Q2 2025 Alaska Air Group Inc Earnings Call

Operator: Group 2025 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 speakers' remarks, we will conduct a question-and-answer session for analysts.

Good morning, ladies and gentlemen, and welcome to the Alaska Air Group, 20125, 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 Alaska, air.com.

Ryan John: I would now like to turn the call over to Alaska Air Group's Vice President of Finance, Planning and Investor Relations, Ryan St.

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

Ryan John: John. Thank you, operator. And good morning.

Speaker Change: I would now like to turn the call over to Alaska Air groups, Vice President of Finance planning and investor relations Ryan St. John

Ryan John: Thanks for joining us today to discuss our second quarter 2025 earnings results. Yesterday, we issued our earnings release along with several accompanying slides detailing our results, which are available at investor.alaskaair.com. On today's call, you'll hear updates from Ben, Andrew, and Shane. Several others of our management team are also on the line to answer your questions during the Q&A portion of the call.

Thank you, operator, and good morning. Thanks for joining us today to discuss our second quarter 2025 earnings results.

Speaker Change: Yesterday, we issued our earnings release along with several accompanying, slides detailing, our results which are available at investor alaskaair.com.

Speaker Change: On today's call, we want your updates from Ben Andrew and Shane.

Unknown Executive: Group reported a second quarter gap net income of 172 million dollars. Excluding special items and mark-to-market fuel hedge adjustments, Air Group reported adjusted net income of $215 million.

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: Are group reported a second quarter, gaap, net income of 172 million.

Unknown Executive: Our comments today will include discussion of Air Group reported results and forward-looking guidance compared to prior year pro forma results as if Alaska and Hawaiian were a combined company for the full period's Lastly, as a reminder, forward-looking statements about future performance may differ materially from our actual results. Information on risk factors that could affect our business can be found within our SEC file. We will also refer to certain non-GAAP financial such as adjusted earnings and unit cost excluding fuel. And as usual, we have provided a reconciliation between the most directly comparable gap and non-gap measures in today's earnings.

Speaker Change: Excluding special items and mark-to-market fuel. Hedge adjustments are group, reported adjusted, net, income of 215 million.

Speaker Change: Our comments today will include discussion of Air Group reported results and forward-looking guidance compared to Prior year profile results. As if Alaska and Hawaiian were a combined company for the full period reference.

Speaker Change: Lastly, as a reminder forward-looking statements about future performance, 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 cost excluding fuel.

Benito Minicucci: or what are you Ben? Thanks, Ryan, and good morning, everyone.

Speaker Change: 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.

Benito Minicucci: First, I want to acknowledge the operational disruption we experienced earlier this week due to an IT outage. To our guests whose travel plans were impacted, I sincerely apologize. Safety is always our top priority, and upon identifying the issue, we made the decision to pause operations until it was safe to resume. Our teams worked around the clock to restore operations as quickly as possible. We are actively partnering with our hardware vendor to investigate the root cause and we'll take appropriate action once the review is.

Ben: Thanks Ryan and good morning everyone.

Ben: First, I want to acknowledge the operational disruption we experienced earlier this week, due to an IT outage to our guests, whose travel plans were impacted. I sincerely apologize.

Ben: The decision to pause operations until it was safe to resume.

Benito Minicucci: Now turning to our earnings. We delivered a strong second quarter result, marking another step forward in achieving our long-term ambition. Our adjusted earnings per share of $1.78 exceeded the high end of our guidance, clear evidence of our team's disciplined execution and unwavering focus on what we can control, delivering a remarkable guest experience, driving operational excellence, and unlocking the value of our newly combined network and commercial platform. Alaska Xcelerate is working. The powerful combination of these two networks and the changes we've made are already delivering greater utility and choice for Hawaii residents and visitors alike. These changes drove our Hawaiian assets to its first profitable quarter since 2019 and just 10 months post acquisition.

Ben: Our teams worked around the clock to restore operations as quickly as possible. We are actively partnering with our Hardware, vendor to investigate the root cause, and will take appropriate action once to review is complete.

Ben: Now, turning to our earnings, we delivered a strong second quarter result marking. Another step forward in achieving, our long-term ambitions,

Our adjusted earnings per share of a dollar 78 cents, exceeded the high end of our guidance. Clear evidence of our team's disciplined execution, and unwavering focus on what we can control, delivering a remarkable guest experience driving operational, excellence and unlocking, the value of our newly combined Network and Commercial platform.

Ben: Alaska accelerate is working the powerful combination of these 2 networks. And that changes we've made are already delivering greater utility and choice for Hawaii residents and visitors alike.

Benito Minicucci: We're excited to continue building scale, relevance, and loyalty as Hawaii's trusted airline. In total, Air Group generated a record $3.7 billion in revenue with year-over-year unit revenue performance that we are confident will lead the industry. As we continue to implement our initiatives, our sights are set on diversifying our revenues even further from the 50% we generate outside the main cabin today. A key driver of this growth is premium revenue, which continues to outperform.

Ben: These changes drove our Hawaiian assets to its first profitable quarter since 2019 and just 10 months post-acquisition.

Ben: We're excited to continue building scale relevance and loyalty as Hawaii's trusted airline in, total are group generated a record 3.7 billion dollars. In Revenue with year-over-year unit Revenue performance, that we are confident will lead the industry.

Ben: As we continue to implement our initiatives, our sights are set on diversifying. Our revenues even further from the 50%. We generate outside the main cabin today.

Benito Minicucci: We've now retrofitted nearly 90 of our 737 aircraft, expanding our ability to deliver a more premium experience as part of a seamless end-to-end journey for our a more premium experience as part of a seamless end-to-end journey for our Next month, we're launching our newly branded loyalty program and premium credit card, uniting Alaska Mileage Plan and Hawaiian Mileage. This will better reflect the expanded reach of our combined networks, strengthen loyalty, and connect with more guests.

Ben: A key driver of this growth is premium Revenue, which continues to outperform.

We've now retrofitted, nearly 90 of our 737 aircraft expanding our ability to deliver a more premium experience as part of a seamless end-to-end Journey for our guests.

Benito Minicucci: In May, we launched our inaugural intercontinental flight from Seattle to Tokyo, Narita, marking the first step in establishing an international gateway at our hometown. As Andrew will share shortly, the route has gotten off to a very successful start. This September, we'll begin service from Seattle to Seoul and Incheon, followed by the launch of our first transatlantic route to Rome next May. To support this international growth, we've also ordered five additional Boeing 787s, bringing our future fleet total to 17 aircraft. With a Boeing 787 crew base established in Seattle, we're laying the foundation to expand our international operations to at least 12 destinations from Seattle in the coming year.

