Q2 2024 Alaska Air Group Inc Earnings Call

Started and will be accessible for future playback at Alaska Air Dot Com.

Speaker Change: After our speakers remarks, we will conduct a question and answer session for analysts.

Speaker Change: I would now like to turn the call over to Alaska Air Group's Vice President of Finance planning and Investor Relations Brion St. John.

Speaker Change: Thank you operator, and good morning, Thank you for joining us for our second quarter 2024 earnings call.

Speaker Change: Yesterday, we issued our earnings release, along with several accompanying slides detailing our results, which are available at Investor Dot Alaska Air Dot Com.

Speaker Change: On today's call, you'll hear updates from Ben Andrew and Shane.

Speaker Change: Several others of our management team are also on the line to answer your questions. During the Q&A portion of the call.

Speaker Change: This morning Air Group reported second quarter, GAAP net income of $220 million, excluding special items and mark to market fuel hedge adjustments Air group reported adjusted net income of $327 million.

Speaker Change: As a reminder, our comments today will include forward looking statements about future performance, which may differ materially from our actual results information on risk factors that could affect our business can be found within our SEC filings.

Speaker Change: 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 Andrew: Thanks, Ryan and good morning, everyone as.

Ben Andrew: As we closed out another strong quarter, we remain steadfast in executing on the key pillars that are paramount to our success safety and operational excellence financial strength and taking care of our guests and employees.

Ben Andrew: A few highlights for the quarter include achieving $2 9 billion in revenue the highest quarterly result in our history with nearly a $1 billion generated from our premium segments.

Ben Andrew: Our 15, 8% adjusted pre tax margin will likely lead the entire industry differentiating us from other domestic focused peers in terms of profitability.

Ben Andrew: We continue to prove that our ability to achieve industry, leading profits during the second quarter and the summer peak is unmatched and at the same time, we are actively working to improve margins in this seasonally weaker Q1 and Q4.

Speaker Change: We're happy to announce a record tentative agreement with our flight attendants underscoring our deep appreciation for their vital role in our business. This includes a 32% increase in compensation aligning with industry standards and reflecting our commitment to their futures.

Ben Andrew: This would mark the completion of our last major labor contract and pending ratification in August It will conclude this labor cycle for us.

A few highlights for the quarter include achieving $2.9 billion in revenue, the highest quarterly result in our history, with nearly a billion dollars generated from our premium segments.

Unknown Executive: Billion dollars in revenue, the highest quarterly result in our history, with nearly a billion dollars generated from our premium segment. Our 15.8% adjusted pre-tax margin will likely lead the entire industry, differentiating us from other domestic focused peers in terms of profitability.

Ben Andrew: Making investments in our people remains a focus and we look forward to the stability and alignment that our labor contract spring as we focus on being best in class operators.

Our 15.8% adjusted pre-tax margin will likely lead the entire industry, differentiating us from other domestic-focused peers in terms of profitability.

Ben Andrew: Our resolute focus on cost management and productivity across the business remained strong driving our unit cost result that is among the best in the industry down nearly 2% year over year.

Unknown Executive: We continue to prove that our ability to achieve industry-leading profits during the second quarter and the summer peak is unmatched, and at the same time, we are actively working to improve margins in the seasonally weaker Q1 and Q4. We're happy to announce a record tentative agreement with our flight attendants, underscoring our deep appreciation for their vital role in our company. This includes a 32% increase in compensation, aligning with industry standards and reflecting our commitment to their. This would mark the completion of our last major labor contract, and pending ratification in August, it will conclude this labor cycle for us.

We continue to prove that our ability to achieve industry-leading profits during the second quarter and the summer peak is unmatched, and at the same time, we are actively working to improve margins in the seasonally weaker Q1 and Q4.

Ben Andrew: This was even better than our expectations, reflecting the dedication of our teams and carrying out our aggressive internal plans.

Ben Andrew: We ran a safe reliable operation with a completion rate of 99, 5% or better each month this quarter as our teams were focused on delivering for our guests.

Speaker Change: We're happy to announce a record tentative agreement with our flight attendants, underscoring our deep appreciation for their vital role in our business. This includes a 32% increase in compensation, aligning with industry standards and reflecting our commitment to their futures.

Speaker Change: And lastly, an update on our planned acquisition of Hawaiian Airlines in the quarter, we submitted the Doj's second request for information, we are maintaining close and transparent communication with the Doj as they finalize their review process expected to be completed by August 5th when we anticipate learning more about potential.

Speaker Change: This would mark the completion of our last major labor contract and pending ratification in August , it will conclude this labor cycle for us.

Unknown Executive: Making investments in our people remains a focus, and we look forward to the stability and alignment that our labor contracts bring as we focus on being best-in-class operators. Our resolute focus on cost management and productivity across the business remains strong, driving a unit cost result that is among the best in the industry, down nearly 2% year-over-year. This was even better than our expectations, reflecting the dedication of our teams and carrying out our aggressive internal plan.

Speaker Change: Making investments in our people remains a focus, and we look forward to the stability and alignment that our labor contracts bring as we focus on being best-in-class operators.

Speaker Change: <unk> next steps.

Speaker Change: Now turning to our business outlook.

Speaker Change: As we move into the second half of the year, we are adjusting the midpoint of our full year EPS guide by 25 to.

Speaker Change: Our resolute focus on cost management and productivity across the business remains strong, driving a unit cost result that is among the best in the industry, down nearly 2% year over year.

Speaker Change: Reflect the economics of our flight attendant deal as well as the current domestic environment.

Speaker Change: That said the fundamental drivers that have consistently placed us among the top margin producers in the industry remain unchanged.

Speaker Change: This was even better than our expectations, reflecting the dedication of our teams and carrying out our aggressive internal plans.

Speaker Change: In terms of growth in aircraft deliveries, we have acquired 10 Max aircraft from Boeing while maintaining vigilant oversight of the production process to guarantee nothing but the highest quality aircrafts are delivered to us.

Unknown Executive: We ran a safe, reliable operation with a completion rate of 99.5% or better each month this quarter, as our teams were focused on delivering for our guests and, lastly, an update on our planned acquisition of Hawaiian Air. In the quarter, we submitted the DOJ's second request for, and we are maintaining close and transparent communication with the DOJ as they finalize their review process.

Speaker Change: We ran a safe, reliable operation with a completion rate of 99.5% or better each month this quarter as our teams were focused on delivering for our guests.

Speaker Change: With line of sight and increased confidence to 2024 Boeing deliveries, we now expect full year capacity growth to be less than two 5%.

Speaker Change: Lastly, an update on our planned acquisition of Hawaiian Airlines.

Speaker Change: In the quarter, we submitted the DOJ's second request for information. We are maintaining close and transparent communication with the DOJ as they finalize their review process, expected to be completed by August 5th, when we anticipate learning more about potential next steps.

Speaker Change: Although lower than the level of growth we configured the business for this year. Our teams are doing a great job managing costs and productivity.

Unknown Executive: We expect it to be completed by August 5th, when we anticipate learning more about potential next steps. Now, turning to our business outlet. As we move into the second half of the year, we are adjusting the midpoint of our full-year EPS guide by 25 cents to reflect the economics of our flight attendant deal, as well as the current domestic environment. That said, the fundamental drivers that have consistently placed us among the top margin producers in the industry remain unchanged.

Operational excellence is core to our DNA and we're committed to being best in class operators and delivering for our guests we're off to a great start as we fly our largest ever summer schedule and posted a 99, 5% completion rate over the fourth of July holiday period, Despite some challenging weather in airport construction.

Speaker Change: Now turning to our business outlook.

Speaker Change: As we move into the second half of the year, we are adjusting the midpoint of our full year EPS guide by 25 cents to reflect the economics of our flight attendant deal, as well as the current domestic environment.

Speaker Change: Projects.

Speaker Change: As a further testament to the care our employees to provide for our guests and our commitment to run a safe reliable on time airline with exceptional service recently released data for 2023 shows Alaska generated the lowest number of customer complaints per 100000 guests of any U S airline.

Speaker Change: That said, the fundamental drivers that have consistently placed us among the top margin producers in the industry remain unchanged.

Unknown Executive: In terms of growth and aircraft deliveries, we have acquired 10 Max aircraft from Boeing while maintaining vigilant oversight of the production process to guarantee nothing but the highest quality aircraft are delivered to us. With line-of-sight and increased confidence in 2024 Boeing deliveries, we now expect full-year capacity growth to be less than 2.5%. Although lower than the level of growth we configured the business for this year, our teams are doing a great job managing costs and productivity.

Speaker Change: In terms of growth and aircraft deliveries, we have acquired 10 MAX aircraft from Boeing while maintaining vigilant oversight of the production process to guarantee nothing but the highest quality aircraft are delivered to us.

Speaker Change: This result is an improvement versus <unk>.

Speaker Change: With line of sight and increased confidence to 2024 Boeing deliveries, we now expect full year capacity growth to be less than 2.5%.

Speaker Change: 2020.

75% better than the industry average and 35% better than the second ranked airlines.

Speaker Change: Still we are not sitting idle, we have more to do and continue to elevate our brand and travel experience remaking the online process easier with 23 of our one world and global partners now available to book through Alaskaair Dot Com.

Speaker Change: Although lower than the level of growth we configured the business for this year, our teams are doing a great job managing costs and productivity.

Unknown Executive: Operational excellence is core to our DNA, and we are committed to being best in class operators and delivering for our customers. We're off to a great start as we fly our largest ever summer schedule and posted a 99.5% completion rate over the 4th of July holiday period, despite some challenging weather and airport construction. As a further testament to the care our employees provide for our guests and our commitment to run a safe, reliable, on-time airline with exceptional service, recently released DOT data for 2023 shows Alaska generated the lowest number of customer complaints per 100,000 guests of any U.S. airline. This result is an improvement over 2020

Speaker Change: Operational excellence is core to our DNA and we are committed to being best in class operators and delivering for our guests.

Speaker Change: We're enhancing the in person guest experience with new technology, and a beautiful new terminal and lounge at San Francisco, where we are the second largest carrier and a state of the art stunning and brand new lobby and Portland.

Speaker Change: We're off to a great start as we fly our largest ever summer schedule and posted a 99.5% completion rate over the 4th of July holiday period, despite some challenging weather and airport construction projects.

Speaker Change: We're also stepping up our premium exposure given the strength in demand and shift in guest preference towards this segment.

Speaker Change: As a further testament to the care our employees provide for our guests and our commitment to run a safe, reliable, on-time airline with exceptional service,

Speaker Change: But the first modifications set to begin this September this was a decision made some time ago, we will be adding six premium class seats to our 737, 900, ER and Max nine fleets and for first class seats to our 737 Dash 800 fleet driving our total premium seat mix up three points to.

Speaker Change: Recently released DOT data for 2023 shows Alaska generated the lowest number of customer complaints per 100,000 guests of any U.S. airline. This result is an improvement versus the previous year.

Unknown Executive: 75% better than the industry average and 35% better than the second ranked air. Still, we're not sitting idle. We have more to do and continue to elevate our brand and travel experience. We're making the online process easier with 23 of our One World and global partners now available to book through alaskair.com.

Speaker Change: 2020 75% better than the industry average and 35% better than the second ranked airline

Speaker Change: 28% when completed.

Speaker Change: Im excited that we are making this investment as we continue to respond to guest preference and diversify our revenue base.

Speaker Change: Still, we're not sitting idle. We have more to do and continue to elevate our brand and travel experience.

Speaker Change: This is a dynamic industry that requires constant adaptation and course corrections had it not been for the full $223 million impact from flight <unk>, two and the fleet grounding to start the year, we'd be on track for improving full year margins versus last year, even amidst a softer than <unk>.

Speaker Change: We're making the online process easier with 23 of our One World and Global Partners now available to book through alaskair.com.

Unknown Executive: We're enhancing the in-person guest experience with new technology and a beautiful new terminal and lounge in San Francisco, where we are the second largest carrier, and a state-of-the-art, stunning, and brand new lobby in Port Island. We're also stepping up our premium exposure, given the strength in demand and shift in guest preference towards the latter. With the first modification set to begin this September, this was a decision made some time ago. We'll be adding six premium class seats to our 737-900ER and MAX 9 fleets and four first class seats to our 737-800 fleet, driving our total premium seat mix up three points to 28% when completed.

Speaker Change: We're enhancing the in-person guest experience with new technology in a beautiful new terminal and lounge at San Francisco where we are the second largest carrier and a state-of-the-art stunning and brand new lobby in Portland.

Speaker Change: Mystic demand environment, and continued material step ups and industry labor costs.

Speaker Change: We're also stepping up our premium exposure, given the strength in demand and shift in guest preference towards this segment.

Speaker Change: And still we expect to be a top three margin producer and far and away the strongest domestic focused carrier.

Speaker Change: With the first modification set to begin this September , this was a decision made some time ago. We'll be adding 6 premium class seats to our 737-900ER and MAX 9 fleets, and 4 first class seats to our 737-800 fleet.

Speaker Change: I am grateful for the talented and dedicated team of employees here at Air Group and building a business model designed to excel and achieve long term success. The underlying fundamentals are embedded in our DNA a strong balance sheet.

Speaker Change: Driving our total premium seat mix up three points to 28% when completed.

Operational excellence guests care and a relentless focus on areas within our control.

Unknown Executive: I'm excited that we are making this investment as we continue to respond to guest preferences and diversify our revenue. This is a dynamic industry that requires constant adaptation and course correction. Had it not been for the full $223 million impact from Flight 1282 and the fleet grounding to start the year, we'd be on track for improving full-year margins versus last year, even amidst a softer domestic demand environment and continued material step-ups in industry labor costs.

Speaker Change: I'm excited that we are making this investment as we continue to respond to guest preference and diversify our revenue base.

Speaker Change: I am confident our investments going forward build on our unique competitive advantages.

<unk> the potential acquisition of Hawaiian Airlines, which if approved we believe will enhance our strength as we broaden our presence in both domestic and international markets.

Speaker Change: This is a dynamic industry that requires constant adaptation and course corrections.

Speaker Change: Had it not been for the full 223 million impact from Flight 1282 and the fleet grounding to start the year,

Speaker Change: At Alaska, we meet challenges head on and we are committed to maintaining a track record of consistent success day in and day out just as we have done for years and with that I'll turn it over to Andrew.

Speaker Change: We'd be on track for improving full-year margins versus last year, even amidst a softer domestic demand environment and continued material step-ups in industry labor costs.

Unknown Executive: And still, we expect to be a top three margin producer and far and away the strongest domestic focus carrier. I am grateful for the talented and dedicated team of employees here at Air, Building a Business Model Designed to Excel and Achieve Long-Term Success. The underlying fundamentals are embedded in our DNA.

Andrew: Thanks, Ben and good morning, everyone.

Speaker Change: and still we expect to be a top three margin producer and far and away the strongest domestic focus carrier.

Andrew: Today, My comments will highlight our second quarter results.

Andrew: As well as provide color on our third quarter outlook and capacity guidance.

Speaker Change: I am grateful for the talented and dedicated team of employees here at Air Group in building a business model designed to excel and achieve long-term success. The underlying fundamentals are embedded in our DNA.

Andrew: We achieved a record $2 $9 billion in revenue this quarter up 2% year over year.

Unknown Executive: A strong balance sheet, operational excellence, guest care, and a relentless focus on areas within our control. I am confident that our investments going forward build on our unique competitive advantage. Including the potential acquisition of Hawaiian Airlines, which, if approved, we believe will enhance our strength as we broaden our presence in both domestic and international markets. At Alaska, we meet challenges head on, and we are committed to maintaining a track record of consistent success, day in and day out, just as we have done for years. And with that, I'll turn it over to you.

Andrew: This was on capacity increase of 6%, resulting in unit revenues down three 7%.

Speaker Change: A strong balance sheet, operational excellence, guest care, and a relentless focus on areas within our control. I am confident that our investments going forward build on our unique competitive advantages.

Andrew: Notably this unit revenue result reflects the impact of $60 million in lost revenue attributed to the fleet grounding.

Speaker Change: including the potential acquisition of Hawaiian Airlines which if approved we believe will enhance our strength as we broaden our presence in both domestic and international markets.

Andrew: Two points of RASM.

Throughout the quarter unit revenues moderated as our and industry capacity reached peak growth in the month of June.

Andrew: <unk> also increased sequentially, reaching 87% in June.

Speaker Change: At Alaska, we meet challenges head on, and we are committed to maintaining a track record of consistent success, day in and day out, just as we have done for years. And with that, I'll turn it over to Andrew.

Alrighty, 4% load factor for the quarter.

Andrew: The records of the past two years, so outsized impacts from regions with double digit capacity additions that pressurized both yields and loads more than originally anticipated.

Unknown Executive: Thanks, Ben, and good morning, everyone. Today, my comments will highlight our second quarter results, as well as provide some color on our third quarter outlook and capacity guidance. We achieved a record $2.9 billion in revenue this quarter, up 2% year-over-year. This was on a capacity increase of 6%, resulting in unit revenues down 3.7%. Notably, this unit revenue result reflects the impact of $60 million in lost revenue attributed to the fleet grounding, or two points of lost resonance.

