska Airlines | $2,373 | $267 | | Hawaiian Airlines | $857 | $1 | | Regional | $471 | $7 | | Air Group Adjusted Total | $3,704 | $295 | Non-GAAP Reconciliations and Supplementary Information Non-GAAP reconciliations for Q2 2025 show adjusted net income of $215 million ($1.78/share), with pro forma data indicating 2% revenue growth but a decline in adjusted pre-tax margin from 10.3% to 8.0% GAAP to Adjusted Net Income Reconciliation - Q2 2025 (in millions) | Item | Amount ($ millions) | Per Share ($) | | :--- | :--- | :--- | | GAAP Net Income | $172 | $1.42 | | Mark-to-market fuel hedge adjustments | $(1) | $(0.01) | | Losses on foreign debt | $2 | $0.02 | | Special items - operating | $56 | $0.46 | | Income tax effect | $(14) | $(0.11) | | Adjusted Net Income | $215 | $1.78 | Pro Forma Financial Comparison - Q2 2025 vs Q2 2024 (in millions) | Metric | Q2 2025 (Actual) ($ millions) | Q2 2024 (Pro Forma) ($ millions) | % Change | | :--- | :--- | :--- | :--- | | Total Operating Revenue | $3,704 | $3,629 | 2% | | Adjusted Income Before Income Tax | $295 | $374 | (21)% | | Adjusted Pretax Margin | 8.0% | 10.3% | (2.3) pts | - Pro forma CASMex (unit cost ex-fuel) increased 6.5% year-over-year, from 10.23¢ to 10.90¢, indicating rising underlying operational costs for the combined entity[46] Appendix The appendix defines key industry and financial terms in its Glossary and explains the rationale for non-GAAP measures like CASMex and adjusted pre-tax income, enhancing investor analysis Note on Non-GAAP Measures This note explains non-GAAP measures like CASMex and adjusted pre-tax income provide investors better visibility into core operational results by excluding certain costs, used by management for performance assessment - The company excludes certain costs (fuel, freighter, special items) from unit metrics to provide better visibility into controllable operational results and for comparability with other carriers[47] - CASMex is a key metric used by management and the Board to assess cost performance, and adjusted pre-tax income is important for employee incentive plans[47] Glossary of Terms This section defines key aviation and financial acronyms and terms used in the report, including ASM, CASMex, RASM, and EBITDAR - Defines key performance indicators such as ASMs (capacity), RPMs (traffic), Load Factor (percentage of seats filled), and Yield (revenue per passenger mile)[48] - Clarifies financial metrics including CASMex (unit cost), RASM (unit revenue), and various adjusted debt calculations[48]