Ben: Next month, we're launching our newly branded loyalty program and premium credit card, uniting Alaska mileage plan and Hawaiian Miles. This will better reflect the expanded reach of our combined networks. Strengthened loyalty and connect with more guests.

Ben: In may, we launched our inaugural InterContinental flight from Seattle to Tokyo. Narita marking the first step in establishing an international Gateway at our hometown hub.

Ben: As Andrew will share shortly, the root has gotten off to a very successful start.

The September, we'll begin service from Seattle to stolen Chan, followed by the launch of our first transatlantic, route to Rome. Next May

Ben: to support this International growth, we've also ordered 5 additional Boeing 787s bringing our future Fleet total to 17 aircraft

Benito Minicucci: Beyond our targeted initiatives at Air Group, the broader industry is also making necessary and meaningful. Capacity adjustments continue to align more closely with current demand trends, creating a more favorable setup for the second half of the year and providing further upside. Although demand remains softer than initially expected, it has stabilized and consumer sentiment is gradually improving amid the broader macroeconomic environment. We're also encouraged by the recent uptick in bookings, early signs of positive demand momentum, and the potential for easing fuel prices, all factors that position us well for stronger performance in the latter half of the year.

Ben: With a Boeing 787 crew, bases established in Seattle where laying the foundation to expand our International operations to at least 12 destinations from Seattle in the coming years.

Beyond our targeted initiatives at are group. The broader industry is also making Necessary and meaningful changes.

Ben: Capacity adjustments, continue to align more closely with current demand Trends, creating a more favorable setup for the second half of the year and providing further upside, although the man remains softer than initially expected, it has stabilized and consumer sentiment is gradually improving amid the broader macroeconomic environment.

Benito Minicucci: Given this improving outlook, we expect to deliver at least $3.25 in adjusted earnings per share in 2025, an important step on our path to reaching $10 in earnings per share by 2027, a target we remain fully confident in. Our focus remains on executing Alaska Accelerate and unlocking a billion dollars in incremental profit over the next two years. Early results are promising, with synergies and key initiatives tracking ahead of time.

Ben: We're also encouraged by the recent uptick in bookings, early signs of positive demand momentum and the potential for easing fuel prices. All factors that position us well for stronger performance and the latter half of the year.

Give me this improving Outlook. We expected the liver at least 3.25 and adjusted earnings per share in 2025 an important step on our path to reaching ten dollars in earnings per share. By 2027 our Target. We remain fully confident in

Ben: our Focus remains on executing Alaska accelerate and unlocking a billion dollars in incremental profit over the next 2 years.

Benito Minicucci: In closing, there's a renewed sense of energy and purpose across our driven by our shared vision to transform Alaska Air Group into a larger global airline. With the Alaska Accelerate Plan as our guide, our people are moving forward with clarity, confidence, and a deep commitment to what we're building together. I want to thank all our incredible employees for their dedication and hard work on this journey. The opportunities ahead are significant, and we're eager to capitalize on them and position Air Group for long-term growth, success, and value creation.

Ben: Early results are promising with synergies and key initiatives tracking ahead of plan.

Ben: In closing There's A Renewed sense of energy and purpose across our company driven by our shared Vision, to transform Alaska, Air Group into a larger global airline.

Ben: But the Alaska accelerator plan as our guide, our people are moving forward with Clarity confidence and a deep commitment to what we're building together. I want to thank all our incredible employees for their dedication and hard work on this journey.

Andrew Didora: And with that, I'll turn it over to Andrew. Thanks Ben and good morning everyone. Today my comments will focus on second quarter results, continued progress on our Alaska Accelerate vision, and demand trends we're seeing for the third quarter. For the second quarter, total revenues reached a record $3.7 billion, up 2% year-over-year on capacity growth of 2.7%. We expect that our unit revenue performance will meaningfully lead the industry, finishing on the better end of our prior guidance, down less than 1%. As we had expected, the industry capacity backdrop pressured monthly yields sequentially throughout the quarter, but our planes flew full, with a second quarter load factor of 84%.

Andrew: I'll turn it over to Andrew.

Thanks Ben and good morning everyone. Today, my comments will focus on second quarter results.

Continued progress on our Alaska accelerate vision and demand Trends. We're seeing for the third quarter.

Andrew: For the second quarter total revenues reached a record 3.7 billion dollars up 2% year-over-year on capacity growth of 2.7%. We expect that our unit Revenue performance will meaningfully lead the industry finishing on the better end of our prior guidance. Down less than 1%.

Andrew: As we had expected the industry capacity backdrop pressured, monthly yields sequentially throughout the quarter, but our planes flew full.

Andrew Didora: This performance, despite softer than anticipated main cabin demand across the industry, highlights the strength of our loyalty program and continued guest preference for the Alaska and Hawaiian experience. Not surprisingly, outperformance of first and premium class revenues have persisted. Second quarter premium revenues were up 5% year over year, led by our Hawaiian assets, with premium up nearly 19%. As Ben highlighted, we're making strong strides in expanding our premium offerings. We've now completed 40% of our 737 retrofits, increasing premium seat share from 26% to 27%, a segment that already drives 35% of our total revenue. We're targeting 29% premium seat share by next summer when all 218 Boeing narrowbody aircraft retrofits will be complete.

Andrew: With a second quarter load factor of 84% this performance, despite softer than anticipated main cabin demand across the industry, highlights the strength of our loyalty program and continued guest preference for the Alaska and Hawaiian experience.

Andrew: Not surprisingly, outperformance of first, and premium class revenues have persisted.

Andrew: second quarter premium revenues, were up 5% year-over-year led by our Hawaiian assets, with premium up, nearly 19%

Andrew: As been highlighted, we're making strong strides in expanding our premium offerings.

We've now completed, 40% of our 737 retrofits increasing premium seat, share from 26% to 27% a segment that already drives 35% of our total revenue.

Andrew Didora: We will also be elevating the guest experience by upgrading our Airbus 330 fleet with refreshed interiors and enhanced amenities. These strategic investments are not only meeting a structural growing demand for premium travel, they're diversifying our revenue base and reinforcing our long-term competitive edge. Touching on loyalty, we generated $558 million in cash remuneration from our co-brand cards, up 5% year-over-year. Card spend and acquisitions remain robust, with active cards in the portfolio up 10% year-over-year. And just this week, Alaska Mileage Plan was named U.S. News' Best Airline Rewards Program for the 11th year in a row. We're gearing up for the mid-August launch of our newly branded Unified Loyalty Program, along with our new Premium Credit Card with unique benefits targeting global travellers on the West Coast with an International Companion Award Certificate, shareable lounge passes and three times point on foreign spend.