Andrew: Thanks Ben and good morning everyone. Today my comments will highlight our second quarter results, as well as provide colour on our third quarter outlook and capacity guidance.

Andrew: As you know the past few years have demonstrated significant volatility in passing demand, but I believe trends are stabilizing and should continue to allow us to optimize further.

Andrew: We achieved a record $2.9 billion in revenue this quarter, up 2% year-over-year. This was on capacity increase of 6%, resulting in unit revenues down 3.7%.

Andrew: For the most part booking patents are similar to what they were pre pandemic and business travel has largely returned.

Speaker Change: For Alaska, I still see opportunity in front cabins, giving guest preferences as well as network refinement to match, when and where guests want to fly.

Andrew: Notably, this unit revenue result reflects the impact of $60 million in lost revenue attributed to the fleet grounding, or two points of lost RASM.

Unknown Executive: Throughout the quarter, unit revenues moderated as hourly and industry capacity reached peak growth in the month of June. Load factors also increased sequentially, reaching 87% in June. Our 84% load factor for the quarter, below the records of the past two years, saw out-sized impacts from regions with double-digit capacity that pressurized both yields and loads more than originally anticipated. As you know, the past few years have demonstrated significant volatility in passing demand, but I believe trends are stabilizing and should continue to allow us to optimize further.

Speaker Change: Our premium cabins continue to be the bright spot in our performance.

Andrew: Throughout the quarter, unit revenues moderated as hour and industry capacity reached peak growth in the month of June . Load factors also increased sequentially, reaching 87% in June .

Speaker Change: First class and premium class revenues were up 8% and 6% year over year, respectively and.

Speaker Change: And continue to outpace main cabin revenue growth.

Speaker Change: Paid first class load factor was 71% for the quarter up four points on flat yields.

Andrew: Our 84% load factor for the quarter, below the records of the past two years, saw outsized impacts from regions with double-digit capacity additions that pressurized both yields and loads more than originally anticipated.

Speaker Change: As Ben mentioned, we are continuing to invest in premium seating.

Ben Andrew: Late last year, we added a row of premium class to a regional Embraer 175 fleet and starting this full approximately 220 of our mainline aircraft on property, including all our eight hundreds 900 Diaz and Max Eights and nines will start being fitted with additional <unk>.

Andrew: As you know, the past few years have demonstrated significant volatility in passing demand, but I believe trends are stabilizing and should continue to allow us to optimize further.

Unknown Executive: For the most part, booking patterns are similar to what they were pre-pandemic, and business travel has largely returned. For Alaska Airlines, I still see opportunity in front cabins given guest preference, as well as network refinement to match when and where guests want to fly. Our premium cabins continue to be a bright spot in our performance. First Class and Premium Class revenues were up 8% and 6% year-over-year, respectively, and continue to outpace main cabin revenue growth. Paid first class load factor was 71% for the quarter, up four points on the previous quarter.

Andrew: For the most part, booking patterns are similar to what they were pre-pandemic and business travel has largely returned.

Speaker Change: Premium seats with.

Speaker Change: Loss in total ship seats with program completion by mid 2026.

Speaker Change: For Alaska, I still see opportunity in front cabins given guest preferences, as well as network refinement to match when and where guests want to fly. Our premium cabins continue to be the bright spot in our performance.

Speaker Change: Similarly, our loyalty program remains strong with bank cash remuneration totaling $430 million for the quarter.

Speaker Change: We are constantly strengthening the value of the program with new and varied offerings that allow our guests to build value in different ways.

Speaker Change: First Class and Premium Class revenues were up 8% and 6% year-over-year, respectively, and continue to outpace main cabin revenue growth. Paid First Class load factor was 71% for the quarter, up 4 points on flat yields.

Speaker Change: We found unique ways to attract younger next generation mileage plan members to build lifetime loyalty.

Unknown Executive: As Ben mentioned, we are continuing to invest in premium seating. Late last year, we added a row of premium class seats to our regional Embraer 175 fleet, and starting this fall, approximately 220 of our mainline aircraft on property, including all our 800s, 900ERs, and MAX 8s and 9s, will start being fitted with additional premium seats with no loss in total ship with program completion by mid-2026. Similarly, our loyalty program remains strong, with bank cash remuneration totaling $430 million for the quarter.

Speaker Change: Our recent partnership with built where customers can pay rent with Alaska's credit card and earn Triple miles. For example has had great initial results.

Speaker Change: As Ben mentioned, we are continuing to invest in premium seating.

Ben: Late last year, we added a row of premium class to our regional Embraer 175 fleet, and starting this fall, approximately 220 of our mainline aircraft on property, including all our 800s,

Speaker Change: Our partner selling platform now covers 23 global airlines, including the recent addition of our longtime partner British Airways.

Speaker Change: To date guests have purchased tickets to more than 80 countries and ticket sales were up 53% year to date.

Ben: 900ERs and MAX 8s and 9s will start being fitted with additional premium seats with no loss in total ship seats with program completion by mid-2026.

Speaker Change: Also continuing to invest in our global loyalty proposition.

Speaker Change: Since we relaunched partner redemptions on April one with more content <unk>.

Ben: Similarly, our loyalty program remains strong, with bank cash remuneration totaling $430 million for the quarter.

Speaker Change: New promotions and refreshed pricing, we've seen activity increase 61%, helping drive overall revenue contribution from our partners to 7% of our total revenue.

Unknown Executive: We are constantly strengthening the value of the program with new and varied offerings that allow our guests to build value in different ways. We have found unique ways to attract younger, next-generation mileage plan members to build lifetime loyalty. Our recent partnership with Bilt, where customers can pay rent with Alaska's credit card and earn triple miles, for example, has had great initial results. Our partner selling platform now covers 23 global airlines, including the recent addition of our long-time partner, British Airways.

Ben: We are constantly strengthening the value of the program with new and varied offerings that allow our guests to build value in different ways.

Speaker Change: And we continue to enhance our customer experience, we're excited to move to a stunning new terminal in San Francisco, This month, which co locates us with many of our Oneworld partners.

Ben: We've found unique ways to attract younger, next-generation mileage plan members to build lifetime loyalty.

Speaker Change: We will also open a new 11000 square foot lounge next week in.

Ben: Our recent partnership with Bilt, where customers can pay rent with Alaska's credit card and earn triple miles, for example, has had great initial results.

Speaker Change: In addition to offering a world class experience and amenities our lobby in the Harvey milk terminal. One is the first to offer next generation automated backdrop technology.

Ben: Our partner selling platform now covers 23 global airlines, including the recent addition of our long-time partner, British Airways.

This innovative and seamless self service technology introduced in the heart of Silicon Valley will get guests through the chicken process within minutes, our bag tag technology, which is being implemented system wide has also resulted in a 30% increase in guests checking and digitally before they arrive at the edge.

Ben: To date, guests have purchased tickets to more than 80 countries and ticket sales are up 53% year-to-date. We are also continuing to invest in our global loyalty proposition.

Unknown Executive: Since we relaunched Partner Redemptions on April 1 with more content, new promotions, and refreshed pricing, we've seen activity increase 61%, helping drive overall revenue contribution from our partners to 7% of our total revenue, and we continue to enhance our customer experience. We're excited to move to a stunning new terminal in San Francisco this month, which co-locates us with many of our One World partners. We will also open our new 11,000-square-foot lounge next week. In addition to offering a world-class experience and amenities, our lobby in Harvey Milk Terminal 1 is the first to offer next-generation automated bag drop technology.

Ben: Since we relaunched Partner Redemptions on April 1 with more content, new promotions, and refreshed pricing, we've seen activity increase 61%, helping drive overall revenue contribution from our partners to 7% of our total revenue.

Port.

Speaker Change: And guests using self service check in for bags has doubled to over 70%.

Speaker Change: We've also reintroduced hot meals for pre purchase onboard our aircraft in our premium and main cabins.

Ben: And we continue to enhance our customer experience.

At Alaska, we are focused on quality experience for all our guests. We are excited to continue investing in the products and amenities that create this premium experience for them.

Ben: We're excited to move to a stunning new terminal in San Francisco this month, which co-locates us with many of our One World partners. We will also open our new 11,000 square foot lounge next week.

Speaker Change: Turning to our managed corporate business travel remained solid throughout the quarter. Following the significant step up we experienced at the beginning of the year.

Ben: In addition to offering a world-class experience and amenities, our lobby in the Harvey Milk Terminal 1 is the first to offer next-generation automated bag drop technology.

Speaker Change: Corporate revenues were up 24% year over year in the second quarter and continued to be driven by technology companies that were up 40% year over year.

Unknown Executive: This innovative and seamless self-service technology, introduced in the heart of Silicon Valley, will get guests through the check-in process within minutes. Our bag tag technology, which has been implemented system-wide, has also resulted in a 30% increase in guests checking in digitally before they arrive at the airport, and guests using self-service check-in for bags have doubled to over 70%. We've also reintroduced Hot Meals for pre-purchase on board our aircraft in our Premium and Main Cabins.

Ben: This innovative and seamless self-service technology, introduced in the heart of the Silicon Valley, will get guests through the check-in process within minutes.

Speaker Change: On a revenue basis, we have now eclipsed 2019, although overall volumes are about 85% recovered.

Ben: Our bag technology, which has been implemented system-wide, has also resulted in a 30% increase in guests checking in digitally before they arrive at the airport, and guests using self-service check-in for bags has doubled to over 70%.

Speaker Change: Specific to the Bay area, we see further upside potential given the market has only recovered 80% of revenue to date.

Speaker Change: Encouragingly as we sit here today.

Speaker Change: <unk> managed corporate revenue on the books is up over 15%.

Ben: We've also reintroduced hot meals for pre-purchase on board our aircraft in our premium and main cabins.

Unknown Executive: At Alaska, we're focused on quality experiences for all our guests, and we are excited to continue investing in the products and amenities that create this premium experience for them. Turning to our Managed Corporate Business, Travel remains solid throughout the quarter following the significant step-up we experienced at the beginning of the year. Corporate revenues were up 24% year-over-year in the second quarter and continue to be driven by technology companies that were up 40% year-over-year.

Speaker Change: Now turning to our outlook and guidance, we expect capacity to moderate sequentially, two up 2% to 3% year over year in the third quarter.

Ben: At Alaska, we're focused on quality experience for all our guests. We are excited to continue investing in the products and amenities that create this premium experience for them.

Speaker Change: Similarly, domestic industry capacity is set to increase approximately 3% year over year in the third quarter, that's down from the 6% increase we saw in the second quarter.

Speaker Change: Turning to our managed corporate business, travel remains solid throughout the quarter following the significant step-up we experienced at the beginning of the year.

Speaker Change: Following an exceptionally strong Q1 result, we stretched to capture more yield in the second quarter before rebalancing towards load.

Speaker Change: Corporate revenues were up 24% year-over-year in the second quarter, and continue to be driven by technology companies that were up 40% year-over-year.

Speaker Change: While we saw good results versus competitors in this peak flying period.

Unknown Executive: On a revenue basis, we have now eclipsed 2019, although overall volumes are about 85% recovered. Specific to the Bay Area, we see further upside potential given the market has only recovered 80% of revenue to date. Encouragingly, as we sit here today, held managed corporate revenue on the books is up over 15%.

Speaker Change: We've made network and capacity adjustments for Q3 and beyond to better match supply and demand in off peak periods.

Speaker Change: On a revenue basis we have now eclipsed 2019 although overall volumes are about 85% recovered.

Speaker Change: Also factoring into our expectations as what we believe to be a shift in school calendars to slightly earlier summer breaks leading to a strengthening in June versus July and August.

Speaker Change: Specific to the Bay Area, we see further upside potential given the market has only recovered 80% of revenue to date.

Speaker Change: Encouragingly, as we sit here today, held managed corporate revenue on the books is up over 15%.

Speaker Change: As more leisure trips take place earlier this has pushed June to become a stronger peak months.

Unknown Executive: Now, turning to our Outlook and Guidance. We expect capacity to moderate sequentially to up 2-3% year over year in the third quarter. Similarly, domestic industry capacity is set to increase approximately 3% year over year in the third quarter.

Speaker Change: Given this shift along with the yield environment, we observed last year. During these months, we are planning for nearly flat capacity in August and September versus 2023.

Speaker Change: Now, turning to our Outlook and Guidance.

Speaker Change: We expect capacity to moderate sequentially to up 2-3% year-over-year in the third quarter.

Speaker Change: Lastly, the international versus domestic traffic mix has not yet normalized although we still believe it will over time with.

Speaker Change: Similarly, domestic industry capacity is set to increase approximately 3% year-over-year in the third quarter. That's down from the 6% increase we saw in the second quarter.

Unknown Executive: That's down from the 6% increase we saw in the second quarter. Following an exceptionally strong Q1 result, we stretched to capture more yield in the second quarter before rebalancing towards load. While we saw good results versus competitors in this peak flying period, we've made network and capacity adjustments for Q3 and beyond to better match supply and demand in off-peak periods. Also factoring into our expectations is what we believe to be a shift in school calendars to slightly earlier summer break, leading to higher demand in June versus July and August. As more leisure trips take place earlier, this has pushed June to become a stronger peak month.

Speaker Change: With over one point of demand having shifted out of domestic travel since 2019. We expect this phenomena is still detracting from high value domestic demand that would otherwise be present.

Speaker Change: Following an exceptionally strong Q1 result, we stretched to capture more yield in the second quarter before rebalancing towards load.

Speaker Change: While we saw good results versus competitors in this peak flying period, we've made network and capacity adjustments for Q3 and beyond to better match supply and demand in off-peak periods.

Speaker Change: Looking ahead, we've been encouraged by our advanced bookings, which are coming in above capacity growth.

Speaker Change: With load factors for August and September building ahead of last year.

We currently have 65% of forecasted coupon revenue in the books as of today's call.

Speaker Change: Also factoring into our expectations is what we believe to be a shift in school calendars to slightly earlier summer breaks, leading to a strengthening in June versus July and August .

Speaker Change: Given our lower growth as we go into the shoulder periods of August and September we are seeing the benefit of stronger loads relative to last year. These.

Speaker Change: As more leisure trips take place earlier, this has pushed June to become a stronger peak month. Given this shift, along with the yield environment we observed last year during these months, we are planning for nearly flat capacity in August and September versus 2023.

These trends give us confidence that we can achieve flat to positive unit revenues in the third quarter versus last year.

Unknown Executive: Given this shift, along with the yield environment we observed last year during these months, we are planning for nearly flat capacity in August and September versus 2020. Lastly, the international versus domestic traffic mix has not yet normalized, although we still believe it will over time, with over one point of demand having shifted out of domestic travel since 2019. We expect this phenomenon is still detracting from high-value domestic demand that would otherwise be present.

Speaker Change: This assumes negative unit revenues in July.

Speaker Change: Modestly positive in August and solidly positive unit revenue in September <unk>.

Speaker Change: Lastly, the international vs domestic traffic mix has not yet normalized, although we still believe it will over time. With over 1 point of demand having shifted out of domestic travel since 2019,

Speaker Change: September may have more upside potential as corporate travel traditionally picks up versus the summer months.

Speaker Change: We have a strong commercial plan that offers great value for our guests is producing results and has room to grow.

Speaker Change: We expect this phenomena is still detracting from high-value domestic demand that would otherwise be present.

Unknown Executive: Looking ahead, we've been encouraged by our advanced bookings, which are coming in above capacity growth with load factors for August and September building ahead of last year. We currently have 65% of forecasted coupon revenue in the books as of today's call. Given our lower growth as we go into the shoulder periods of August and September, we are seeing the benefit of stronger loads relative to last year. These trends give us confidence that we can achieve flat to positive unit revenues in the third quarter compared to last year. This assumes negative unit revenues in July.

Speaker Change: Our upcoming fleet modifications, we will expand our premium offering, adding $1 3 million lifted seats annually.

Speaker Change: Looking ahead, we've been encouraged by our advanced bookings, which are coming in above capacity growth, with load factors for August and September building ahead of last year. We currently have 65% of forecasted coupon revenue in the books as of today's call.

Speaker Change: I am excited to drive more revenue from this side of the business from the 25% premium seat mix today to 28% of seats when completed.

Speaker Change: Hearing on a comprehensive network, both our own and through our partners internationally guests can go anywhere in the world and they can do so while accruing currency in the most valuable loyalty program out there.

Speaker Change: Given our lower growth as we go into the shoulder periods of August and September , we are seeing the benefit of stronger loads relative to last year.

Speaker Change: These trends give us confidence that we can achieve flat to positive unit revenues in the third quarter versus last year. This assumes negative unit revenues in July .

Speaker Change: While Alaska doesn't offer long haul international services on our own medal our guests consistently choose to fly out partner Airlines when taking these trips.

