Alaska Air (ALK) Q2 2025 Earnings Call July 24, 2025 11:30 AM ET Company ParticipantsRyan St. John - VP - Finance Planning & IRBen Minicucci - CEO, President & DirectorAndrew Harrison - EVP & Chief Commercial OfficerShane Tackett - CFO & EVP - FinanceConor Cunningham - Director – Travel & Transports ResearchScott Group - Managing DirectorJames Baker - Managing Director & Investment SpecialistCatherine O'Brien - Vice PresidentJohn Dorsett - Equity Research AssociateDuane Pfennigwerth - Senior Managing Direct ...

Financial Data and Key Metrics Changes - The company reported a second quarter GAAP net income of $172 million, with adjusted net income of $215 million, exceeding guidance [4] - Adjusted earnings per share reached $1.78, surpassing the high end of guidance [7][31] - Total liquidity at the end of the quarter was $3 billion, with net leverage at 2.4 times and debt to capital at 60% [31] Business Line Data and Key Metrics Changes - Total revenue reached a record $3.7 billion, up 2% year over year, with a load factor of 84% [15][16] - Premium revenues increased by 5% year over year, with Hawaiian assets seeing a nearly 19% rise in premium revenue [16] - Cargo revenues surged by 34% year over year, supported by the launch of new freighter services [22] Market Data and Key Metrics Changes - The company experienced a stabilization in demand, with positive momentum in bookings observed since late June [12][25] - Managed corporate revenue declined by 5% year over year, but small and medium businesses showed resilience, leading to a total corporate revenue decline of only 1% [26][27] - The Hawaiian franchise reported a 17% revenue increase, with unit revenues up 4% and capacity up 13% [50] Company Strategy and Development Direction - The Alaska Accelerate plan aims to unlock $1 billion in incremental profit over the next two years, with a target of reaching $10 in earnings per share by 2027 [12][32] - The company is focusing on expanding its premium offerings and enhancing customer loyalty through a newly branded loyalty program and premium credit card [9][18] - International growth is being supported by the addition of new routes and aircraft, with plans to serve at least 12 long-haul destinations from Seattle by 2030 [11][22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the second half of the year, citing improved consumer sentiment and potential easing of fuel prices [12][35] - The company anticipates delivering at least $3.25 in adjusted earnings per share for the full year, assuming continued execution of synergy and commercial initiatives [35] - There is a renewed sense of energy and purpose within the company, driven by a shared vision to transform into a larger global airline [13] Other Important Information - The company faced operational disruptions due to an IT outage but managed to restore operations quickly [6] - The integration of Alaska and Hawaiian Airlines is progressing well, with synergies exceeding expectations [51][92] Q&A Session Summary Question: Expectations for Q3 to Q4 ramp - Management indicated that positive momentum is expected to continue into Q4, with synergies contributing to improved performance [42] Question: Buyback strategy - Management acknowledged that the stock does not reflect the company's earnings power and plans to continue share repurchases if earnings recover [46] Question: Performance of Hawaiian franchise - The Hawaiian franchise has shown strong performance, with revenues up 17% and unit costs down, attributed to synergies and improved market conditions [50] Question: Corporate revenue dynamics - While large managed corporates remain cautious, small and medium businesses are showing resilience, and recent bookings have improved significantly [26][28] Question: Integration progress - The company is tracking ahead of its synergy targets and expects significant contributions in Q4 [91][92]