Andrew: We're targeting 29% premium seat, share by next summer. When all 218 Boeing narrow body, aircraft retrofits, will be complete.

We will also be elevating the guest experience by upgrading our Airbus 330 Fleet with refreshed interiors and enhanced amenities.

These strategic Investments are not only meeting a structural growing demand for premium travel, they're diversifying our Revenue base and reinforcing our long-term Competitive Edge.

Andrew: Generated 558 million in cash remuneration from our co-brand cards up, 5% year-over-year.

Andrew: And Acquisitions remain robust with active cards in the portfolio up. 10% year-over-year and just this week, Alaska mileage plan was named US News, best Airline rewards program for the 11th year in a row.

Andrew: We're gearing up for the mid August launch of our newly branded unified loyalty program, along with our new premium, credit card with unique benefits targeting Global Travelers on the west coast with an international companion award certificate.

Andrew Didora: This card is strategically positioned to attract a high quality mix of new cardholders across broader geographies and drive greater engagement from our most loyal members, especially our high value elites, which we believe will accelerate significant program growth in the back half of the year.

Sharable Lounge passes and 3 times points on foreign spend.

Andrew Didora: Turning to synergies and revenue initiatives, these are on track and continue to deepen our conviction in our path forward. Hawaii has continued to produce strong, network-leading results with robust bookings and high single-digit yield growth throughout the quarter. Neighbour Island has improved significantly, boasting double-digit margin improvement. Our bank schedules are also performing well in Seattle and Portland. In Seattle, this has supported strong load factors with connecting passengers up mid single digits for the quarter. There is opportunity to further optimize our Seattle banks in 2026 to leverage the seasonality of our business, winter versus summer, as well as feed our growing international gateway.

This card is strategically positioned to attract a high-quality mix of new card holders across broader geographies and drive greater engagement from our most loyal members, especially our high value Elites which we believe will accelerate significant program growth in the back half of the year.

Andrew: Turning to synergies and revenue initiatives. These are on track and continue to deepen. Our conviction in our path. Forward Hawaii has continued to produce strong Network leading results with robust, bookings and high single-digit yield growth throughout the quarter neighbor island has improved significantly. Boosting double-digit margin improvements.

Andrew: Our bank schedules are also performing well in Seattle and Portland in Seattle, this has supported strong load, factors with connecting passengers up mid single digits for the quarter.

There is opportunity to further optimize our Seattle banks in 2026, to Leverage, The seasonality of our business winter versus Summer.

Andrew Didora: In Portland, we carried over 130% more connecting passengers year over year, and future connecting bookings are over 200% higher. Our Portland team has done an outstanding job supporting the expanded flight schedule and we're very excited to open our new and expansive 12,500 square foot lounge in 2026. complementing one of the nation's newest and most impressive terminals and lobbies.

Andrew: As well as feed, our growing International Gateway, in Portland, we carried over 130%. More connecting passengers, year-over-year and future connecting bookings are over 200% higher

Andrew: Our Portland team has done an outstanding job, supporting the expanded flight schedule and we're very excited to open our new and expansive 12, a half thousand square foot Lounge in 2026.

Andrew Didora: I also would like to briefly highlight the launch of our Global Seattle Gateway. We've commenced Seattle Narita service on May 12th, with ticket sales starting only in December of 2024. For the month of June, we achieved a load factor of greater than 80% and stage length adjusted RASM was 18% higher than our discontinued Honolulu Narita service for the same period last year. I want to personally recognize both the commercial and operational organizations. Taking Air Group from zero Seattle long-haul capability to announcing and launching long-haul operations from Seattle within just eight months is an incredible achievement.

Andrew: 1 of the nation's newest, and most impressive Terminals and lobbies.

Andrew: I also like to briefly highlight the launch of our Global Seattle Gateway.

We've commenced Seattle. Narita service on May 12th with ticket sales starting only in December of 2024.

Andrew: Recognized both the commercial and operational organizations.

Andrew Didora: We are well-positioned to launch Korea in September and Rome in May of 2026, with plans to add more destinations at a steady cadence as we build to our fleet of 17 787s, while continually improving our product and commercial selling infrastructure. Our goal remains clear, to serve at least 12 long-haul destinations from Seattle by 2030.

Andrew: Taking are group from zero, Seattle Long, Haul capability to announcing and launching Long, Haul operations, from Seattle. Within just 8 months is an incredible achievement

Andrew Didora: To wrap up our Q2 discussion, cargo revenues are performing extremely well, up 34% year-over-year. We successfully brought the last two of our 10 Airbus 330 Amazon freighters into service this quarter and look forward to maturing and growing this relationship. The launch of our Seattle-Tokyo-Narita route has rapidly expanded our international cargo capabilities from Asia's third-largest market. We have already surpassed our initial cargo volume targets on this route and have effectively backfilled much of the volume we anticipated might shift from Honolulu with the new high-value revenue streams. While there's still much more to unlock, our focus this year is on building a strong foundation to accelerate our cargo contribution in 2026 and beyond, as we scale and optimize this business as a key profit growth engine for Air Group.

Andrew: We are well positioned to launch career in September, in Rome, in May of 2026, with plans to add more destinations at a steady Cadence, as we build to our Fleet of 17787. While continually improving our product and Commercial selling infrastructure. Our goal remains clear to serve at least 12 Long, Long Haul destinations from Seattle by 2030.

Andrew: To wrap up our Q2 discussion cargo revenues are performing extremely well up 34% year-over-year.

We successfully brought the last 2 of our 10 Airbus 330, Amazon Freighters, into service, this quarter and look forward to maturing and growing this relationship.

Andrew: The launch of our Seattle. Tokyo Narita route has rapidly expanded our International cargo capabilities from Asia's third largest market.