Unknown Executive: Modestly positive in August and solidly positive unit revenue in September. September may have more upside potential as corporate travel traditionally picks up versus the summer months. We have a strong commercial plan that offers great value for our guests, is producing results, and has room to grow. Our upcoming fleet modifications will expand our premium offering, adding 1.3 million extra seats annually. I am excited to drive more revenue from this side of the business from the 25% premium seat mix today to 28% of seats when completed.

Speaker Change: Modestly positive in August and solidly positive unit revenue in September . September may have more upside potential as corporate travel traditionally picks up versus the summer months.

Choosing one of the attractive options within the global Alaska ecosystem.

Shane: This is among the many reasons, our multifaceted approach to creating a premium experience across our product segmentation drives value for our guests differentiates us from domestic peers and supports long term sustainable financial results and with that I'll pass it over to Shane.

Speaker Change: We have a strong commercial plan that offers great value for our guests, is producing results, and has room to grow.

Speaker Change: Our upcoming fleet modifications will expand our premium offering, adding 1.3 million lifted seats annually.

Shane: Thanks, Andrew and good morning, everyone.

Speaker Change: I am excited to drive more revenue from this side of the business from the 25% premium seat mix today to 28% of seats when completed.

Shane: We delivered a strong second quarter, which is now by a large distance our strongest quarter of the year.

Unknown Executive: Layering on a comprehensive network, both our own and through our partners internationally, guests can go anywhere in the world, and they can do so while accruing currency in the most valuable loyalty program out there. While Alaska doesn't offer long-haul international services on our own aircraft, our guests consistently choose to fly our partner airlines when taking these trips.

Shane: June has become our strongest margin month of the year and while margins were down slightly year over year. The gap to 2023 narrowed in each month of the quarter sequentially.

Speaker Change: Layering on a comprehensive network both our own and through our partners internationally, guests can go anywhere in the world and they can do so while accruing currency in the most valuable loyalty program out there.

Shane: Absent the impacts of the fleet grounding during the first quarter our results in the first half of this year would've improved nicely versus 2023 and indication of the strong underlying business model we have created.

Speaker Change: While Alaska doesn't offer long-haul international services on our own metal, our guests consistently choose to fly our partner airlines when taking these trips.

Unknown Executive: Choosing one of the attractive options within the Global Alaska Ecosystem is among the many reasons our multifaceted approach to creating a premium experience across our product segmentation drives value for our guests, differentiates us from domestic peers, and supports long-term, sustainable financial results. And with that, I'll pass it over to Shane. Thanks, Andrew, and good morning, everyone. We delivered a strong second quarter, which is now, by a large distance, our strongest quarter of the year.

Shane: And while we are seeing similar trends demand wise as others and will experience a significant step up in labor costs should our tentative agreement with our flight attendants ratify our expectation is that our full year pre tax results again adjusted for the impact of the fleet grounding would be similar or better than 2020 Three's full year.

Speaker Change: Choosing one of the attractive options within the global Alaska ecosystem.

Speaker Change: This is among the many reasons our multifaceted approach to creating a premium experience across our product segmentation drives value for our guests.

Speaker Change: differentiates us from domestic peers and supports long-term sustainable financial results. And with that I'll pass it over to Shane.

Shane: The result of seven 5%.

Shane: Turning to our second quarter, our adjusted earnings per share was $2 55.

Shane: Thanks, Andrew, and good morning, everyone.

Shane: With what we believe will be an industry, leading adjusted pre tax margin of 15, 8%.

Shane: We delivered a strong second quarter, which is now, by a large distance, our strongest quarter of the year.

Unknown Executive: June has become our strongest margin month of the year, and while margins were down slightly year over year, the gap to 2023 narrowed in each month of the quarter sequentially. Absent the impacts of the fleet grounding during the first quarter, our results in the first half of this year would have improved nicely versus 2023, an indication of the strong underlying business model we have created. And while we are seeing similar trends demand-wise as others and will experience a significant step up in labor costs should our tentative agreement with our flight attendants ratify, our expectation is that our full year pre-tax results, Again, adjusted for the impact of the fleet grounding, would be similar or better than 2023's full year result of 7.5 percent.

Shane: Fuel price per gallon was $2 84.

Shane: June has become our strongest margin month of the year, and while margins were down slightly year over year, the gap to 2023 narrowed in each month of the quarter sequentially.

Speaker Change: <unk> from $3 <unk> in the first quarter in.

Speaker Change: In particular, we were encouraged to see West coast refining margins returned to being on par with Gulf coast during the quarter.

Shane: Absent the impacts of the fleet grounding during the first quarter, our results in the first half of this year would have improved nicely versus 2023, an indication of the strong underlying business model we have created.

Speaker Change: Our total liquidity inclusive of on hand, cash and Undrawn lines of credit stood at $3 1 billion at quarter end.

Speaker Change: Debt repayments for the quarter were approximately $50 million and are expected to be approximately $110 million in the third quarter. We.

Shane: And while we are seeing similar trends demand-wise as others, and will experience a significant step up in labor costs,

Speaker Change: We continue to have one of the healthiest balance sheets in the industry with debt to cap at 45% and net debt to EBITDAR at one turn.

Shane: Should our tentative agreement with our flight attendants ratify, our expectation is that our full year pre-tax results, again, adjusted for the impact of the fleet grounding, would be similar or better than 2023's full year result of 7.5%.

Speaker Change: Share repurchases totaled $28 million this quarter for a year to date total of $49 million and we are tracking to at least fully offset dilution for the year.

Unknown Executive: Turning to our second quarter, our adjusted earnings per share was $2.55, with what we believe will be an industry-leading adjusted pre-tax margin of 15.8%. Fuel price per gallon was $2.84, down from $3.08 in the first quarter.

Shane: Turning to our second quarter, our adjusted earnings per share was $2.55, with what we believe will be an industry-leading adjusted pre-tax margin of 15.8%.

Speaker Change: Second quarter unit costs were down one 9% year over year coming in better than our original expectation as our teams continued to do a great job managing costs with incrementally better results across the organization.

Shane: Fuel price per gallon was $2.84, down from $3.08 in the first quarter. In particular, we were encouraged to see West Coast refining margins return to being on par with Gulf Coast during the quarter.

Unknown Executive: In particular, we were encouraged to see West Coast refining margins return to being on par with Gulf Coast during the quarter. Our total liquidity, inclusive of on-hand cash and undrawn lines of credit, stood at $3.1 billion at quarter end. Debt repayments for the quarter were approximately $50 million and are expected to be approximately $110 million in the third quarter.

Speaker Change: Productivity improved again this quarter with passengers per FTE up two 3%.

Speaker Change: This was the sixth consecutive quarter of productivity improvements.

Speaker Change: Adjusted for the impact of the fleet grounding a trend we expect to continue going forward.

Shane: Our total liquidity, inclusive of on-hand cash and undrawn lines of credit, stood at $3.1 billion a quarter end.

Speaker Change: Turning to third quarter guidance, we expect more pressure on unit costs than we saw in the first and second quarters, which we anticipate will be in the high single digits for the back half of the year.

Shane: Debt repayments for the quarter were approximately $50 million and are expected to be approximately $110 million in the third quarter. We continue to have one of the healthiest balance sheets in the industry, with debt to cap at 45% and net debt to EBITDAR at one turn.

Unknown Executive: We continue to have one of the healthiest balance sheets in the industry with debt to cap at 45% and net debt to EBITDAR at one turn. Chair repurchases total $28 million this quarter for a year-to-date total of $49 million, and we are tracking to at least fully offset dilution for the year. Second quarter unit costs were down 1.9% year over year, coming in better than our original expectation as our teams continue to do a great job managing costs with incrementally better results across the organization.

Speaker Change: I will provide detail on what is driving this but would note that we have the toughest comp in the industry given that we lead and cost performance in the second half of last year with unit costs down 5% versus an industry average up 3% year over year in the third quarter, creating a natural headwind as we lap those results.

Shane: Share repurchases total $28 million this quarter for a year-to-date total of $49 million, and we are tracking to at least fully offset dilution for the year.

Shane: Second quarter unit costs were down 1.9% year over year, coming in better than our original expectation as our teams continue to do a great job managing costs with incrementally better results across the organization.

Speaker Change: For the third quarter. This year, we are seeing a 5% to six point drag on CASM X from the following areas.

Speaker Change: First two points of headwind is from having configured our business for a higher level of growth than we will realize this year, primarily driven by fewer and later deliveries from Boeing.

Unknown Executive: Productivity improved again this quarter, with passengers per FTE up 2.3%. This was the sixth consecutive quarter of productivity improvement. Adjusted for the impact of the fleet grounding, a trend we expect to continue going forward. Turning to third-quarter guidance, we expect more pressure on unit costs than we saw in the first and second quarters, which we anticipate will be in the high single digits for the back half of the year. I won't provide detail on what is driving this, but I would note that we have the toughest comp in the industry.

Shane: Productivity improved again this quarter with passengers per FTE up 2.3 percent. This was the sixth consecutive quarter of productivity improvements.

Speaker Change: While we have done an excellent job managing costs down in the face of lower growth, we are still not at an optimal level.

Shane: Adjusted for the impact of the fleet grounding, a trend we expect to continue going forward.

Speaker Change: While this will be a future opportunity and tailwind as we continue to rightsize our cost structure at these new growth levels, it's driving a headwind in Q3.

Shane: Turning to third quarter guidance, we expect more pressure on unit costs than we saw in the first and second quarters, which we anticipate will be in the high single digits for the back half of the year.

Speaker Change: Second we are seeing about a one point of pressure from the timing of cost shifting to later in the year. This includes modestly higher maintenance spend in the second half.

Shane: I will provide detail on what is driving this, but would note that we have the toughest comp in the industry, given that we led in cost performance in the second half of last year.

Unknown Executive: Given that we led in cost performance in the second half of last year, with unit costs down 5% versus an industry average up 3% year over year in the third quarter, creating a natural headwind as we lapped those results. For the third quarter of this year, we are seeing a five to six point drag on Chasm X from the following areas.

Speaker Change: And airport real estate costs that reset July one.

Speaker Change: Third labor costs continue to step up materially and we will see two points of pressure from our agreement with our flight attendants, assuming it ratifies.

Shane: with unit costs down 5% versus an industry average up 3% year over year in the third quarter, creating a natural headwind as we lapped those results.

Speaker Change: And also on the labor cost category, there is a little more than a one point headwind from the annualized <unk> of our pilot wage snap up to industry from last September and the new agreement with our technicians from late last year.

Shane: For the third quarter of this year, we are seeing a 5 to 6 point drag on CASM-X from the following areas.

Unknown Executive: First, two points of headwinds are from having configured our business for a higher level of growth than we will realize this year, primarily driven by fewer and later deliveries from Boeing. While we have done an excellent job managing costs down in the face of lower growth, we are still not at an optimal level. While this will be a future opportunity for a tailwind as we continue to right-size our cost structure at these new growth levels, it's driving a headwind in Q3.

Shane: First, two points of headwind is from having configured our business for a higher level of growth than we will realize this year, primarily driven by fewer, and later, deliveries from Boeing.

Speaker Change: We are excited about the investments we've been able to make in our people and with line of sight to closing our last labor deal of this round of bargaining. We now have more visibility into our future cost structure, which we now need to fully adapt our business model too.

Shane: While we have done an excellent job managing costs down in the face of lower growth, we are still not at an optimal level.

Speaker Change: Importantly, our long term strategy and commitment is to maintain our unit cost advantage versus our competitors and we remain confident this continues to be the case on a stage length adjusted CASM X basis, we still expect to finish the year with one of the best results in the industry versus 2019.

Shane: While this will be a future opportunity in tailwind as we continue to right-size our cost structure at these new growth levels, it's driving a headwind in Q3.

Unknown Executive: Second, we are seeing about one point of pressure from the timing of costs shifting to later in the year. This includes modestly higher maintenance spend in the second half and airport real estate costs that reset on July 1st. Third, labor costs continue to step up materially, and we will see two points of pressure from our agreement with our flight attendants, assuming it is ratified.

Shane: Second, we are seeing about a one point of pressure from the timing of costs shifting to later in the year.

Shane: This includes modestly higher maintenance spend in the second half and airport real estate costs that reset July 1st.

Speaker Change: But unit metrics may be pressured in the near term.

Speaker Change: As I noted on our last few calls we will continue to be responsible with capacity given the current demand context, and we'll focus on prioritizing margin and profitability over other metrics.

Shane: Third, labor costs continue to step up materially, and we will see two points of pressure from our agreement with our flight attendant, assuming it ratifies.

Unknown Executive: And also in the labor cost category, there's a little more than a point from the annualization of our pilot wage snap up for the industry from last September and the new agreement with our technicians from late last year. We are excited about the investments we've been able to make in our people, and with line of sight to closing our last labor deal of this round of bargaining, we now have more visibility into our future cost structure, which we now need to fully adapt our business model.

Shane: And also in the labor cost category, there's a little more than a one point Edwin from the annualization of our pilot wage snap up to industry from last September , and the new agreement with our technicians from late last year.

Speaker Change: Fuel remained somewhat unpredictable, but trends in the last quarter has been a welcome change with crude around $80, a barrel and west coast refining margins, averaging only a <unk> <unk> premium over Gulf coast for the quarter.

Shane: We are excited about the investments we've been able to make in our people, and with line of sight to closing our last labor deal of this round of bargaining, we now have more visibility into our future cost structure, which we now need to fully adapt our business model to.

Speaker Change: Although these spreads have recovered more in line with historical levels. We are still focused on neutralizing the west coast fueled disadvantage, we've seen through other initiatives over time.

Unknown Executive: Importantly, our long-term strategy and commitment is to maintain our unit cost advantage versus our competitors, and we remain confident this continues to be the case. On a stage length adjusted CASM-X basis, we still expect to finish the year with one of the best results in the industry versus 2019. Well, unit metrics may be pressured in the near term. As I noted on the last few calls, we will continue to be responsible for capacity given the current demand context, and we'll focus on prioritizing margin and profitability over other metrics.

Speaker Change: For the third quarter, we expect our economic fuel cost per gallon to be between $2 85 and.

Shane: Importantly, our long-term strategy and commitment is to maintain our unit cost advantage versus our competitors, and we remain confident this continues to be the case.

Speaker Change: And $2 95.

Speaker Change: Taken altogether, we expect third quarter EPS to be $1 40 to $1 60.

Shane: On a stage length adjusted CASM-X basis, we still expect to finish the year with one of the best results in the industry versus 2019.

Speaker Change: And we've adjusted our full year EPS lower by 25 at the midpoint.

Speaker Change: These are both principally driven by an outlook that now incorporate.

Shane: While unit metrics may be pressured in the near term, as I noted on the last few calls, we will continue to be responsible with capacity given the current demand context and will focus on prioritizing margin and profitability over other metrics.

Speaker Change: Our new labor contract more moderate growth in the second half of the year and the moderated domestic fare environment, we've experienced recently compared to a few months earlier in the year.

Unknown Executive: Fuel remains somewhat unpredictable, but trends in the last quarter have been a welcome change, with crude around $80 a barrel and West Coast refining margins averaging only a 3-cent premium over Gulf Coast for the quarter. Although these spreads have recovered more in line with historical levels, we are still focused on neutralizing the West Coast fuel disadvantage we've seen through other initiatives over time. For the third quarter, we expect our economic fuel costs per gallon to be between $2.85 and $2.95.

Speaker Change: That said, we still expect to be in the top group of margin producers in the industry. Both this year and in years to come.

Shane: You'll remain somewhat unpredictable, but trends in the last quarter have been a welcome change with crude around $80 a barrel and West Coast refining margins averaging only a three cent premium over Gulf Coast for the quarter.

Speaker Change: The grounding we're on track to achieve at least flat margins versus last year validating our differentiated business model and the strong fundamentals that underpin it and.

Shane: Although these spreads have recovered more in line with historical levels, we are still focused on neutralizing the West Coast fuel disadvantage we've seen through other initiatives over time.

Speaker Change: And then a more premium leaning environment, we're excited to not only add premium seats, but to do so without removing any total seats from our planes are positive for revenue and our unit cost.

Shane: For the third quarter, we expect our economic fuel costs per gallon to be between $2.85 and $2.95.

Speaker Change: By any metric Alaska has a long track record of success as we continue to build on our competitive advantages and apply learnings to adjust parts of our business within our control. We are strengthening our already successful business model that is helping us win in today's environment and as the industry continues to evolve we will adapt and position ourselves.

Unknown Executive: Taken all together, we expect third-quarter EPS to be $1.40 to $1.60, and we've adjusted our full year EPS lower by 25 cents at the midpoint. These are both principally driven by an outlook that now incorporates the New Contract, more moderate growth in the second half of the year, and a moderated domestic fare environment we've experienced recently compared to a few months earlier in the year. That said, we still expect to be in the top group of margin producers in the industry both this year and in years to come.

Shane: Taken all together, we expect third quarter EPS to be $1.40 to $1.60.

Shane: and we've adjusted our full-year EPS lower by 25 cents at the midpoint.

Shane: These are both principally driven by an outlook that now incorporates...

Speaker Change: To continue delivering margins amongst the best in the industry and with that let's go to your questions.

Shane: Historic New Labor Contract, more moderate growth in the second half of the year, and the moderated domestic fare environment we've experienced recently compared to a few months earlier in the year.

Speaker Change: At this time I would like to invite analysts who would like to ask a question. Please press Star then the number one on your telephone keypad.

Shane: That said, we still expect to be in the top group of margin producers in the industry, both this year and in years to come.

Unknown Executive: Absent the grounding, we're on track to achieve at least flat margins versus last year, validating our differentiated business model and the strong fundamentals that underpin it. And in a more premium-leaning environment, we're excited to not only add premium seats but to do so without removing any total seats from our planes, a positive for revenue and our unit costs. By any metric, Alaska has a long track record of success.

Speaker Change: Pause for just a moment to compile the Q&A roster.

Shane: Absent the grounding, we're on track to achieve at least flat margins versus last year, validating our differentiated business model and the strong fundamentals that underpin it.

Speaker Change: And our first question today will come from Jamie Baker with Jpmorgan. Please ask your question.

Speaker Change: Two in a row should be paranoid.

Shane: And in a more premium leaning environment, we're excited to not only add premium seats, but to do so without removing any total seats from our planes, a positive for revenue and our unit costs.

Speaker Change: So a deal related question folks so with Virgin you disclosed you were speaking with justice and remedies were being.

Unknown Executive: As we continue to build on our competitive advantages and apply learnings to adjust parts of our business within our control, we are strengthening our already successful business model that's helping us win in today's environment. And as the industry continues to evolve, we will adapt and position ourselves to continue delivering margins amongst the best in the industry. And with that, let's go to your questions.

Speaker Change: Bantered about I'm trying to square that against what you said in the prepared remarks regarding the August 5th day, it sounds as if you're not yet having constructive discussions rather you're at a wait and see mode just as the <unk>.

Shane: By any metric, Alaska has a long track record of success.

Shane: As we continue to build on our competitive advantages and apply learnings to adjust parts of our business within our control, we are strengthening our already successful business model that's helping us win in today's environment.

Shane: And as the industry continues to evolve, we will adapt and position ourselves to continue delivering margins amongst the best in the industry.

Speaker Change: It is to hear back from Justice by then is that how should I, how I should incorporate.

Operator: Next time, I would like to invite analysts who would like to ask a question to please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster, and our first question today will come from Jamie Baker with JP Morgan. Please ask your question. Oh, it's two in a row. I should be paranoid.

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

Ben Andrew: Ben's opening remarks.

Speaker Change: At this time, I would like to invite analysts who would like to ask a question to please press star, then the number one on your telephone keypad.

Speaker Change: Yes, Jamie look we went through the entire process with the Doj and all the documents and discussions have occurred.

Speaker Change: We'll pause for just a moment to compile the Q&A roster.

Unknown Executive: Um, so a deal-related question, folks. So you know, with Virgin, you disclosed that you were speaking with justice, and you know, remedies were being, you know, discussed. I'm trying to square that against what you said in your prepared remarks regarding the August 5th date. It sounds as if you're not yet having constructive discussions, rather you're in a wait and see mode. Just as you know, the market is to hear back from justice by then. Is that how I should incorporate, you know, Ben's opening remarks? Yeah, Jamie, look, we went through the entire process with the DOJ, and all the documents and discussions have taken place.

Speaker Change: We're in the homestretch here in two weeks and.

Speaker Change: And our first question today will come from Jamie Baker with JP Morgan. Please ask your question.

Speaker Change: We're waiting to see what with Doj.

Speaker Change: It comes back to us with so.

Speaker Change: We've made our case.

Jamie Nathaniel Baker: It's two in a row. I should be paranoid. Um, so a deal related question, folks. So, you know, with Virgin, you disclosed you were speaking with justice and, you know, remedies were being, you know, bantered about. I'm trying to square that against

Speaker Change: And we feel pretty strong about our case on being a pro consumer and pro competitive. So we'll wait the Doj is.

Speaker Change: Decision and go from there.

Speaker Change: Perfect.

Speaker Change: And then second on a yield basis, what's your paid premium class not first class, but premium class paid premium to traditional or average economy yield. So I know, it's a it's a metric you don't usually disclose them.

Speaker Change: What you said in the prepared remarks regarding the August 5th date It sounds as if you're not yet having constructive discussions rather

Speaker Change: You're in a wait-and-see mode, just as the market is, to hear back from justice by then. Is that how I should incorporate Ben's opening remarks?

Speaker Change: Estimating it's in the 15% to 20% range just trying to find out if I'm close with that forecast.

Unknown Executive: We're in the homestretch here in two weeks, and we're waiting to see what DOJ comes back to us with. So, we've made our case, and we feel pretty strong about our case on being pro-consumer and pro-competitive, so we'll wait for DOJ's decision and go from there. Perfect. And then, on a yield basis, what's your paid premium class?

Speaker Change: Yes, Jamie I think you are off the top of my head I can tell the entire Kaplan is around 40% and about half of those are paid versus not so I think you are.

Speaker Change: Yeah, Jamie, look, we went through the entire process with the DOJ, and all the documents and discussions have occurred. We're in the homestretch here in two weeks, and we're waiting to see what DOJ comes back to us with.

Speaker Change: That's sort of where we sit at that so it's a good 40% for the cabin over the main cabin and it's been very encouraging.

Speaker Change: We've made our case, and we feel pretty strong about our case on being a pro-consumer and pro-competitive, so we'll wait the DOJ's decision and go from there.

Speaker Change: Sure.

Again, but you are 40% includes elite upgrades right correct of which about okay. There was about half of them. Yes, okay. Perfect. Just wanted to make sure I understood. Okay. Thank you both appreciate it take care.

Speaker Change: Perfect. And then second, on a yield basis, what's your paid premium class, not first class, but premium class

Unknown Executive: Not first class, but premium class, paid a premium to traditional or, you know, average economy yields. I know it's a metric you don't usually disclose, but I'm estimating it's in the, you know, 15 to 20% range, just trying to find out if I'm close with that forecast. Yeah, Jamie, I think you are on the top of my head.

Jamie Baker: Thanks, Jamie.

Duane <unk>: And we'll move next to Duane <unk> with Evercore ISI.

Jamie Baker: Okay.

Duane: Hey, thanks.

Speaker Change: paid premium to traditional or, you know, average economy yields. I know it's a it's a metric you don't usually disclose, I'm estimating it's in the, you know, 15 to 20% range, just trying to find out if I'm close with that forecast.

Speaker Change: I don't know if you have this metric but.

Duane <unk>: Overall competitive capacity in your markets what was that growth in <unk>.

Speaker Change: And how do you see that evolving in <unk> and perhaps <unk>.

Unknown Executive: I can tell the entire cabin is around 40%, and about half of those are paid versus not. So I think you're, you know, that's sort of where we sit on that. So it's a good 40% for the cabin over the main cabin, and it's been very encouraging. Sure, but and again, but your 40% includes elite upgrades, right? Correct, of which about okay, there's about half of them.

Duane <unk>: Hey, Duane.

Duane <unk>: <unk> elevated as you're aware than anyone in my prepared remarks.

Speaker Change: Yeah, Jamie, I think you are off the...

Duane <unk>: Area like Alaska long haul industry capacity was up over 20%.

Speaker Change: Top of my head I can tell the entire cabin is around 40% and about half of those are paid versus not so.

Duane <unk>: 12% of our network, but as.

Jamie Nathaniel Baker: I think you're, you know, that's sort of where we sit at that point.

Duane <unk>: As you look through all of our hubs.

Duane <unk>: Going forward and certainly September October.

Jamie Nathaniel Baker: So it's a good 40% for the cabin over the main cabin and it's been very encouraging.

Duane <unk>: Seats.

Sort of flat to very low single digits, so very much a significant reduction in the overall trajectory of growth.

Jamie Nathaniel Baker: Sure, but and again, but your 40% includes elite upgrades, right? Correct. Okay. There's about half of them. Yeah. Okay, perfect. Just wanted to make sure I understood. Okay. Thank you both. Appreciate it. Take care. Thanks, Jamie.

Unknown Executive: Yeah. Okay, perfect. Just wanted to make sure I understood. Okay. Thank you both. I appreciate it. Take care.

Duane Thomas Pfennigwerth: Thanks, Jamie. We will move next to Duane Pfennigwerth with Evercore ISI. Hey, thanks. I don't know if you have this metric, but overall competitive capacity in your markets.

Duane <unk>: What we see today.

Speaker Change: Sorry, sorry to stay with you, but you piqued my interest with the 65% booked comment.

Jamie Nathaniel Baker: And we'll move next to Duane Pfennigwerth with Evercore ISI.

Can you put that in context for us.

Speaker Change: Revenue pacing of 65% at this point, how would that compare to.

Unknown Executive: What was that growth in 2Q? And how do you see that evolving in 3Q and perhaps 4Q? Duane, it was elevated, as you know, and even in my prepared remarks, an area like Alaska Long Haul, industry capacity was up over 20%, which is, you know, 12% of our network. But as you look through all of our hubs, looking forward to certainly September and October, seats are sort of flat to very low single digits up.

Duane Thomas Pfennigwerth: Hey, thanks. I don't know if you have this metric, but...

Speaker Change: So last year, maybe maybe 2019.

Duane Thomas Pfennigwerth: Overall competitive capacity in your markets, what was that growth in 2Q and how do you see that evolving in 3Q and perhaps 4Q?

Speaker Change: 2019 off the top of my head, we might need to follow up on that but it's this is in line. It's normally anywhere in the mid sixties headed towards the highest 60, so its certainly right in line.

Unknown Executive: So, very much a significant reduction in the overall trajectory of growth that we see today. Greetings. Sorry to stay with you, but you piqued my interest with the 65% book comment. Can you put that in context for us?

Speaker Change: Yeah, Duane, it was elevated, as you're aware, and even in my prepared remarks.

Speaker Change: Over the last year or two.

Speaker Change: An area like Alaska long-haul industry capacity was up over 20 percent.

Speaker Change: Okay. Thank you.

Duane <unk>: Thank you Duane.

Speaker Change: which is a you know 12% of our network but as you look through all of our hubs looking forward in certainly September , October seats

Duane <unk>: And our next question will come from Scott Group with Wolfe Research.

Scott Group: Hey, Thanks, So I wanted to focus on the cost side, a little bit so I totally get the year over year comps are harder on CASM and less capacity growth Hertz unit costs I want to try and focus on absolute cost for a minute. So if you just look like Q2 to Q3.

Speaker Change: sort of flat to very low single digits up. So very much a significant reduction in the overall trajectory of growth that we see today.

Speaker Change: Creighton, sorry to stay with you, but you piqued my interest with the 65% book comment. Can you put that in context for us?

You're guiding to like a 10 or 11% increase just in absolute cost X fuel with capacity only up five and it's.

Unknown Executive: You know, revenue pacing of 65% at this point. How would that compare to, you know, say last year or maybe 2019? Um, 2019 off the top of my head. We might need a follow-up on that, but this is in line. It's normally anywhere in the mid-60s headed towards the higher 60s, so it's certainly right in line over the last year or two. Okay. Thank you. Thank you, Duane. Thanks, Dwight.

Creighton: You know revenue pacing of 65% at this point. How would that compare to you know, say last year or maybe maybe 2019?

It's like almost $200 million.

Speaker Change: Help us bridge that to a little less than 200, but help us bridge that how much is pilot.

Speaker Change: 2019 off the top of my head we might need a follow-up on that but it's this is in line it's normally anywhere in the mid 60s headed towards the higher 60s so it's certainly right in line.

Speaker Change: I started flight attendant, how much as the other factors.

Speaker Change: And does that new level of cost stay does that start to come down again as you go out to the fourth quarter next year, just any thoughts.

Speaker Change: Over the last year or two.

Speaker Change: Okay, thank you.

Scott Group: Yes, Thanks Scott.

Scott H. Group: Our next question will come from Scott Group with Wolf Rees. Hey, thanks. So Shane, I want to focus on the cost side a little bit. So I totally get that year over year comps are harder on the chasm and less capacity growth, or its unit cost. I want to try and focus on just absolute cost for a minute. So if you just look at Q2 to Q3, you're guiding to like a 10 11% increase, just an absolute cost x fuel, with capacity only up five. And I know it's like almost $200 million.

Dwayne: Thank you, Duane.

Speaker Change: Good morning.

Speaker Change: In terms of like proportionality I think.

Speaker Change: And our next question will come from Scott Group with Wolf Research.

Speaker Change: Labor is going to be a third or so.

Scott H. Group: So, Shane, I want to focus on the cost side a little bit.

Speaker Change: The increase just on a percentage basis with the bulk of that being.

Dwayne: The year-over-year comps are harder on chasm and less capacity growth.

Speaker Change: The flight attendant.

Scott H. Group: I want to try and focus on just absolute costs for a minute.

Speaker Change: <unk> contract, we do have another.

Speaker Change: Much more modest snap up with our pilots that that.

Speaker Change: So if you just look, like, Q2 to Q3, you're guiding to, like, a 10-11% increase just in absolute cost x fuel, with capacity only up five, and it's, like, almost $200 million.

Speaker Change: We will occur in September again.

Speaker Change: A different magnitude than last year, but the last rate adjustment we have in our current contract.

Scott H. Group: Help us bridge that to, you know, a little less than 200. Help us bridge that. How much is a pilot? Sorry, flight attendant? How much are the other factors?

Speaker Change: The rest is really like there is some shifting timing things we had a significant credit on the airport.

Speaker Change: Help us bridge that to, you know, a little less than 200, but help us bridge that. How much is pilot? Sorry, flight attendant. How much is the other factors and and does that

Speaker Change: Cost side in the first half of the year, but hit June.

And as I noted in my prepared remarks, you've got new rates coming in.

Speaker Change: New level of cost stay, does that start to come down again as you go out to fourth quarter next year? Just any thoughts.

Speaker Change: With airports in July one and so we've got.

Scott H. Group: And, and does that new level of cost stay? Does that start to come down again as you go out to the fourth quarter next year? Just any thoughts?

A slightly lower base in Q2 that rolls over to Q3 maintenance is similar there are some shifts from Q2 to Q3 I don't think any of our costs are.

Unknown Executive: Yeah, thanks, Scott, and good morning. In terms of like proportionality, I think, you know, labor is going to be a third or so of the increase just on a percentage basis, with the bulk of that being, you know, the flight attendant contract. We do have another, much more modest, snap-up with our pilots that will occur in September. Again, very different in magnitude than last year, but the last rate adjustment we have in the current contract. The rest is really like there's some shifting timing issues.

Speaker Change: Yeah, thanks, Scott, and good morning.

Speaker Change: In terms of like proportionality, I think, you know, labor is going to be a third or so of the increase just on a percentage basis with the bulk of that being

Speaker Change: Structurally different than any of our competitors and that's we've talked about this quite a bit and we will continue to we're going to ultimately maintain our cost advantage against the legacies and shrink the cost gap to the Lcs.

Speaker Change: You know, the flight attendant contract. We do have another

Speaker Change: We have lower costs and Jetblue today were close to southwest.

Speaker Change: And we're not letting delta United American Encroach on us.

Speaker Change: much more modest snap up with our pilots that that will occur in September again very different in magnitude than last year but the last rate adjustment we have in the current contract

Speaker Change: And that's that's what our expectation is for the balance of the year and as we go forward.

The other thing I, just want to make sure I know I think we had six consecutive quarters of productivity improvement that will continue even though we're having to adjust growth lower and it is going to be a tailwind throughout the rest of this year and into next year. So we don't expect.

Speaker Change: The rest is really like there's some shifting timing things. We had a significant credit on the airport cost side in the first half of the year that hit June .

Unknown Executive: We had a significant credit on the airport cost side in the first half of the year, that hit June. And as I noted in my prepared remarks, you've got, you know, new rates coming in with airports on July 1. And so we've got, you know, a slightly lower base in Q2 that rolls over to Q3. Maintenance is similar. There are some shifts from Q2 to Q3. However, I don't think any of our costs are structurally different from any of our competitors.

Speaker Change: High single digit number to be a new normal for us at all I think it's it's timing and some material step up costs and labor rates switch.

Speaker Change: and as I noted in my prepared remarks, you've got, you know, new rates coming in with airports in July 1 and so we've got, you know,

Speaker Change: I think this is probably the last of this size as we close this particular negotiation cycle down if our flight attendants ratify their deal.

Speaker Change: A slightly lower base in Q2 that rolls over to Q3. Maintenance is similar. There's some shifts from Q2 to Q3.

Unknown Executive: And that's, we've talked about this quite a bit, and we will continue to, we are going to ultimately maintain our cost advantage against the legacies and shrink the cost gap to the LCCs. We have lower costs than JetBlue today. We're close to Southwest, and we're not letting Delta United or American encroach on us.

Speaker Change: I don't think any of our costs are structurally different than any of our competitors and that's we've talked about this quite a bit and we will continue to. We are going to ultimately maintain our cost advantage against the legacies and

Speaker Change: Okay. That's helpful and then.