Andrew: We've already surpassed our initial cargo volume Targets on this route and have effectively backfilled much of the volume. We anticipated might shift from Honolulu with the new high-value revenue streams. While there's still much more to unlock our Focus, this year is on building a strong Foundation to accelerate our cargo contribution in 2026 and Beyond as we scale

Andrew Didora: Now, turning to our outlook, we expect third quarter capacity to be down about 1%, nearly two points below our prior expectations shared back in April. This is predominantly driven by deliberate reductions in off-peak flying. Similarly, we've reduced fourth quarter flying by approximately two points, bringing our full year capacity growth to around 2% year over year. These adjustments are expected to be margin accretive. Importantly, much of our growth continues to be sourced from increased utilization of our Hawaiian assets, which comes at very low incremental costs. Coupled with domestic industry capacity now expected to be nearly flat in the third quarter, we're confident that our continued commercial momentum will drive sequential improvement throughout the third quarter, resulting in unit revenues flat to up low single digits.

Andrew: And optimize this business as a key profit growth engine for air group.

Now, turning to our Outlook, we expect third quarter capacity, to be down about 1%, nearly 2 points below our prior expectation. Share back in April.

This is predominantly driven by deliberate reductions in off peak flying.

similarly, we've reduced fourth quarter, flying by approximately 2 points, bringing our full year capacity growth to around 2% year-over-year

Andrew: Is adjustments, are expected to be margin. Accretive importantly, much of our growth continues to be sourced from increased utilization of our Hawaiian assets, which comes at very low incremental costs.

Andrew: Coupled with domestic industry capacity. Now, expected to be nearly flat in the third quarter. We're confident that our continued commercial momentum will drive sequential Improvement throughout the third quarter.

Andrew Didora: Demand has stabilized following the abrupt pullback we experienced earlier this year and we're seeing encouraging signs of resilience. Our Q3 builds have seen a strong inflection since late June with our traffic, yield, and total revenue intakes moving from negative to positive. We have experienced this on Alaska and Hawaiian assets alike. Although the strength is mostly close in at this stage, with recent July revenue intakes up low double digits, August low single digits, and September flat, we are seeing positive momentum. In summary, bills have been positive and improving on a year-over-year basis since late June. This is the first time all three have been in the black since early Q1.

Andrew: Resulting in unit, revenues flat to upload single digits.

Andrew: Demand has stabilized following the abrupt pullback. We experienced earlier this year and we're seeing encouraging signs of resilience, our Q3 builds have seen a strong inflection. Since late June with our traffic yield and total revenue intakes, moving from negative to positive.

We have experienced this on Alaska and Hawaiian assets alike.

Andrew: Although the strength is mostly closed in at this stage with recent July Revenue, intakes up, low, double digits, August low single digits and September flat. We are seeing positive momentum.

Andrew Didora: As mentioned earlier, Hawaii continues to book well, with high single-digit yield growth and solid load factors in the second quarter. Momentum that is carrying through year-end and supports the region's continued outperformance. Managed corporate revenue declined 5% year over year in Q2, primarily due to lower yields. While large managed corporates, particularly in sectors like manufacturing and technology, remain cautious, small and medium businesses continue to demonstrate resilience. Factoring in small and medium business performance, total corporate revenue was down only 1%. Encouragingly, July has seen an uptick in closer in-managed corporate bookings, a shift from what we saw in early Q2.

Andrew: In summary bills have been positive and improving on a year-over-year basis since late June, this is the first time. All 3 have been in the black since early q1, as mentioned earlier, Hawaii continues to book, well, with high single-digit yield growth and solid load factors in the second quarter. Momentum, that is carrying through year end and supports the Region's continued outperformance.

Manage corporate Revenue decline 5% year-over-year in Q2 primarily due to lower yields.

While large manage corporates. Particularly in sectors, like manufacturing and Technology remain cautious, small and medium businesses. Continue to demonstrate resilience.

Andrew: Factoring in small and medium business performance total. Corporate Revenue was down. Only 1% encouragingly July has seen an uptick in closer in managed corporate bookings.

Andrew Didora: Most importantly, despite a more challenging corporate setup on the West Coast compared to our peers, we still delivered industry-leading unit revenue in Q2, and we're well positioned to do so again in Q3. With greater economic clarity ahead, we're cautiously optimistic about renewed corporate confidence, offering potential upside to corporate travel in our geography.

Andrew Didora: Our second quarter results and outlook reinforce our confidence in our commercial strategy. Alaska Xcelerate is working and continues to drive meaningful progress across the network. The synergies we've targeted are taking hold, validating our strategic direction and operational discipline. Even in a dynamic environment, Air Group's revenue performance reflects the strength of our brands, the loyalty of our guests, and the adaptability of our teams. Importantly, we are not standing still. We are making necessary adjustments to support improvements in overall unit revenues and profits. And as conditions improve and we continue to execute, we are well positioned to build on this momentum and deliver even greater value and resilience over time.

Shift from what we saw in early Q2. Most importantly, the Spy, more challenging corporate setup on the west coast compared to our peers. We still delivered industry-leading unit Revenue in Q2 and we're well positioned to do. So again, in Q3 with greater economic Clarity ahead where cautiously optimistic about renewed, corporate confidence offering potential upside to corporate travel in our geographies.

Our second quarter, result and Outlook reinforce our confidence in our commercial strategy.

Alaska, accelerate is working and continue to drive. Meaningful progress across the network. The synergies we've targeted are taking hold validating our strategic Direction and operational discipline

Andrew: even in a dynamic, environment are groups Revenue performance, reflects the strength of Our Brands, the Loyalty of our guests and the adaptability of our teams,

Shane Tackett: And with that, I'll pass it over to Shane. Thanks, Andrew, and good morning, everyone. We reported earnings per share of $1.78 this quarter, exceeding our guidance range and delivering a pre-tax margin in the top three of the industry, even as we work through an integration. Our strategic plan continued to gain traction in the second quarter with strong execution against our commercial initiatives and synergy capture. The momentum we are seeing reinforces our conviction in Alaska Accelerate and the long-term value it is designed to create. Turning to our financial position, we ended the quarter with total liquidity of $3 billion, inclusive of on-hand cash and undrawn lines of credit.

Andrew: Movements in overall unit revenues and profits and as conditions improve and we continue to execute we're well positioned to build on this momentum and deliver even greater value and resilience over time. And with that, I'll pass it over to Shane.

Shane: Thanks Andrew and good morning everyone.

Shane: We reported earnings per share of $1.78 this quarter exceeding, our guidance range and delivering a pre-tax margin in the top 3 of the industry, even as we work through an integration.

Shane: Our strategic plan continued to gain Traction in the second. Quarter with strong execution, against our commercial initiatives and Synergy capture.

Shane: The momentum, we are seeing reinforces our conviction in Alaska accelerate and the long-term value it is designed to create.