Speaker Change: So everyone is.

Speaker Change: All the airlines so far I've talked about Hey, you look at August September things start to flatten out on capacity and it looks good when I just look at current schedules. It looks like you guys Reaccelerate in Q4. So is that just a placeholder and do you think that gets revised down for Q4 closer to flat.

Speaker Change: shrink the cost gap to the LCCs. We have lower costs than JetBlue today. We're close to Southwest and we're not letting Delta United or American encroach on us.

Unknown Executive: And that's what our expectation is for the balance of the year and as we go forward. The other thing I just want to make sure I know is that I think we have had six consecutive quarters of productivity improvement. That will continue even though we're having to adjust growth lower, and it's going to be a tailwind throughout the rest of this year and into next year. So we don't expect a high single-digit number to be a new normal for us at all.

Speaker Change: And that's what our expectation is for the balance of the year and as we go forward.

Speaker Change: For you Mike you earn in September and then any early thoughts about how to think about capacity.

Speaker Change: The other thing I just want to make sure I know, I think we had six consecutive quarters of productivity improvement that will continue even though we're having to adjust growth lower. And it's going to be a tailwind throughout the rest of this year and into next year. So we don't expect

Speaker Change: 25.

Scott Group: Just on the Scott on the capacity.

Scott Group: As you heard in our prepared remarks, the year will be sort of sub two and a half.

Scott H. Group: I think it's timing and some material step-up costs and labor rates, which, you know, I think this is probably the last of this size as we close this particular negotiation cycle down if our flight attendants ratify their deal. Okay, that's helpful. So everyone has, all the airlines so far have talked about, hey, look at August and September. Things start to flatten out on capacity, and it looks good. When I just look at the current schedules, it looks like you guys reaccelerate in Q4. So is that just a placeholder, and do you think that gets revised down for Q4 closer to flat? And for you, like you are in September?

Speaker Change: A high single digit number to be a new normal for us at all. I think it's timing and some material step up costs and labor rates, which, you know, I think this is probably the last.

Speaker Change: What I'm expecting is that.

Q4 on a year over year basis will actually be a little lower than Q3 is what I'm, saying.

Speaker Change: Yes.

Speaker Change: Of this size as we close this particular negotiation cycle down if our flight attendants ratify their deal.

Speaker Change: 25, not ready to speak to one thing I will share, though is we expect to take.

Fewer deliveries next year of aircraft and.

Speaker Change: Okay, that's helpful. And then

Speaker Change: And we do expect to retire more aircraft than we did this year and so I think it's going to.

Speaker Change: So everyone has, all the airlines so far have talked about, hey, you look at August , September , things start to flatten out on capacity and it looks good. When I just look at current schedules, it looks like you guys re-accelerate in Q4, so is that

Speaker Change: We're going to be judicious about capacity in.

Speaker Change: Really be thoughtful about the network and making sure were.

Speaker Change: As I said in my remarks. This time on the last call and I think the call before that really focused on expanding margins for the company as we go forward.

Speaker Change: Just a placeholder, and you think that gets revised down for Q4 closer to flat, and for you, like you are in September , and then any early thoughts about how to think about capacity in 25.

Unknown Executive: And then any early thoughts about how to think about capacity in 24 months? Just on the capacity, Scott, as you heard in our prepared remarks, the year will be sort of sub-two and a half. What I'm expecting is that Q4 on a year-over-year basis will actually be a little lower than Q3. Yeah, and 2025 I'm not ready to speak to.

Speaker Change: Okay. Thank you guys.

Scott Group: Thanks Scott.

Andrew <unk>: And we will take our next question from Andrew <unk> with Bofa Global research.

Speaker Change: Just, Scott, on the capacity, as you heard in our prepared remarks, the year will be sort of sub two and a half.

Andrew <unk>: Hi, good morning, everyone.

Andrew <unk>: Shane I was actually going to ask the 2025 capacity question as well, but I guess kind of big picture given kind of the delivery delays is it fair to say that next year. We will continue to remain below sort of your medium to longer term targets.

Speaker Change: What I'm expecting is that Q4 on a year-over-year basis will actually be a little lower than Q3 is what I'm seeing.

Unknown Executive: One thing I will share, though, is we expect to take fewer deliveries next year of aircraft, and we do expect to retire more aircraft than we did this year. And so, you know, I think it's going to, we're going to be judicious about capacity and really thoughtful about the network and making sure we're, as I said in our remarks this time and on the last call, and I think the call before that really focused on expanding margins for the company as we go forward. Thank you, guys.

Speaker Change: Mid single digit growth.

Speaker Change: Yeah, and 2025, not ready to speak to. One thing I will share, though, is we expect to take fewer deliveries next year of aircraft.

Speaker Change: Yeah, Hey, Andrew Good morning, I think Thats, a fair way to look at it.

Speaker Change: I think we're going to.

Speaker Change: and we do expect to retire more aircraft than we did this year and so you know I think it's going to

Speaker Change: We really want the 10 and I think that certification is extending to the right. That's really what the bulk of our forward order book is now positioned as a Max 10.

Speaker Change: We're going to be judicious about capacity and really be thoughtful about the network and making sure we're, as I said in my remarks this time and on the last call, and I think the call before that, really focused on expanding margins for the company as we go forward.

Speaker Change: And I think theres, a lot of opportunity for us to continue to work.

Speaker Change: And further optimize the network and so I think it's fair that we would likely be below as we sit here today looking out our longer term sort of growth target.

Andrew George Didora: Thanks, Scott. We'll take our next question from Andrew Didora with B of A Global Research. Hey, good morning, everyone.

Speaker Change: Thank you guys.

Scott H. Group: Thanks, Scott.

Speaker Change: 25.

Speaker Change: And we'll take our next question from Andrew Didora with BofA Global Research.

Shane R. Tackett: Shane, I was actually going to ask the 2025 capacity question as well, but I guess, in the bigger picture, given kind of the delivery delays, is it fair to say that next year will continue to remain below sort of your medium to longer term targets of kind of mid single digit growth? Yeah, hey, Andrew. Good morning. I think that's a fair way to look at it. I think we're going to we really want the 10.

Speaker Change: Got it makes sense and just thinking about it.

Speaker Change: Type of growth environment.

Andrew George Didora: Hey, good morning everyone. Shane, I was actually going to ask the 2025 capacity question as well, but I guess kind of big picture given kind of the delivery delays, is it fair to say that next year will continue to remain below sort of your medium to longer term targets of kind of mid single-digit growth?

Speaker Change: Well, we see unit costs kind of at that similar high single digit level into the first half of 'twenty five because it doesn't seem like.

Speaker Change: Much of these headwinds will.

Speaker Change: He is by then or do you expect some sort of relief earlier than that thanks.

Andrew George Didora: And I think that certification is extending to the right. That's really what the bulk of our forward order book is now positioned as a max 10. And I think there's a lot of opportunity for us to continue to work and further optimize the network. And so I think it's fair that we would likely be below as we sit here today looking at our longer-term sort of growth target in 2025. Yep, it got to make sense.

Speaker Change: Yes, Thanks, Andrew I really early for us to be.

Speaker Change: Yeah, hey, Andrew. Good morning. I think that's a fair way to look at it. I think we're gonna

Speaker Change: Thinking about or talking about.

Speaker Change: 2025, what I would say is philosophically no we wouldn't.

Speaker Change: We really want the 10. And I think that certification is extending to the right. That's really what the bulk of our forward order book is now positioned as is a max 10. And I think there's a lot of opportunity for us to continue to work.

Speaker Change: Expect to see this level of elevated unit cost, it's not been a part of our thinking about the business or the business model, it's not going to become a part of our thinking about the business model that have high single digit.

Speaker Change: And I think for the full year.

Speaker Change: and further optimize the network. And so I think it's fair that we would likely be below as we sit here today looking out our longer-term sort of growth target in 2025.

Speaker Change: We're going to be in a fair place and if you look at US against 2022 are against 2019 were no no different holding our own on a unit cost basis against all of the industry.

Andrew George Didora: And just thinking about it, you know, in that type of growth environment, will we see unit costs kind of at that similar high single-digit level into the first half of 25? Because it doesn't seem like, you know, much of these, you know, headwinds will, you know, ease by then? Or do you expect some sort of relief earlier than that?

Speaker Change: We'll be very mindful about continuing to work on our productivity and other efficiency levers in the business and some of these things do begin to actually lap.

Speaker Change: Yep, got to make sense. And just thinking about it, you know, in that type of growth environment, you know, will we see unit costs kind of at that similar high single digit level into the first half of 25? Because it doesn't seem like

Speaker Change: They are part of the base next year.

Speaker Change: And then the last thing I'll, just remind you we had a lot of capacity out of Q1 of last year. So there's going to be some noise in the comps even as we go forward in 2025.

Speaker Change: Much of these headwinds will ease by then, or do you expect some sort of relief earlier than that?

Speaker Change: Alright, that's fair thanks, so much.

Speaker Change: Thank you.

Speaker Change: Yeah, thanks, Andrea. Really early for us to be thinking about or talking about, you know, 2025. What I would say is, philosophically, no, we wouldn't.

Speaker Change: And we'll move next to Dan Mckenzie with Seaport Global.

Dan Mckenzie: Oh, hey, thanks.

Dan Mckenzie: Good morning, guys going back to the premium on economy, plus is the 40% premium over mainline cabinet across all stage lengths or you know.

Speaker Change: expect to see this level of elevated unit costs. It's not been a part of our thinking about the business or the business model. It's not going to become a part of our thinking about the business model to have high single digit unit costs. And I think, you know, for the full year,

Dan Mckenzie: Is it reasonable to assume it's a little bit higher in the longer haul and a little bit less on the shorter haul flights.

Dan Mckenzie: Hi, Dan, Yes, that's absolutely correct and just as a reminder, we have premium class across our entire regional fleet as well and our stage length.

Shane R. Tackett: Thanks. 2022, or against 2019, we're no different holding our own on a unit cost basis against all of the industry. And we'll be very mindful about continuing to work on the productivity and other efficiency levers in the business. And some of these things do begin to actually lap into part of the base next year.

Speaker Change: We're going to be in a fair place. And if you look at us against 2022 or against 2019, we're no, no different holding our own on a unit cost basis against all of the industry. And we'll be very mindful about

<unk> is one of the longest domestically in the industry and so this is why premium class is such a huge asset for us and I think out regionally across probably fly amongst longer than most other regional aircraft as well. So that's why the PC product is a really good fit for us.

Speaker Change: Continuing to work on the productivity and other efficiency levers in the business.

Speaker Change: And some of these things do begin to actually lap and they're part of the base next year. And the last thing I'll just remind you, we had a lot of capacity out of Q1 of last year, so there's going to be some noise in the comps even as we go forward in 2025.

Speaker Change: Yeah of course.

Speaker Change: And then going back to San Francisco being 80% recovered.

Andrew George Didora: And the last thing I just want to remind you, we had a lot of capacity out of Q1 of last year, so there's going to be some noise in the comps, even as we go forward in 2025. Right, that's fair. Thanks so much.

Speaker Change: Much revenue does that account for and is it primarily corporate that hasnt recovered or leisure and then how are we how are you thinking about the recovery cadence from here.

Speaker Change: Right, that's fair. Thanks so much. Thank you.

Daniel J. McKenzie: Thank you, and I will move next to Dan McKenzie with Seaport Global. Oh, hey, thanks. Good morning, guys. Going back to the premium on Economy Plus, is the 40% premium over the mainline cabin across all stage lengths? Or, you know, is it reasonable to assume it's a little bit higher on the longer haul and a little bit less on the shorter haul flights?

Speaker Change: And we'll move next to Dan McKenzie with Seaport Global.

Speaker Change: Yeah.

Daniel J. McKenzie: Oh, hey, thanks. Good morning, guys. Going back to the premium on Economy Plus, is the 40% premium over mainline cabin across all stage lengths? Or, you know, is it reasonable to assume it's a little bit higher in the longer haul and a little bit less on the shorter haul flights?

Speaker Change: Yes, Hi, Dan My comments were specifically to business travel.

Speaker Change: Uh huh.

You know I think we have the network.

Speaker Change: In a post COVID-19 positioned very well in California and.

Unknown Executive: Hi Dan. Yeah, that's absolutely correct. And just as a reminder, we have premium class across our entire regional fleet as well, and our stage length is one of the longest in the industry.

Speaker Change: As.

Speaker Change: You look at our growth.

Daniel J. McKenzie: Hi Dan, yeah that's absolutely correct and just as a reminder we have premium class across our entire regional fleet as well and our stage length

In the Bay area has been very moderate just because we're not going to get ahead of the demand curve there and.

Speaker Change: And again in Los Angeles, we've been focusing more on some of these.

Unknown Executive: And so this is why premium class is such a huge asset for us. And I think our regional aircraft probably fly longer than most other regional aircraft as well. So that's why the PC product is a really good fit for us. Yeah, of course. And then going back to San Francisco being 80% recovered, how much revenue does that account for?

Daniel J. McKenzie: is one of the longest domestically in the industry. And so this is why premium class is such a huge asset for us. And I think our regional aircrafts probably fly most longer than most other regional aircraft as well. So that's why the PC product is a really good fit for us.

Lisa: Hi, Lisa.

Lisa: Markets, which have.

Lisa: Generating revenue done quite well for us, but again, we are on a low growth.

Cadence here for the next little bit and what we will be doing is spending a lot of time theres sort of no autopilot here on network, we will be managing this dynamically through this year and into next year to ensure that we've got the airplanes in the right markets to maximize our revenues and to accommodate where our guests actually want to fly.

Speaker Change: Yeah, of course. And then going back to San Francisco being 80% recovered, how much revenue does that account for? And is it, you know, primarily corporate that hasn't recovered or leisure? And then, you know, how are we, how are you thinking about the recovery cadence from here?

Unknown Executive: And is it, you know, primarily corporate that hasn't recovered or leisure? And then, you know, how are we, what are you thinking about the recovery cadence from? Yeah, hi, Dan. My comments were specifically about business travel. And, you know, I think we have the network, you know, post COVID position very well in California. And, you know, as you look at our growth, certainly in the Bay Area, it has been very moderate, just because we're not going to get ahead of the demand curve there.

Speaker Change: Yeah. Thanks for the time you guys.

Dan Mckenzie: Thanks, Dan.

Speaker Change: Yeah, hi Dan. My comments were specifically to business travel and

Speaker Change: Okay.

Speaker Change: And our next question will come from Ravi Shanker with Morgan Stanley.

Speaker Change: You know, I think we have the network, you know, post-COVID position very well in California, and, you know, as you look at our growth,

Speaker Change: Alright, Thanks, Scott for anyone and kudos for sneaking in that auto pilot funding there.

Ravi Shanker: Just on the premium cabin kind of just given the new initiatives and the target really is the mix there where does that incremental customer coming from is that converting from main cabin is that coming from one way to partner Airlines is that coming from other legacy carriers.

Speaker Change: Certainly in the Bay Area has been very moderate just because we're not going to get ahead of the demand curve there and

Unknown Executive: And, and again, in Los Angeles, we've been focusing more on some of these, you know, Latin and high leisure markets, which have, you know, generated revenue done quite well for us. But again, we are on a low growth rate. Cadence here for the next little bit.

Speaker Change: And again, in Los Angeles, we've been focusing more on some of these, you know, Latin and high leisure markets, which have, you know, generating revenue done quite well for us. But again, we are on a low growth.

Speaker Change: Who that incremental customer.

Speaker Change: Yes, Thanks Ravi.

Speaker Change: It's sort of all of the above and I think.

Unknown Executive: And what we will be doing is spending a lot of time. There's sort of no autopilot here on the network. We will be managing this dynamically through this year and into next year to ensure that we've got the airplanes in the right markets to maximize our revenues and to accommodate where our guests actually want to fly. Yep, thanks for the time, you guys. Thanks, Dan. And our next question will come from Ravi Shanker with Morgan Stanley. Thanks, everyone, and kudos for sneaking in that autopilot fun in there.

Speaker Change: We are being going to tell a lot more of a story.

Speaker Change: Cadence here for the next little bit and what we will be doing is spending a lot of time there's sort of no autopilot here on network we will be

Around our premium product in general both first class and premium class.

Speaker Change: Our international partners can sell into that.

Speaker Change: Managing this dynamically through this year and into next year to ensure that we've got the airplanes in the right markets to maximise our revenues and to accommodate where our guests actually want to fly.

Speaker Change: And we've just seen as I shared.

Speaker Change: Just a real Apple.

Speaker Change: Appetite and demand for that premium class cabin I think as you look at the industry and you look at the lower end of fares.

Speaker Change: Yep, thanks for the time you guys.

Speaker Change: Thanks Dan.

Speaker Change: And our next question will come from Ravi Shanker with Morgan Stanley .

Speaker Change: We meet those very well.

Speaker Change: Without.

Speaker Change: Save a fair, but we are doing a much better job at actually selling the product. We have for instance, not too long ago. The only way you could buy premium class on us directly was to go into the seat map. While you were choosing your seat and we would upsell you. There now we havent fully on our front page matrix and then it will be coming to mobile here soon so I <unk>.

Ravi Shanker: Thanks for everyone and kudos for sneaking in that autopilot fun in there. Just on the premium cabin, kind of just given the new initiatives and the target to kind of raise the mix there, where is that incremental customer coming from? Is that converting from main cabin? Is that coming from one world partner airline? Is that coming from other legacy carriers? Who's that incremental customer?

Ravi Shanker: Just on the premium cabin, kind of just given the new initiatives and the target to kind of raise the mix there. Where is that incremental customer coming from? Is that conversion from the main cabin?

Speaker Change: We have real merchandising opportunity to catch demand out there that perhaps folks haven't seen it as much as we could have put it in front of them and.

Speaker Change: Thanks, Ravi. You know, I think it's sort of all of the above, and I think we are being going to tell a lot more of a story.

Speaker Change: Ravi It's Ben I, just even higher level, we're talking about not just the premium seat, but a premium experience and I think this is what really differentiates us from our domestic competitors.

Speaker Change: Around our premium product in general, both first class and premium class.

Ravi Shanker: From the time, you check and we're innovating lobbies with automated backdrop, we have lounges, we have a partnership with one world. We have a fantastic loyalty program, but great rewards, we have the premium product onboard we've got excellent food and beverage local food and beverage and so you look at the entire experience, we're providing a premium experience.

Speaker Change: Our international partners can sell into that.

Speaker Change: and we've just seen as I shared earlier just a real appetite and demand for that premium class cabin. I think as you look at the industry and you look at the lower end of fares we meet those very well with our

And I think this is where the accretion comes from what the premium seats.

Speaker Change: Save Affair, but we are doing a much better job at actually selling the product we have. For instance, not too long ago, the only way you could buy premium class on us

Understood Thats, great color and look forward to experiencing that maybe as a follow up just wanted to confirm that when you check your net <unk> net promoter scores.

Speaker Change: directly was to go into the seat map while you were choosing your seat and we would upsell you there. Now we have it fully on our front page matrix and then it will be coming to mobile here soon. So I think we have real merchandising opportunity to catch demand out there that perhaps folks haven't seen it as much as we could have put it in front of them.

Speaker Change: And customer like booking behavior and everything.

Speaker Change: Is everything back to normal after the January incident or is there still some lingering it back.

Unknown Executive: Is that coming from one world partner airline? Is that coming from other legacy carriers? Who's the incremental customer? Thanks, Ravi. You know, I think it's sort of all of the above.

Speaker Change: Yes, I think.

Speaker Change: We actually even said last quarter I think.

Speaker Change: And Ravi, it's Ben, I just...

Ravi Shanker: Even higher level we're talking about not just a premium seat but a premium experience and I think this is what really differentiates us from

Speaker Change: We are not seeing any lingering impact or effect at all from the grounding in the first quarter.

Speaker Change: And I'll just add I'm, so proud of how our company got through the first quarter. If you think about.

Speaker Change: The.

Speaker Change: How immense that incident was on January 5th and the grounding how our company came out of it.

Speaker Change: With losses in Q1 to this fantastic quarter, where we're posting industry leading margins.

Ravi Shanker: And so you look at the entire experience, we're providing a premium experience and I think this is where the accretion comes from with the premium seats.

Speaker Change: It's really attributed to all the people here and I'm, so proud of them and Ravi and I think everything is behind us.

Speaker Change: Understood. That's a great color and look forward to experiencing that. Maybe as a follow-up, I just wanted to confirm that, you know, when you check your net report...

Speaker Change: And and we feel pretty pretty good going forward in the future and I mentioned in my script two.

Speaker Change: 2023 data, we had the lowest customer complaints of any airline in the industry and I think thats just attribute of what our people are doing out there in our operation.

Speaker Change: Net Promoter Scores, and customer booking behavior and everything, is everything back to normal after the January incident or is there still some lingering effect?

Speaker Change: Wonderful thank you.

Ravi Shanker: Thanks Ravi.

Speaker Change: Yeah, I think, as we actually even said last quarter, I think we've not seen any lingering impact or effect at all from the grounding in the first quarter.

Speaker Change: And we will move next to Conor Cunningham with Melius research.

Conor Cunningham: Hi, everyone. Thank you just.

Conor Cunningham: As you.

Conor Cunningham: Just on the premium topic for a quick second when you when you're expanding a first class I'm just curious on how much capex is actually driving for you I don't know if you've mentioned that anywhere and then it seems like a pretty.

Speaker Change: Yeah, and I'll just add, I'm so proud of how our company got through the first quarter. If you think about, you know, the

Speaker Change: You know, the how immense that incident was on January 5th and the grounding, how our company came out of it.

Speaker Change: Pretty quick turnaround time.

Speaker Change: Just on this alcohol overhaul thing just did you have any issues finding MRO capacity at all to do this retro side just curious thank you.

Speaker Change: with losses in Q1 to this fantastic quarter where we're posting in the Street League margins.

Speaker Change: It's really a tribute to all the people here, and I'm so proud of them, and Ravi, and no, I think everything is behind us, and we feel pretty good going forward in the future. And I mentioned in my script...

Speaker Change: Well, let me start I think I said in my script Conor.

Speaker Change: We just didn't.

Conor Cunningham: Come up with this a month ago and put it in here. This is something we've been thinking about a lot we've invested in our premium experience now for many many years and this just doesn't happen overnight. So.

Speaker Change: In 2023 DOT data we had the lowest customer complaints of any airline in the industry and I think that's just a tribute of what our people are doing out there in our operation.

Conor Cunningham: On the eight hundreds on the first class seats, we have 12 in there it's a smaller airplane, but over time, we feel that we need to match with the rest of our fleet. So that's why we're going to <unk> now in terms of Capex.

Speaker Change: Wonderful, thank you.

Speaker Change: Thanks, Ravi.

Conor Cunningham: Currency is going to be.

Speaker Change: We'll move next to Conor Cunningham with Melius Research.

Conor Cunningham: Roughly $1 million, an airplane and it'll be spread out over a couple of years, it's a new seat in the 800 900 yards easier if it's just re pitching.

Conor T. Cunningham: Hi, everyone. Thank you. Just on the premium topic for a quick second, when you're expanding the first class, I'm just curious on how much...

And that will be done relatively quickly I know we've had good allocation from our MRO partners available to us the last few years and good capacity looking forward.

Conor T. Cunningham: Capaccess is actually driving for you. I don't know if you've mentioned that anywhere. And then it seems like a pretty quick turnaround time.

Conor T. Cunningham: I just on this the whole overhaul thing just did you have any issues finding your MRO capacity at all to do this retrofit just curious thank you

Speaker Change: Okay. That's helpful and then when I think about your historical seasonality of your business you guys make the vast majority of your money into Q3 Q venue mandated significant change in <unk>.

Conor T. Cunningham: Well, let me start. I think I said in my script, Conor, we just didn't...

Speaker Change: As you think about the opportunity in fourth quarter. What are your learnings that you saw in <unk> that you can apply to the fall or is it more of just an off peak versus peak change.

Speaker Change: Come up with this a month ago and put it in here. This is something we've been thinking about a lot. We've invested in our premium experience now for many, many years, and this just doesn't happen overnight.

Speaker Change: Changing of capacity just curious on how you're thinking about evolving seasonality in general of your earnings stream. Thank you.

Speaker Change: You know, on the 800s, on the first class seats, we have 12 in there. It's a smaller airplane, but over time, we feel that we need to match with the rest of our fleet. So that's where we're going to 16. Now, in terms of CapEx,

Speaker Change: Yes. Thanks for the question I'll, let Andrew provide more detail, but for US as you know we are.

Speaker Change: Our.

Q2, and Q3 are right is we're super Super strong and we outperform mostly everyone.

Speaker Change: It's going to be roughly a million dollars an airplane, and it'll be spread out over a couple of years. It's a new seat in the 800. The 900ER is easier, it's just repitching.

In Q1 and Q4, there is just several weeks in both of those quarters, where it's weaker than the rest of the year and those are the ones that we are attacking and like I said in my script, we try and control the things we can control and we're going to appoint airplanes and places where we know we can make money. So with that we've made some actually some pretty significant.

Speaker Change: And that will be done relatively quickly. And no, we've had good allocation from our MRO partners available to us the last few years and in good capacity looking forward.

Announcements, Andrew just a little more color on that yes.

Speaker Change: Okay, that's helpful. And then...

Speaker Change: But when I think about your historical seasonality of your business,

Speaker Change: <unk>.

Andrew <unk>: Exactly right and I think we.

Ben: You guys make the vast majority of your money in 2Q, 3Q. Ben, you mandated significant change in 1Q. As you think about the opportunity in fourth quarter, what are your learnings that you saw in 1Q that you could apply to the fall? Is it more of just an off-peak versus peak changing of capacity? Just curious on how you're thinking about evolving seasonality in general of your earning stream.

Andrew <unk>: We are being more judicious than we've ever been before.

Andrew <unk>: On the first on the fourth quarter and the capacity side and the days of week, but I just I just want to just remind folks that this is not just about network I think we're nearly done with a three year modernization.

Speaker Change: <unk> digital platform, so conversion rates, what we're able to sell how we're able to sell we just think there was more merchandising opportunity.

Ben: Yeah, Conor, thanks for the question. I'll let Andrew provide more detail. But for us, as you know, like we are, the Q2 and Q3, you're right, is we're super, super strong. And we outperform mostly everyone. And Q1 and Q4, there's just several weeks in both of those quarters where it's weaker than the rest of the year. And those are the ones that we're we are attacking. And like I said, in my script, we try and control the things we can control, we're going to point airplanes and

Speaker Change: Heard that we've re rack DAU.

Speaker Change: The whole sort of the loyalty program and how we've rolled that out and looked at redemptions domestically globally.

Speaker Change: And the awards were monetizing more of the cabins and seats in front of the exit row.

Speaker Change: Excuse me and then also the exit rows and premium class. So I think we.

Speaker Change: We're looking at the entire portfolio of being very exec.

Andrew George Didora: places where we know we can make money. So with that, you know, we made some actually some pretty significant announcements. Andrew, just a little more color on that. Yeah, and Ben's exactly right. And I think we are being more judicious than we've ever been before on the first

Speaker Change: Exact and disciplined on the network side, but we also have numerous revenue initiatives offering guests better product and service and more options and I think we're going to just see those continue.

Unknown Executive: And I think we are going to tell a lot more of a story around our premium product in general, both first class and premium class. Our international partners can sell into that. And we've just seen, as I shared earlier, just a real appetite and demand for that premium class cabin. I think as you look at the industry and at the lower end of fares, we meet those very well with our saver fare.

Speaker Change: To improve.

Speaker Change: I appreciate it thank you.

Unknown Executive: But we are doing a much better job at actually selling the product we have. For instance, not too long ago, the only way you could buy premium class on us directly was to go into the seat map while you were choosing your seat, and we would upsell you there. Now we have it fully on our front page matrix, and then it will be coming to mobile here soon.

Unknown Executive: So I think we have a real merchandising opportunity to catch demand out there that perhaps folks haven't seen it as much as we could have put it in front of them. And Ravi, it's been, even higher level. We're talking about not just the premium seat, but a premium experience. And I think this is what really differentiates us from our domestic competitors. You know, from the time you check in, we're innovating lobbies with automated backdrops, we have lounges, we have a partnership with One World, we have a fantastic loyalty program with great rewards.

Connor: Thanks Connor.

Andrew George Didora: On the fourth quarter and the capacity side and the days of week But I just I just want to just remind folks that this is not just about network I think you know we're nearly done with a three-year modernization

Unknown Executive: We have the premium product on board, we've got excellent food and beverage, local food and beverage. And so you look at the entire experience, we're providing a premium experience. And I think this is where the appeal comes from with the premium seat.

Connor: Our next question comes from Mike Lindenberg with Deutsche Bank.

Mike Lindenberg: Oh, Hey, good morning, everyone.

I wanted to just go back you call it out as a guide about this moderating domestic revenue environment I think Andrew you kind of mentioned it sounds like I heard it a few times.

Speaker Change: of our digital platform. So conversion rates, what we're able to sell, how we're able to sell. We just think there is more merchandising opportunity.

Speaker Change: How much of it is pure macro versus just supply demand out of kilter and maybe another way of asking is it we see volumes domestically running up 67% right now.

Speaker Change: You heard that we've re-racked our, um, the whole, sort of the loyalty program and how we've rolled that out and looked at redemptions domestically, globally, um, and the awards. We're monetizing more of the cabins and seats in front of the exit row, um, excuse me, and then also the exit rows and premium class. So I think, um,

But I think the prevailing view is that maybe a much greater portion of that is stimulated demand like what's your when you look at your forecasting and where you see things what do you think organic demand like true demand absent any sort of stimulation or are we really starting to see some macro softness.

Speaker Change: We're looking at the entire portfolio of being very exact and disciplined on the network side, but we also have numerous revenue initiatives offering guests better product and service and more options, and I think we're going to just see those continue to improve.

Speaker Change: And then I have a follow up.

Speaker Change: Yeah, Hey, Greg Great question.

Greg: What I would say is this firstly, there's just the general population and then there's Flyers and people, who travel and I do think there's a little bit of a difference there I do think on the lower end of phase just even the last 28 days, we've seen more of a shift out of OTI mix into direct which.

Ravi Shanker: Maybe as a follow-up, I just wanted to confirm that, you know, when you check your net promoter scores and customer, like, booking behavior and everything, is everything back to normal after the January incident, or is there still some lingering effect? Yeah, I think. As we actually even said last quarter, I think we've not seen any lingering impact or effect at all from the grounding in the first quarter.

Unknown Executive: Yeah, and I'll just add I'm so proud of how our company got through the first quarter. If you think about, You know, the. You know the how immense that incident was on January 5th and the grounding how our company came out of it uh with losses in Q1 to this fantastic quarter where we're posting in the Street League margins I it's it's really a tribute to all the people here and I'm so proud of them uh and Ravi and uh and no I think everything is behind us uh and um and we feel pretty but pretty good going forward on the future and I mentioned in my script you know in 2023 DOT data we had the lowest customer complaints of any airline uh in the industry and I think that's just a tribute of of what our people are doing out there in our operation, Wonderful, thank you. Thanks, Ravi. We'll move next to Conor Cunningham with Milius.

Speaker Change: Appreciate it, thank you.

Conor T. Cunningham: Thanks, Conor.

Conor T. Cunningham: Hi everyone. Thank you. Just as you are just on the premium topic for a quick second. Yeah, when you when you're expanding the first class, I'm just curious about how much Capaccess is actually driving for you. I don't know if you've mentioned that anywhere, but then it seems like a pretty quick turnaround time. Just on this whole overhaul thing. Did you have any issues finding your MRO capacity at all to do this retrofit?

Speaker Change: Our next question comes from Mike Linenberg with Deutsche Bank.

Michael John Linenberg: Oh, hey. Good morning, everyone. I want to just go back. You know, you call it out in the guide about this moderating domestic revenue environment. I think, Andrew, you kind of mentioned it. I felt like I heard it a few times.

Greg: Sometimes theyre the lowest fares so that would seem that there is softness there, but I think mostly for us.

Speaker Change: How much of it is pure macro versus just

Greg: Just really a capacity story as I said, we grew six 8% in first class and our revenues went up 8% in the second quarter. The main cabin was a little bit of a different story. So I do think that in general demand if we.

Speaker Change: Supply Demand out of Kilter. And maybe another way of asking is that, you know, we see volumes domestically running up six, 7% right now.

Speaker Change: But I think the prevailing view is that maybe a much greater portion of that is stimulated demand. Like, what's your, you know, when you look at your forecasting and where you see things, what do you think organic demand, like true demand, absent any sort of stimulation? Or are we really starting to see some macro softness?

The adjustments, we're making to our capacity I think will go a long way of getting equilibrium there.

Speaker Change #100: Okay and just to.

Speaker Change #100: Mind you on that.

Speaker Change #100: If you look at our again what counts at the bottom line. If you look at our at our margin and if you look at ex the impact of $12 82, our full year margin, even with all the incremental cost.

Unknown Executive: Just curious. Thank you. Well, let me start. I think I said in my script, Conor, we just didn't come up with this a month ago and put it in here. This is something we've been thinking about a lot. We've invested in our premium experience now for many, many years, and this just doesn't happen overnight.

Speaker Change: And then I have a follow-up.

Speaker Change: Yeah.

Speaker Change: Hey, great, great question. You know, what I would say is this. Firstly, there's just the general population and then there's flyers and people who travel and I do think there's a little bit of a difference there. I do think on the lower end of fares, just even the last 28 days, we've seen more of a shift out of OTA mix into direct, which

Speaker Change #100: Step ups that we have it will be the same or better for 2024 than it was in 'twenty three and I think that's a remarkable achievement and I think its attribute of the business model, we have and the investment we made in premium and so I do think there is a lot of resilience there and that we're attracting the right set of customers that we have enough segmentation.