Shane Tackett: We made $80 million in scheduled debt repayments during the quarter and expect to repay approximately $150 million in Q3. Net leverage ended the quarter at 2.4 times, while our debt-to-cap ended at 60%. During the quarter, we repurchased $428 million in shares, bringing our year-to-date total to $535 million, more than double our original repurchase expectations for the year. We executed our repurchases at attractive prices, returning value to shareholders without compromising the strength of our balance sheet. We continue to believe that our equity does not reflect the earnings power of the company, and we remain confident in our trajectory towards $10 in earnings per share by 2027.

Shane: Turning to our financial position. We ended the quarter with total liquidity of 3 billion. Inclusive of on-hand cash and undrawn lines of credit. We made 80 million dollars. In scheduled debt repayments during the quarter and expect to repay approximately 150 million in Q3.

Shane: Net leverage ended the quarter at 2.4 times while our debt to cap ended at 60%.

During the quarter. We repurchased 428 million in shares. Bringing our year-to-date total to 535 million, more than double our original repurchase expectations for the year.

We executed our repurchases at attractive prices returning value to shareholders without compromising. The strength of our balance sheet, we continue to believe that our Equity does not reflect the earnings power of the company, and we remain confident in our trajectory towards ten dollars in earnings per share by 2027.

Shane Tackett: Turning to our cost performance, second quarter unit costs were up six and a half percent year over year, in line with our expectations and prior guidance. The primary drivers of our unit cost profile remain elevated airport real estate cost growth rates, as well as maintenance costs and new labor contracts. We also remain disciplined in our capacity deployment and will continue to choose growth rates that focus on maximizing margin over minimizing unit cost. Our absolute non-fuel costs remain on plan, thanks to strong execution and our team's commitment to cost discipline, which is challenging when integrating two companies quickly.

Shane: Turning to our cost performance. Second quarter unit costs were up 6 and a half percent year-over-year in line with our expectations and prior guidance.

Shane: The primary drivers of our unit cost profile remain elevated airport. Real estate cost growth rates as well as maintenance costs and new labor contracts.

Shane: We also remain disciplined in our capacity deployment and will continue to choose growth rates that focus on maximizing margin over minimizing unit costs,

Shane Tackett: We have lowered our third quarter growth by approximately two points from the rate we expected earlier in the year, and now expect year-over-year unit costs in the third quarter will be similar to our second quarter result. However, this will be on 1% fewer year-over-year ASMs in the third quarter versus 2.7% more ASMs year-over-year in the second quarter. Had we not cut capacity as close in as we did, we would have seen a step down in third-quarter unit costs. And we still expect to see a meaningful step down in Q4 unit costs, setting up a strong exit rate into 2026.

Shane: Our absolute non-fuel costs remain on plan, thanks to strong execution, and our team's commitment to cost discipline, which is challenging, when integrating 2 companies quickly.

Shane: We have lowered our third quarter growth by approximately 2 points from the rate we expected earlier in the year and now expect year-over-year unit costs. In the third quarter will be similar to our second quarter result. However, this will be on 1% fewer. Year-over-year asm's in the third quarter. Versus 2.7% more asm's year-over-year in the second.

Shane: Had we not cut capacity as close in as we did, we would have seen a step down in third quarter, unit costs.

Shane Tackett: As a reminder, we've generally shared that growth of 4-5% would be required to cover normal cost inflation, so I'm pleased that we are on track to deliver full-year unit costs up mid-single digits on just 2% full-year capacity growth, which includes roughly two points of cost growth from our four new labor agreements. Our fuel price averaged $2.39 per gallon during the second quarter, trending down through June both for crude and West Coast refining margins. While we did see a temporary spike in refining margins to start the third quarter, reaching as high as $0.90 in early July due to supply fluctuations, this volatility should moderate as we move past peak summer demand, and we expect our economic fuel costs to remain stable around $2.45 per gallon in the third quarter.

And we still expect to see a meaningful step down in Q4 unit, costs setting up a strong exit rate into 2026.

Shane: As a reminder, we've generally shared that growth of 4 to 5% would be required to cover normal cost inflation. So I'm pleased that we are on track to deliver full year. Unit costs up mid single digits on just 2% full year capacity growth which includes roughly 2 points of cost growth from our 4, new labor agreements.

Our fuel price, averaged $2.39 per gallon during the second quarter trending down through June, both for crude and West Coast refining margins.

Shane Tackett: We expect to deliver adjusted earnings per share between $1.00 and $1.40 in the third quarter, which incorporates an expected $0.10 impact from the IT outage. We now expect at least $3.25 EPS for the full year. This outlook assumes that we continue to deliver on our synergy and commercial initiative commitments and that the recent inflection in demand and pricing remains through the rest of the year. As we look ahead, we are genuinely excited by the opportunities in front of us. We have seen strong initial execution against both the commercial roadmap and synergy capture we shared in December at our Investor Day and are encouraged by the setup we see for the rest of 2025.

Shane: While we did see a temporary spike in refining, margins to start the third quarter. Reaching as high as 90 cents in early July due to supply fluctuations, this volatility should moderate as we move past Peak summer demand and we expect our economic fuel cost to remain stable around $2.45 per gallon in the third quarter.

We expect to deliver adjusted earnings per share between $1 and $1.40 in the third quarter which incorporates an expected 10 cent impact from the it outage.

Shane: We now expect at least $3.25 EPS for the full year.

Shane: This Outlook assumes that we continue to deliver on our Synergy and Commercial initiative, commitments. And that the recent inflection and demand and pricing remains through the rest of the year.

Shane Tackett: We believe we are uniquely positioned to deliver more value to customers, employees and owners as we continue execution of the Alaska Accelerate vision and develop deeper loyalty and preference with existing and new customers to Air Group.

Shane: As we look ahead, we are genuinely excited by the opportunities. In front of us, we have seen strong initial execution against both. The commercial road map and Synergy capture we shared in December at our investor day and our encouraged by the setup. We see for the rest of 2025.

Operator: And with that, let's go to your question. 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. We'll pause for just a moment to compile the Q&A.

At this time, I would like to invite analysts who would like to ask a question to please press star. Then the number 1 on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Conor Cunningham: And our first question today will come from Conor Cunningham with Melious Hey, everyone. Thank you. If we were to reflect back a little bit, I think you guys were probably the most accurate in terms of just flagging the issues that kind of presented from an industry level in June and July. So, Sakuta is there.