Speaker Change: sometimes that they're the lower fare so that would seem that there's

Conor T. Cunningham: So, you know, on the 800s, in the first class seats, we have 12 in there; it's a smaller airplane. But over time, we feel that we need to match them with the rest of our fleet. So that's where we're going to 16. Now, in terms of CapEx, Conor, it's going to be roughly a million dollars an airplane, and it'll be spread out over a couple of years. It's a new seat in the 800. The 900 ER is easier.

Speaker Change #100: Our product too.

Speaker Change: Softness there, but I think mostly for us

Speaker Change #100: To win.

Speaker Change #100: And so we feel pretty good about about where we are and where we're going.

Speaker Change: It's just really a capacity story. As I said, we grew seats 8% in first class and our revenues went up 8% in the second quarter. The main cabin was a little bit of a different story. So I do think that in general demand, if we

Speaker Change #101: And then just quick one on now that you are well established as a one world partner, although maybe maybe youre still saying you would probably tell me that you are still maybe in the third or fifth inning to Shannon.

Speaker Change: Adjustments we're making to our capacity I think will go a long way of getting equilibrium there.

Speaker Change #102: What are you seeing like the contribution and it may even be what is driving you to go from 25% to 28% because someone who comes off a da flight and maybe is connecting to I don't know Portland, our medford or wherever maybe.

Speaker Change: Okay, just to remind you on that, like, if you look at our, again, what counts at the bottom line, if you look at our

Speaker Change #101: Maybe even the state of Alaska.

Speaker Change: at our margin. And if you look at X, the impact of 1282.

Speaker Change #101: They want that front seat product.

Speaker Change #101: If we think about it I don't know if its load factor points or whatever that you are getting now.

Speaker Change: Our full-year margin, even with all the incremental cost step-ups that we have,

Speaker Change #101: Now that.

Speaker Change: It will be the same or better for 2024 than it was in 23. And I think that's a remarkable achievement. And I think it's a tribute of the business model we have and the investments we made in premium.

Speaker Change #103: You think up very nicely I mean, you gave some numbers on how much more you're selling.

Speaker Change #104: The one world ecosystem, what is that driving on your own them on your own mental thanks for taking my question.

Speaker Change: And so, like, I do think there's a lot of resilience there and that we're attracting the right set of customers and we have enough segmentation in our product to, you know, to win. And so we feel pretty good about where we are and where we're going.

It's a great question and I would just.

Speaker Change #105: So in the scheme of size, if you will that the number of international <unk>.

Speaker Change #106: Connections onto our network, given our domestic size and what we do carrier.

Speaker Change: Great. And then just a quick one on, now that you're well-established as a One World Partner, although maybe, maybe you're still saying, you would probably tell me that you're still maybe in the third or fifth inning, not the seventh.

Speaker Change #107: Is not a huge component of it I think the one world is really.

Speaker Change #107: Our loyalty members being able to carry the elite benefits globally and staying within the Oneworld system and Alaska is loyalty system as the the real upside, but nonetheless to your point as we continue to put more first class seats on our aircraft as well as premium that opens up more opportunity.

Speaker Change: What are you seeing like the contribution I and it may even be what is driving you to go from 25 to 28 percent because Someone who comes off a BA flight

Speaker Change: and maybe is connecting to, I don't know, Portland or Medford or wherever, maybe even the state of Alaska, you know, they want that front seat product. So

Speaker Change #107: For all of long haul connections, we do to provide them and many of them also choosing premium seats up their long trip.

Speaker Change: If we think about it, I don't know if it's load factor points or whatever that you're getting now that you've synced up very nicely. I mean, you gave some numbers on how much more you're selling in the one world ecosystem. What is that driving on your own, you know, on your own metal? Thanks for taking my question.

Speaker Change #108: Very good Andrew it's seven what percentage of revenues.

Andrew <unk>: Total revenues.

Speaker Change #107: The.

Speaker Change #109: Partners is about 7% of the mix.

Andrew <unk>: Does that include you again, Andrew is that Youre regionals, as well or is that non regional connections.

Unknown Executive: It's just re-pitching, and that will be done relatively quickly. And no, we've had a good allocation from our MRO partners available to us the last few years and in good capacity looking forward. Okay, that's helpful.

Speaker Change: Yeah, you know, that's a great question and now we're just.

Speaker Change #110: I'm, sorry, I think Mike He's just saying 7% of our revenue is enabled by our partnerships he wasn't.

Speaker Change: say in the scheme of size if you will that the number of international

Speaker Change: Connections onto our network given our domestic size and what we do carry it as.

Speaker Change #113: Arent talking mainland versus regional so that's coming from our one world and other partners Thats perfect.

Speaker Change: is not a huge component of it. I think the one world is.

Speaker Change #114: Correct, Yeah, and I think it's going to grow from there and to your point, it's a high value traveler generally speaking, yes, yes, very good. Thank you everyone.

Speaker Change: Really

Speaker Change: Our loyalty members being able to carry their elite benefits globally and staying within the One World System and Alaska's loyalty system is the real upside, but nonetheless, to your point, as we continue to put more first class seats on our aircraft,

Thanks, Mike.

Savi <unk>: We'll hear next from Savi <unk> with Raymond James.

Speaker Change #112: Hey, good morning.

Savi <unk>: If I might.

Savi <unk>: Thank you Carlos France chart is very helpful and just curious what what in there might have been incremental versus what you were thinking before and just along that line of question that you've gotten so far on the cost side I think historically I think you can actually grew about 5% or a little bit higher than that you can keep.

Speaker Change: As well as premium, that opens up more opportunity for all the long haul connections we do to provide them and many of them also choosing premium seats up their long trip.

Conor T. Cunningham: And then when I think about your historical seasonality of your business, you guys make the vast majority of your money in 2Q, 3Q, then you mandate a significant change in 1Q. As you think about the opportunity in the fourth quarter, you know, what are your learnings that you saw in 1Q that you could apply to the fall? Is it more of just an off peak versus peak, you know, changing of capacity?

Speaker Change: Andrew, it says 7, what percentage of revenues? Total revenues from the partners is about 7% of the mix.

Speaker Change #115: Unit costs flat is that relationship still holding.

Speaker Change: Andrew, is that your regionals as well or is that non-regional connections?

Speaker Change #115: Yeah, Hi, Savi. Thanks for the question.

Speaker Change #116: Yes, I think in terms of the second half forecast.

Michael John Linenberg: Sorry, I think Mike, he's just saying 7% of our revenue is enabled by our partnerships. He wasn't, we weren't talking mainline versus regional. So that's coming from our OneWorld and other partners. That's perfect.

Speaker Change #117: What has changed from like earlier in the year, certainly the growth rate coming down and as holding resources and sort of having been configured to fly more that it's not like we haven't had line of sight to that but it is certainly different than our original expectation for the year.

Michael John Linenberg: Perfect. Yeah. And I think it's going to grow from there. And to your point, it's a high value traveler, generally speaking. Yes. Yes. Very good. Thank you, everyone. Thanks, Mike.

Speaker Change #117: Our labor deal with.

Speaker Change #117: Somewhat higher in terms of the final.

Conor T. Cunningham: Just curious about, you know, evolving seasonality in general of your earning stream. Thank you. Yeah, Conor, thanks for the question.

Michael John Linenberg: We'll hear next from Savi Sith with Raymond James.

Speaker Change #117: Negotiated compensation than we had been.

Savi Sith: Hey, good morning.

Savi Sith: If I might, the three-cubed crossbridge chart was very helpful, I'm just curious what

Speaker Change #118: Im thinking about and planning for not not excessively but.

Speaker Change #118: It was a higher deal than we had originally thought at the beginning of the year it might be and then the rest is released some timing shifts of airport credits and how those land relative to.

Savi Sith: What in there might have been incremental versus what you were thinking before and just along that line of questions that you've gotten so far on the cost side, I think historically, I think the thinking was, you know, if you grew about 5% or a little bit higher than that, you can keep unit costs flat. Is that relationship still holding?

Speaker Change #118:

Speaker Change #118: The rest of the year and some shift in maintenance timing so.

Speaker Change #118: I think.

Conor T. Cunningham: I'll let Andrew provide more detail. But for us, as you know, like we are, the Q2 and Q3, you're right, we're super, super strong. And we outperform almost everyone.

Speaker Change #118: The shifting of expenses happens kind of every year, it's hard to predict.

Savvy: Yeah, hi Savi, thanks for the question.

Speaker Change #118: And then this year just happened to be relatively significant on the maintenance side and airport credit side.

Speaker Change: Yeah, I think in terms of the second half forecast, you know, what has changed from like earlier in the year, certainly the growth rate coming down and us holding resources and sort of having been configured to fly more, you know, that it's not like we haven't had line of sight to that. But it's certainly different than our original expectation for the year.

Speaker Change #118: The thinking in terms of leverage against growth, we have not changed our thinking if we grow four 5%, we would expect unit costs to be flattish and.

Speaker Change #118: In fact, I would like to do even a little better than that over time.

Speaker Change #118: That is still our philosophy, that's intact and alive at Alaska.

Speaker Change: You know that our labor deal was

Speaker Change: You know, somewhat higher in terms of the final negotiated compensation than we had in, you know,

Speaker Change #118: That's helpful. Thanks, Shannon and finally on the new product launch.

Speaker Change #119: Youre not taking away seats in.

Speaker Change #120: In fact, you might be actually adding a few seats that is that should we think of that being kind of a unit cost and unit revenue guide as you kind of look through the next 18 months or so.

Speaker Change: Thinking about and planning for, not excessively, but it was a higher deal than we had originally thought at the beginning of the year it might be.

Speaker Change: and then the rest is really some timing shifts of airport credits and how those land relative to, you know,

Speaker Change #121: Absolutely and I think I think I mentioned that I think was the last couple of words in my prepared remarks that we're not losing one fleet, we're adding two seats. The other we're going to get premium revenue into all of those seats and we will have slightly more seats to spread costs over.

Speaker Change: the rest of the year and some shift in maintenance timing. So

Speaker Change: I think

Speaker Change: You know, the shifting of expenses happens kind of every year. It's hard to predict.

Speaker Change #122: I appreciate it thanks.

Speaker Change: And then this here just happened to be relatively significant on the maintenance side and airport credit side.

Savi <unk>: Thanks Savi.

Savi <unk>: Our next question will come from Tom Fitzgerald with Cowen <unk> Company.

Speaker Change: The thinking in terms of leverage against growth, we have not changed our thinking. If we grow...

Tom Fitzgerald: Hi, everyone. Thanks for the time most of mine have been answered maybe this is too granular, but im just curious on the new routes into Mexico do you have.

Speaker Change: 4-5% we would expect unit costs to be flattish and in fact I'd like to do even a little better than that over time. That is still a philosophy that's intact and alive at Alaska.

That all just pretty much a U S point of sale leisure or do you have do you participate in any of the VFR traffic that goes back and forth between that between the two countries. Thanks very much.

Conor T. Cunningham: And Q1 and Q4, there are just several weeks in both of those quarters where it's weaker than the rest of the year. And those are the ones that we're attacking. And like I said, in my script, we try and control the things we can control; we're going to point airplanes at places where we know we can make money. So with that, you know, we made some pretty significant announcements. Andrew, just a little more color on that.

Speaker Change: That's helpful. Thanks, Shane. And if I may, on the new product launch...

Speaker Change #124: Yes, Hi, Tom most of it if you.

Unknown Executive: Yeah, and Ben's exactly right. And I think we are being more judicious than we've ever been before on the first, the fourth quarter, and the capacity side, and the days of the week. But I just, I just want to just remind folks that this is not just about the network. I think, you know, we're nearly done with a three-year modernization of our digital platform. So conversion rates, what we're able to sell, how we're able to sell, we just think there is more merchandising opportunity.

Speaker Change #125: Look at the cities, it's just expanding out coal.

Speaker Change: You're not taking away seeds, but in fact you might be actually adding a few seeds. So is that, should we think of that being kind of a unit cost and unit revenue guy as we kind of look to the next 18 months or so?

U S leisure side point of sale, which have done well and again the good thing about these is that these are a 100% new revenue sources.

Unknown Executive: You heard that we've re-racked out the whole sort of loyalty program and how we've rolled that out and looked at redemptions domestically and globally. And the awards; we're monetizing more of the cabins and seats in front of the exit row, excuse me, and then also the exit rows and premium class. So I think we're looking at the entire portfolio of being very exact and disciplined on the network side, but we also have numerous revenue initiatives offering guests better products and service and more options. And I think we're going to just see those continue to improve.

Speaker Change #126: And while we trimmed capacity in other areas. This again, you'll see the <unk> routes. This is a lot of this doesn't start until December or even January and a lot of this is focused on the depths of the winter in the first quarter. So we feel really good about these changes.

Shane: Absolutely. And I think I think I mentioned that I think was the last couple of words in my prepared remarks that yeah, we're not losing seats. Once we were adding two seats to the other, we're going to get premium revenue into all of those seats, and we'll have slightly more seats to spread costs over.

Conor T. Cunningham: Appreciate it. Thank you. Thanks, Conor. Our next question comes from Mike Linenberg with Deutsche Bank. Oh, hey, good morning, everyone. Um, I want to just go back, you call it out in the guide about this moderating domestic revenue environment. I think, Andrew, you kind of mentioned it. I felt like I heard it a few times. How much of it is pure macro versus just supply and demand out of kil

Michael John Linenberg: And maybe another way of asking it is that, you know, we see volumes domestically running up six, 7% right now, but I think the prevailing view is that maybe a much greater portion of that is stimulated demand. Like what's your, you know, when you look at your forecasting and where you see things, what do you think organic demand, like true demand absent, any sort of stimulation, or are we really starting to see some macro softness?

Speaker Change: Appreciate it. Thanks.

Tom Fitzgerald: And Tom welcome to the earnings call. Thanks for being on and we won't do this again, but please send our best to the new I guess, managing director and mentor, Helane, who will Miss on these call.

Sabi: Thanks, Sabi.

Speaker Change: Our next question will come from Tom Fitzgerald with Cowan & Company.

Michael John Linenberg: and then I have a follow-up. Hey, great, great question. You know, what I would say is this: firstly, there's just the general population, and then there's flyers, and people who travel, and I do think there's a little bit of a difference there. I do think on the lower end of fares, just even the last 28 days, we've seen more of a shift out of the OTA mix into direct, which sometimes are the lower fares. So it would seem that there's softness there.

Unknown Executive: Hi everyone, thanks for the time. Most of it might have been answered, and maybe this is too granular, but I'm just curious on the new routes into Mexico. Is that all just pretty much US point of sale leisure, or do you participate in any of the VFR traffic that goes back and forth between the two countries? Thanks very much.

Tom Fitzgerald: For sure you got it thanks very much everyone.

Tom Fitzgerald: Thanks, Tom.

Speaker Change #127: Our next question will come from Stephen Trent with Citigroup.

Stephen Trent: Yes, Hello, everybody and thanks for taking my question.

Speaker Change: Yeah, hi Tom. Most of it, if you look at the cities, it's just expanding our core.

Stephen Trent: Just a follow up if I may I appreciate that color on the premium increase.

Speaker Change #100: U.S. Leisure side point of sale which have done well and again the good thing about these is is that these are 100% new revenue sources.

Speaker Change #129: Forgive me if I missed this but did you see any parallel adjustments that you might make.

Speaker Change #130: To your App.

Speaker Change #131: For example, any pivots and Youre thinking on changes in the distribution channel as you increase that premiums. Thank you.

Speaker Change #100: and while we trim capacity in other areas. This again, you'll see the 18 routes. This is a lot of this doesn't start until December or even January . And a lot of this is focused on the depth of the winter in the first quarter. So we feel really good about these changes.

Dave: Yes, Dave.

Dave: A great question and.

Speaker Change #133: As I shared earlier, we now have on our website for this.

Unknown Executive: But I think mostly for us, it's just really a capacity story. As I said, we grew seats by 8% in first class, and our revenues went up 8% in the second quarter. The main cabin was a little bit of a different story. So I do think that in general demand, if we make the adjustments we're making to our capacity, I think we'll go a long way to getting equilibrium there. And Mike, just to remind you that, like, if you look at our, again, what counts as the bottom line, if you look at our, at our margin, and if you look at x, the impact of 1282, our full-year margin, even with all And I think that's a remarkable achievement.

Speaker Change #133: Category of premium.

Speaker Change #133: And our website excuse me our app will be updated here in the next month or so as well as some other significant changes to our app. So we have upside in distributing our products through our App, which is increasingly web bookings are going.

Unknown Executive: And Tom, welcome to the earnings call. Thanks for being on, and we won't do this again, but please send our best to the new, I guess, Managing Director and Mentor, Helane, who we'll miss on these calls.