And our first question today, will come from Connor Cunningham with Melius research.

Shane Tackett: But I was curious if you could just talk a little bit about the ramp in your expectations from 3Q to 4Q. What is underpinning your bull issue? Is it an assumption that demand continues to step up from the current booking patterns? Or is it just a combination of that and the competitive capacity environment continue to significantly trend down? Thank you.

Shane: Hey everyone, thank you. Um, if we were to reflect back a little bit, I think you guys would probably the most accurate in terms of just flagging the issues, uh, uh, that that kind of presented the the from an industry level in June and July. So, so Cuda is there. But I, I was curious, if you could just talk a little bit about the ramp, in your expectations from 3Q, to 4 q, what is underpinning? Your bullish, is it an assumption that that demand continues to step up, step up from the current booking patterns or is it just a combination of that and the competitive capacity? Environment continued to, you know, significantly Trend down. Thank you.

Speaker Change: Hey Connor, good morning. Uh, appreciate the the Kudos. Um, um hey, you know, when we look at, you know, the backdrop for, you know, the second half of the Year, obviously it's going to be better in the first and if you look at what we produced last year for Q4, you know, it was close to a dollar VPS. So, when you look at all the and, and a lot of that goodness, came late and the fourth quarter, where we saw things, pick up right now. We're seeing you know uh a positive momentum starting late, June, early July, we're seeing that momentum start early and if it's

Continues into the fourth quarter. You know, we believe that and we're going to have more Tailwinds than we did last year, if you add synergies on top of that, um, I think we can easily be, uh, you know, Q4 of last year. So that's where we're confident. It's not a big stretch for us. When we look at the numbers going from, you know, a buck to a buck 5. I think it's a buck 5 that we need to get to 325. So we feel pretty good, um, uh, based, uh, based on that, just comparing to last year.

Shane Tackett: Hey, thanks, Conor. It's Shane. I appreciate that. We agree that the stock doesn't reflect the earnings power of the company. I think we mentioned that in the script. I think, I think we were really pleased with the rate that we were able to buy ALK back in the first half of the year. And we can have Emily share some of that that detail. We want to be balanced, though, as we look forward, we do want to see some of the earnings come back, which we expect that they will in the second half before we continue to show the level of aggression we did in the first first half of the year, we were not going to ultimately finance, you know, large share repurchases, we were able to do the first first half of the year, really comfortably with the balance sheet.

Speaker Change: Okay, helpful. And then your conviction level around the 10s and earnings power, bi by 2027. So it's still really high and then and that's obviously a pretty impressive, just giving us kind of happened out there. But can you just talk about a bit about the buyback? Like, if, if, if you are again, right? Uh, on that on that assumption, it just seems like you should be incredibly aggressive here given where the stock is, and I just don't think it reflects your ear, potential power overall. So, just just thoughts on the buyback and and how that could play out. Uh, going forward, thank you.

Hey, thanks Connor. Uh, it's Shane, I appreciate that. Um, we agree that the the stock doesn't reflect the the earnings power of the company. I think we mentioned that in the script. Um, I think I think we were really uh, pleased with the rate that we were able to buy ALK back in the first half of the year and we can have Emily share some of that that detail. Um we want to be balanced though as we look forward. We do want to see um some of the earnings come back, which we expect that they will on the second half before we continue to, to show the level of aggression, we did in the first uh, first.

Conor Cunningham: And we're just going to continue to balance that. But you should expect if the stock is undervalued in our mind, and we see the earnings coming back, we'll continue to be aggressive on the capital allocation front. Appreciate it. Thank you.

Half of the year. We we we're not going to ultimately, um, Finance, uh, you know, large share of purchases. We were able to do the first first half of the year, uh, really comfortably with the balance sheet, um, and we're just going to continue to balance that, but you should expect, if the stock is undervalued in our mind, and we see the earnings coming back, we will continue to, um, be aggressive on the capital allocation front.

Conor Cunningham: Thanks, Conor.

Speaker Change: Appreciate it. Thank you.

Tom Fitzgerald: Next question will come from Tom Fitzgerald with TVCALIS Everyone, thanks so much for the time. I was wondering if you could talk about some of the L Performance in the Hawaiian franchise and maybe unpack a little bit like how much was, you know, the merger synergies? How much was maybe just the overall competitive dynamic in that market getting better?

Thank you. Thanks. Connor.

Our next question will come from Tom Fitzgerald with TD Cowen.

Hi everyone, thanks so much for the time. I was wondering if you could talk about some of the health performance in the Hawaiian franchise and maybe unpack a little bit like how much was, um, you know, the merger synergies. How much was maybe just the, the, the overall competitive dynamic in that market getting better?

Benito Minicucci: Thanks, Tom. You know, it was actually across the board. You know, we had revenues were up 17% on the franchise, unit revenues were up 4%, capacity up 13%, unit costs down. So overall, I think a lot of it was the synergies, connecting of the networks, bringing everything together, and just the joint brand of Hawaiian and Alaska is just really performing well. And of course, industry capacity is stable. And that's also helped as well.

Speaker Change: Thanks Tom, you know, um, it was actually across the board. Um, you know, we had, um, revenues were up 17% on the franchise unit revenues are up, 4% capacity up, 13% unit, cost down. So overall, I think a lot of it was the synergies connecting of the networks, bringing everything together and just the joint brand of Hawaiian and Alaska is just really performing well, and of course, industry capacity is stable and that's also helped as well.

Benito Minicucci: Yeah, Tom, I just add on that. I mean, these are all sorry, these are all sorry, I just want to say this was all part of our due diligence when when we acquired Hawaiian. So this is exceeding our expectations. I mean, to have Hawaiian produce a quarterly profit for the first time in 2019. I just want to underscore that achievement and and really the power of connecting these two networks. And the other thing Andrew didn't mention was just, you know, moving assets around, you know, we have 330s flying to Anchorage, you know, we repositioned more 330s flying from Seattle to Hawaii.

Tom: Yeah, tell me just add on that. I mean, these are all these are all. Sorry. I I just want to say this was all part of our due diligence when we acquired Hawaiian. So this is exceeding our expectations. I mean to have

Benito Minicucci: These are all the, the, you know, maximizing, you know, the assets, the Hawaiian assets in a way that really improves the bottom line. So it's just been a great work by the entire team.

Tom: Positioned more. At 3:30 is flying from Seattle to Hawaii. Uh, these are all the the, uh, you know, maximizing. You know, the the assets that Hawaiian Assets in a way that really, um, improves the bottom line. So it's just been a great work, uh, by the entire team.

Tom Fitzgerald: Thank you so much. That's really helpful, Ben and Andrew. And then just as a follow up, should investors be looking for similar or better performance as we move into 2026 out of the Hawaiian franchise as Synergy's ramp as the network, you know, you just get, you know, start picking all the low hanging fruit.

Benito Minicucci: Thanks again for the time. Yeah, for sure, Tom, like that's our Absolute expectation that the Hawaiian assets will continue to improve in the profit side of the business. All the same reasons. We've got lots of synergies still to unlock on the commercial and on the cost side. And then we still have things to do, like get to a single operating certificate, get to a single passenger service system, get the planes in the exact right places that we want them to be in. And so I think there's just a lot of upside yet to come. Thanks, Tom.

Thank you so much. That's that's really helpful. Been and Andrew uh, they're just as a follow-up should should investors be looking for similar or better performance, um, as we move into 2026 out of the Hawaiian franchise, as synergies for amp as the network. Um, you know you you use get, you know start picking all the low hanging fruit. Thanks again for the time.

Tom: Yeah, I for, for sure. Tom, like, that's our, uh, absolute expectation that the the Hawaiian assets will continue to improve, uh, in the profit, uh, uh, side of the business. All the same reasons we've got lots of synergies still to unlock on the commercial and on the Cog side, um, and then, uh, we still have things to do like get to a single operating certificate, get to a single passenger service system. Uh, get get the planes in the exact right places that we want them to be in. And and so, um, I think there's just uh, a lot of upside yet to come

Tom: Thanks Tom.

Scott Group: We'll move next to Scott Group with Wolf. Hey, thanks. So I just want to follow up on just like the Q3 to Q4 is Shane, is your view, is this just like the new seasonality where Q4 and Q3 are a lot more? Similar than they've used to be or would you maybe say it differently that maybe Q3 was just an under earning Reporter, and then maybe just with that, did I hear 245 is the average for jet fuel for Q3 in the guide or is that where you think you sort of end the 245 is the average, Scott, just to take that first.

Speaker Change: And we'll move next to Scott group with Wolfe research.

Scott: Hey thanks. Um, so I just want to follow up on just like the Q3 to Q4 is

Shane is your view is this just like the new seasonality where Q4 and Q3 are a lot more.

Scott: Similar than they've used to be. Or would you maybe say it differently that maybe?

Q3 was is just an under earning quarter and then maybe just what that did. I hear 2 245 is the average for jet fuel for Q3 in the guide. Or is that where you think you sort of end the quarter?

Shane Tackett: I think your question is a good question. If I had to bet, I would think that Q3s of the future should be stronger than they have been the last couple of years. I think there's a lot of demand. People want to go out and travel, and we saw that our planes are relatively full this summer, and I think they're going to be full into the back half of the year. I just think the industry dynamics were the principal issue in Q2 and Q3 this year, and I think that probably fixes itself over time. That would be my guess.

Scott: Uh, 245 is the average Scott just to take that. Uh, uh, first, I I

Scott: I think, um, your question is a good question. If if uh, I had to to bet I would think that q3s of the future should be stronger, uh, than they have in the last couple of years, I think, um,

Scott: I think there's a lot of demand like people want to go out and uh and travel and uh we saw that our planes are relatively full uh this summer. Uh, and I think they're going to be full into the the back half of the year. And I just think, you know, the the industry Dynamics were uh, you know, the principal issue in Q2 and Q3 this year. And I I think that probably 6 is itself over time. That would be my my guess.

Shane Tackett: Okay, and then maybe just a little bit of help on the three and change this year going to ten and two years. I mean, that's a big. lift and what how much of that is market dependent versus Company Specific. and how to think about, you know, that's a big list. So just, you know, any more help to get there. Sure. Look, you know, we in in December, and we answered a lot of these questions, then like our level of confidence and dollars was, you know, you never 100%. But it was incredibly high. And it's close to that level of confidence, as I think we could have gotten the missing demand in the first half of the year, you know, that that obviously, it's something that we've got to recover over the next couple of years.

Speaker Change: Okay. And then maybe just a little bit of help on the 3 and change this year, going to 10 and 2 years. I mean that's a big

Speaker Change: lift and what, how much of that is Market dependent versus just

Speaker Change: Company specific um just and and how to think about, you know, that that's a big lift. So just, you know, any more help to get there.

Shane Tackett: But I'll tell you the $10, you know, that there was more upside to to the potential of the business than we put into, you know, the number we announced. And we've talked openly about that we're not going to give, you know, the absolute highest amount we think we can, we can earn as a company, there's a lot of gyrations, as you guys know, that happened in this industry. So we thought we could get, you know, an even higher number than 10. We didn't think we needed a lot of macro help to get there. I still don't think we need a lot of macro help.

Shane Tackett: Now I can't continue to to go backwards. So I like the trajectory that it seems to be on here in late June and early July. We've got a billion dollars, ultimately, of net profit, like bottom line profit from our initiatives. They're all tracking on or above plan. We're executing all of those things really, really well. And then we we bought back a bunch of shares that we hadn't anticipated at all in that number last December either. So we're going to work all sides of of the the formula, the denominator, and certainly the profit side of the business.

Sure. Look I you know we in in December. Um and we answered a lot of these questions then like our level of confidence and dollars was, you know, uh, you never 100% but it was incredibly high. And as close to that, um, level of confidence as I think we could have gotten the the missing demand in the first half of the year, you know, that that obviously um, if something that we've got to recover over the next couple of years, but I'll tell you the ten dollars, you know, that there was more upside uh to to the potential of the business than we uh put into, you know, the number we announced and we've talked openly about that we're not going to give you know, the absolute highest amount. We think we can, we can earn as a company. There's a lot of generations that you guys know that happen in this industry. Uh, so we thought we could get, uh, you know, an even higher number than 10. Um, we didn't think we needed a lot of macro help to get there. Uh, I still don't think we need a lot of macro help. Now, I can't continue.

Shane Tackett: And, you know, I think as we look forward, we remain absolutely confident and committed to that number.

Speaker Change: To go backwards. So I I like the trajectory that it seems to be on here in late June and early July. Um, we've got a billion dollars, ultimately, of, of of net profit, like bottom line profit from our initiatives. Uh, they're all tracking uh uh on or above plan. We're executing all of those things really, really well. Uh, and then we, we bought back a bunch of shares that we hadn't anticipated, uh, at all in, in that number. Uh, last December either. So we're going to work all sides of of the, the formula, uh, the the denominator, um, and certainly the profit side of the business. And, you know, I, I think, as we look forward, we, we remain absolutely confident and committed to that number.