Unknown Executive: And I think it's a testament to the business model we have and the investment we made in premium. And so, like, I do think there's a lot of resilience there, and that we're attracting the right set of customers, and we have enough segmentation, our product, to, you know, win. And so we feel pretty good about where we are and where we're going. So, if we think about it, I don't know if it's load factor points or whatever that you're getting now that you've synced up very nicely. I mean, you gave some numbers on how much more you're selling in the One World ecosystem. What is it like driving on your own, you know, on your own metal?

Speaker Change #134: Okay I appreciate that Andrew.

Unknown Executive: for sure. You got it. Thanks very much, everyone.

Michael John Linenberg: Thanks for taking my question. Yeah, you know, that's a great question. And now we're just, say in the scheme of size, if you will, that the number of international Connections onto our network given our domestic size and what we do carry it as is not a huge component of it I think the one world is really our loyalty members being able to carry their elite benefits globally and Saying within the one world system and Alaska's loyalty system is the the real upside But but nonetheless to your point as we continue to put more first-class seats on our aircraft as well as premium That opens up more opportunity as for all the long-haul connections We do to provide them and many of them also choosing premium seats up their long trip, Andrew, what percentage of revenues? Total revenues from the partners is about 7% of the mix.

Andrew <unk>: And just one other quick question I appreciate what you.

Unknown Executive: Thanks, Tom.

Speaker Change #101: Our next question will come from Stephen Trent with Citigroup.

Andrew <unk>: Have mentioned on the Boeing deliveries and what have you over the long term do you see any possibility that perhaps the <unk>.

Unknown Executive: Does that include your regionals as well, or is that non-regional connections? Sorry, I think Mike, he's just saying 7% of our revenue is enabled by our partnerships. He wasn't, and we weren't talking mainline versus regional.

Stephen Trent: Ah yes, hello everybody and thanks for taking my question.

Stephen Trent: Just a follow-up, if I may appreciate the color on the premium increase.

Speaker Change #135: Embraer E two could potentially play a bigger role in your fleet, depending on what happens with <unk>.

Speaker Change #103: And forgive me if I miss this, but do you see any parallel adjustments that you might make?

Speaker Change #135: Supply from the larger Oems.

Speaker Change #104: to your app or for example any pivots in your thinking on changes in the distribution channel as you increase that premium. Thank you.

Speaker Change #135: Hey, Steve I I don't.

Speaker Change #136: We're not looking at that aircraft today I think we're really excited about the order book, we have with Boeing we want to get the 10.

Michael John Linenberg: So that's coming from our One World and other partners. That's perfect. Perfect. Yep. And I think it's going to grow from there. And to your point, it's a high-value traveler, generally speaking.

Speaker Change #104: Yes, Steve, that's a great question and as I shared earlier, we now have on our website full description.

Speaker Change #136: To the stable of aircraft.

Speaker Change #136: And Thats really our focus we've got a great arrangement and deal with them. They do a great job for us and we're really focused on executing that fleet order over the next several years.

Speaker Change #137: Okay, I appreciate that and thanks for the time.

Steve: Thanks, Steve Thanks, Steve.

Michael John Linenberg: Yes. Yes. Very good. Thank you, everyone. We'll hear next from Savi Sith with Raymond James.

Steve: And our next question comes from Chris <unk> with Susquehanna Financial Group.

Speaker Change #104: Oh, okay. I appreciate that, Andrew.

Speaker Change #139: Good morning, everyone. Thanks for taking my question wanted to go back to I think it was wayne's question on competitive capacity.

Speaker Change #105: And just one other quick question, I appreciate what you have mentioned on the Boeing deliveries and what have you. Over the long term, do you see any possibility that perhaps the Embraer E2 could potentially play a bigger role in your fleet, depending on what happens with them?

Speaker Change #140: Did give I think a number for <unk> and <unk>.

Speaker Change #141: <unk> I think you said that.

Speaker Change #142: You would expect I'm not sure for <unk>, whether you were referencing.

Speaker Change #143: That competitiveness.

Speaker Change #144: Competitive capacity drop versus your network or sort of domestic as a whole I'm just trying to kind of localized as we think about potential opportunities for yield acceleration, whether it's broad based or we look at your network map chief potential opportunities around pumps things like that thank you.

Savi Sith: Hey, good morning. If I might, the 3Q cost bridge chart was very helpful. I'm just curious what might have been incremental versus what you were thinking before and just along that line of questions that you've gotten so far on the cost side. I think historically, I think the thinking was, you know, if you grew about 5% or a little bit higher than that, you could keep unit costs flat. Is that relationship still holding?

Speaker Change #105: Supply from the larger OEMs.

Speaker Change #106: Hey Steve, I don't have, we're not looking at that aircraft today, I think we're really excited about the order book we have with Boeing, we want to get the 10 into the stable of aircraft.

Shane R. Tackett: Yeah, hi, Savi. Thanks for the question. Yeah, I think in terms of the second half forecast, you know, what has changed from earlier in the year, certainly the growth rate coming down and us holding resources and sort of having been configured to fly more, you know, that it's not like we haven't had a line of sight to that. But it's certainly different than our original expectations for the year.

Chris: Hi, Chris.

Speaker Change #146: It obviously varies by carrier by I will say at the higher level.

Speaker Change #106: And that's really our focus. We've got a great arrangement and deal with them. They do a great job for us. And we're really focused on executing that fleet order over the next several years.

The amount of competitive increase in seats in our hubs at the highest level is extremely low single digit.

Steve: Okay, I appreciate that and thanks for the time.

Speaker Change #146: On average as we go into September and October and we continue to see adjustments to the further out so.

Steve: Thanks, Steve. Thanks, Steve.

Steve: And our next question comes from Chris with Susquehanna Financial Group.

Speaker Change #146: I would just say that it's somewhat flat to marginally up.

Chris: Good morning, everyone. Thanks for taking my question. I want to go back to, I think it was Duane's question on competitive capacity. You did give, I think, a number for 2Q.

Speaker Change #147: Okay and then the second question I realize you don't want to speak to or explicitly give any color on capacity here.

But as we think about.

Chris: 3Q, I think you said that you would expect, I'm not sure for 3Q whether you were referencing that competitive capacity drop versus your network or sort of domestic as a whole. I'm just trying to kind of localize.

Speaker Change #148: The goal of expanding margins here and you have fewer deliveries. So should we think about the pieces of capacity departures stage and gauge sort of more.

Speaker Change #148: Stage engage dependent or positive or accretive for next year, just want to understand sort of at a high level, how you're thinking about that in each of those pieces to come with margin different margin profiles. Thank you.

Speaker Change #109: As we think about potential opportunities for yield acceleration, whether it's broad based or we look at your network map and see potential opportunities around hubs and things like that. Thank you.

Speaker Change #149: Yeah, Hey, Steve I look I think.

Speaker Change #110: Hey Chris, you know it obviously varies by carrier, by hub, I will say at the higher level the amount of competitive increase in seats in our core hubs at the highest level is extremely low single digit.

Speaker Change #150: Sorry, I think it is.

I think I think the <unk>.

Speaker Change #151: Next year is likely to be really similar to the number of units. We take on we have one of the longer stage lengths in the domestic industry because of where we fly off of the west coast. Most of the places people are going are 3456 hours away, which is also one of the reasons, our segmentation and premium configuration work, so well for us.

Speaker Change #111: On average as we go into September and October and we continue to see adjustments to the further out so You know, I would just say there's somewhat flat to marginally up

Speaker Change #151: Our next opportunity for gauge growth is when we have the Max 10 come in and.

Speaker Change #112: Okay and the second question I realize you don't want to speak to or explicitly give any color on capacity here but it's for next year but as we think about

Speaker Change #152: It seems to be a.

Speaker Change #152: It's not next year. So maybe in 2026, we get to see a benefit from that but we are excited to see.

Speaker Change #113: The goal of expanding margins here and you have fewer deliveries, so should we think about the pieces of capacity, departure stage, and gauge as sort of more

Speaker Change #152: A pickup engage once we start to take the 10.

Speaker Change #153: Probably in 'twenty six.

Speaker Change #154: Okay. Thank you.

Speaker Change #114: Stage, Engage, Dependent or Positive or Accretive for next year, just want to understand sort of at a high level how you're thinking about that because each of those pieces do come with different margin profiles. Thank you.

Speaker Change #154: Thanks.

Speaker Change #154: Thanks, Chris and thank you everyone for joining US we'll talk to you next quarter.

This concludes today's conference call. Thank you for attending.

Speaker Change #114: Yeah, hey, Steve, look, I think, or, Chris, sorry, I think it's, um...

Speaker Change #115: I think...

Speaker Change #116: I think the growth next year is likely to be really similar to the number of units we take on. We have one of the longer stage lengths in the domestic industry because of where we fly off of the West Coast, most of the places people are going are three, four, five, six hours away, which is also one of the reasons our segmentation and premium configuration works so well for us.

Speaker Change #116: The real next opportunity for gauge growth is when we have the Max 10 come in and that seems to be a, you know, it's not next year, so maybe in 2026, we get to see a benefit from that. But we are excited to see.

Speaker Change #116: A tick up in gauge once we start to take the 10, you know, probably in 26.

Speaker Change #117: Okay, thank you.

Speaker Change #116: Thanks, Chris, and thank you everyone for joining us. We'll talk to you next quarter.

Speaker Change #119: This concludes today's conference call. Thank you for attending.

Speaker Change #118: The host has ended this call. Goodbye.

Speaker Change #118: [inaudible]

Speaker Change #118: Thanks for watching!

Speaker Change #118: [inaudible]

Speaker Change #118: , , , , , , , , ,

Speaker Change #118: [inaudible]

Shane R. Tackett: You know, that our labor deal was, um, uh, for the rest of the year and some shift in maintenance timing. So, uh, I think, you know, the, the, shifting of expenses happens kind of every year. It's hard to predict. Um, uh, and this year just happened to be relatively significant on the maintenance side and the airport credit side, the, uh, thinking in terms of leverage against growth, we have not changed our thinking.

Speaker Change #120: Good morning ladies and gentlemen and welcome to the Alaska Air Group 2024 second quarter earnings call. At this time all participants have been placed on mute to prevent background noise.

Speaker Change #120: Today's call is being recorded and will be accessible for future playback at alaskaair.com.

Speaker Change #120: After our speakers' remarks, we will conduct a question-and-answer session for analysts.

Speaker Change #121: I would now like to turn the call over to Alaska Air Group's Vice President of Finance, Planning and Investor Relations, Ryan St. John .

Shane R. Tackett: If we grow four or 5%, we would expect, you know, costs to be flattish. And, um, and in fact, I'd like to be even a little better than that over time. Uh, that is still a philosophy that's intact and alive at Alaska.

Speaker Change #122: Thank you, operator, and good morning. Thank you for joining us for our second quarter 2024 earnings call. Yesterday, we issued our earnings release, along with several accompanying slides detailing our results, which are available at investor.alaskaair.com.

Savi Sith: That's helpful. Thanks, Shane. And if I may, on the new product launch, you're not taking away seats, but in fact, you might actually be adding a few seats. So should we think of that being kind of a unit cost and unit revenue guy as we kind of look to the next 18 months or so? Absolutely.

Savi Sith: And I think I mentioned that, I think, it was the last couple of words in my prepared remarks that yeah, we're not losing seats to one fleet, we're adding two seats to the other, we're going to get premium revenue from all of those seats, and we'll have slightly more seats to spread costs over. Appreciate it. Thanks. Thanks, Savi. Our next question will come from Tom Fitzgerald with Cowan & Company. Hi everyone, thanks for your time. Most of it might have been answered, and maybe this is too granular, but I'm just curious about the new routes into Mexico.

Speaker Change #123: On today's call, you'll hear updates from Ben, Andrew, and Shane.

Speaker Change #124: Several others of our management team are also on the line to answer your questions during the Q&A portion of the call.

Speaker Change #125: This morning, Air Group reported second quarter GAP net income of $220 million.

Speaker Change #125: Excluding special items and mark-to-market fuel hedge adjustments, Air Group reported adjusted net income of $327 million.

Unknown Executive: Is that all just pretty much U.S. point-of-sale leisure, or do you participate in any of the VFR traffic that goes back and forth between the two countries? Thanks very much. Yeah, hi Tom. Most of it, if you look at the cities, it's just expanding our core US leisure side point of sale, which has done well.

Unknown Executive: And again, the good thing about these is that these are 100% new revenue sources. And while we trim capacity in other areas, this again, you'll see the 18 routes. A lot of this doesn't start until December or even January, and a lot of this is focused on the depth of the winter in the first quarter.

Unknown Executive: So we feel really good about these changes. And Tom, welcome to the earnings call. Thanks for being on. And we won't do this again.

Unknown Executive: But please send our best to the new, I guess, Managing Director and Mentor, Helane, who will miss these calls. Sure. You got it.

Unknown Executive: Thanks very much, everyone. Thanks, Tom. The next question will come from Stephen Trent with City. Oh, yes.

Speaker Change #125: As a reminder, our comments today will include forward-looking statements about future performance, which may differ materially from our actual results.

Stephen Trent: Hello, everybody. And thanks for taking my question. Um, just a follow-up, if I may appreciate the color on the premium increase. And forgive me if I miss this, but do you see any parallel adjustments that you might make to your app?

Stephen Trent: Or, or, for example, any pivots in your thinking on changes in the distribution channel as you increase that premium? Thank you. Yeah, Steve, that's a great question. And as I shared earlier, we now have a full category of premium content on our website, and our website, excuse me, our app will be updated here in the next month or so as well as some other significant changes to our app. So we have an upside in distributing our products through our app, which is increasingly where bookings are going. Okay.

Unknown Executive: I appreciate that, Andrew. Um, and just one other quick question. I appreciate what you have mentioned about the Boeing deliveries and so forth. Over the long term, do you see any possibility that perhaps the Embraer E2 could potentially play a bigger role in your fleet depending on what happens with supply from the larger suppliers? Hey Steve, we're not looking at that aircraft today.

Stephen Trent: I think we're really excited about the order book we have with Boeing. We want to get the 10 into the stable of aircraft, and that's really our focus. We've got a great arrangement and deal with them. They do a great job for us, and we're really focused on executing that fleet order over the next several years. Okay, I appreciate that.

Operator: Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2024 second 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 speaker's 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. John. Thank you, operator, and good morning.

Stephen Trent: And thanks for the time. Steve, thanks Steve. Our next question comes from Chris with Susquehanna Financial Group. Good morning, everyone. Thanks for taking my question. I want to go back to, I think, Duane's question on competitive capacity. You did give, I think, a number for 2Q and 3Q.

Ryan St. John: Thank you for joining us for our second quarter 2024 earnings call. Yesterday, we issued our earnings release along with several accompanying slides detailing our results, which are available at Investor.AlaskaAir.com.

Chris: I think you said that you would expect, I'm not sure for 3Q whether you were referencing that competitive capacity drop versus your network or sort of domestic as a whole. I'm just trying to kind of localize as we think about potential opportunities for yield acceleration, whether it's broad-based or we look at your network map and see potential opportunities around hubs and things like that. Thank you. Hey Chris, you know, it obviously varies by carrier, by hub, I will say at a higher level.

Unknown Executive: The amount of competitive increase in seats in our core hubs at the highest level is extremely low single digits. On average, as we go into September and October, and we continue to see adjustments further out, so, you know, I would just say it's somewhat flat to marginally up.

Chris: Okay, and the second question I realize you don't want to speak to or explicitly give any color on capacity here, but as for next year, but as we think about the goal of expanding margins here, and you have fewer deliveries, so should we think about the pieces of capacity, departure stage, and gauge as sort of more Stage, Engage, Dependent, or Positive or Accretive for next year? Just want to understand sort of at a high level Thank you, um, yeah, hey Steve, I look. I think our sorry, I think it's, I think the growth next year is likely to be really similar to the number of units we take on.

Speaker Change #125: Information on risk factors that could affect our business can be found within our SEC filings.

Chris: We have one of the longer stage lengths in the domestic industry because of where we fly from on the West Coast. Most of the places people are going are three, four, five, six hours away, which is also one of the reasons our segmentation and premium configuration works so well for us.

Unknown Executive: The real next opportunity for gauge growth is when we have the Max 10 come in. And that seems to be, you know, it's not next year. So maybe in 2026, we get to see a benefit from that. But we are excited to see a pickup in gauge once we start to take the 10, probably in 2026.

Ryan St. John: On today's call, you'll hear updates from Ben, Andrew, and Shane. Additionally, several others on our management team are also on the line to answer your questions during the Q&A portion of the call. This morning, Air Group reported second quarter net income of $220 million. Excluding special items and mark-to-market fuel hedge adjustments, Air Group reported adjusted net income of $327 million. As a reminder, our comments today will include forward-looking statements about future performance, which may differ materially from our actual. Information on risk factors that could affect our business can be found within our SEC file. We will also refer to certain non-gap financial measures, such as adjusted earnings.

Chris: Okay, thank you. Thank you. Well, thanks, Chris. And thank you, everyone, for joining us. We'll talk to you next quarter. This concludes today's conference call. Thank you for attending. The host has ended this call. Goodbye.

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