Shane Tackett: Appreciate it. Thank you guys. Thanks.

Jamie Baker: Thanks, Scott. Your next question will come from Jamie Baker with JP Morgan. Oh, hey, good morning, everybody. So a couple of my questions have already been asked.

Speaker Change: Appreciate it. Thank you guys.

Thanks Scott. Thanks Scott.

Speaker Change: Our next question will come from Jamie Baker with JP Morgan.

Andrew Didora: One clarification, I missed the premium comments earlier, did you indicate when premium is expected to overtake the 50% mark of total revenue? And how does that compare with what you were thinking when you held your post merger investor day? Hey Jamie, it's Andrew. Just to clarify, the 50% is our revenues coming from the premium outside of, you know, other areas like bag fees and all the rest of it. But as we shared in our prepared remarks, that 35% of our revenues right now are premium based on 26, 27%. We're very confident, just given the, I think we expanded the revenue premium over the main cabin, between Q1 and Q2.

Jamie Baker: Test, uh, 1, Click on, I missed the premium comment earlier. Did you indicate when premium is expected to overtake the 50% Mark of total revenue? And how does that compare with what you were thinking? When you held your post merger investor day?

Andrew Didora: And we're well on our way of adding premium class seats to our dash nines and maxes. So we feel really good about that trajectory. We're also seeing continued strong first class cabin, and we're already working on the Airbus 330s and the 787 front cabins as well. Okay, that is helpful. Oh, sorry. Go ahead.

Jamie Baker: Hey, Jamie. It's Andrew. Um, just uh, just to clarify, the 50% um, is our revenues. Um, coming from the premium outside of, you know, other areas like bag fees and all the rest of it. But as we shared in our prepared remarks, about 35% of our revenues right now are premium based on 26.27%. Um, we're very confident, um, just given the I think we expanded, um, the revenue premium over the main cabin between q1 and Q2 and um, we're well on our way of adding premium class seats, um, to our -9 and Maxes. So we feel really good about that trajectory. We're also seeing continued strong first class cabin and we're already working on the Airbus 330s and the 787 front cabinets as well.

Andrew Didora: Well, just to go back to where our expectations were last December, I think we still have an open question about how much of the revenue can be generated outside of the main cabin, but we certainly think it's above 50 and into the mid-50s. It's why we're doing things like adding more premium seats to the fleet, and I think you'll continue to see us do that. And we've got lots of other potential sources of new revenue like cargo, and so we'll continue to diversify the revenue streams, and I think ultimately we'll get close to the mid-50s to high-50s outside of the main cabin.

Jamie Baker: Okay, that's helpful. Oh sorry. Go ahead.

Speaker Change: Well, just to go back to where our expectations were last December. I think um,

Andrew Didora: Okay, helpful.

Jamie Baker: And then I thought you did a good job articulating the response to Conor's question on the fourth quarter demand lift. But just to be clear, does your Industry Capacity Forecast. Assume that we see as much capacity come out October through December as we are in the months prior to that. Because, again, I think you gave it a good answer as to why it can accelerate, but I didn't hear any supply commentary. And the fact of the matter is, there's no guarantee that you're on your capacity, you know, in the fourth quarter is going to tighten as much as it did, you know, sort of second half of August and into September.

Speaker Change: I think we still have a open question about how, how much of the revenue can be generated outside of the main cabin but we we certainly think it's above 50 and, and into the mid-50s, uh, it's why we're doing things like adding, you know, more premium seats, uh, to the fleet and I think you'll continue to see us do that. Um, and we've got lots of other, you know, potential sources of new Revenue like cargo and and so, uh, we'll we'll continue to diversify the revenue streams. And I think ultimately we'll get close to the to, you know, the mid-50s to high 50s outside of the main cabin.

Speaker Change: Okay, helpful. Uh and then I thought you did a good job articulating uh that response to Conor's question on the fourth quarter demand lift. But just to be clear, does your

Speaker Change: Industry capacity, forecast.

Speaker Change: Assume that we see as much capacity come out, October through December, as we are in the months prior to that. Because I, again, I think you gave it a a good answer as to why it can accelerate. But I didn't hear any Supply commentary in the fact of the matter is, there's no guarantee that you're on your capacity. You know, in the fourth quarter is going to tighten as much as it did, you know, sort of second half of August and and into September

Andrew Didora: Yeah, thanks, Jamie. You know, the most important part of that question for us is where it where capacity ultimately ends up in our markets. And I think as we look forward, we think that that setup looks pretty good, and it's probably going to get better. And so Q3 in our markets looks better than last year. And I think Q4 could could be improved again, certainly relative to last year, it would it would appear that the the set of capacity is really constructive for us. So yeah, I do think we we view it as as any good position today and likely to get better as schedules get firmed up going forward.

Jamie Baker: Okay, good. Thanks, everybody. Hey, thanks, Jamie.

Speaker Change: Yeah, thanks Jamie. Um, you know, the the most important part of that question for us is where is where capacity ultimately ends up in in our markets? And I think as we look forward, uh, we think that that's set up looks pretty good and it's probably going to get better. Um, and so Q3 in our markets, looks better than last year and I think Q4 uh, could could be improved again. Um, certainly relative to last year, it would, it would appear that, the the setup, but capacity is really constructive for us. So um, yeah I do think we, we view it as as any good position today and likely to get better uh as schedules get firmed up going forward.

Speaker Change: Okay good. Thanks everybody.

Katherine O'Brien: We'll move next to Katherine O'Brien with Melia Hey everyone, Katie O'Brien with Goldman actually. Good. Good to see you guys. Good to hear from you.

Speaker Change: Hey, thanks. Jamie.

Speaker Change: We'll move next to Katherine O'Brien with Amelia's research.

Speaker Change: Hey everyone. Um, Keo. Bye with Goldman actually but um

Katherine O'Brien: A question for maybe for Shane. This year, I believe more than a typical year, you have some fixed costs, you know, you can't take out given the ongoing integration efforts, even as you cut capacity, just in you can't take out given the ongoing integration efforts, even as you cut capacity, just in Merging the Two Operations. Can you help us think about how much of a drag that is, the 2025... Yeah, hey, thanks, Katie. Yeah, no, I appreciate the question. Just to get a couple of the facts out there. We essentially grew as we thought we were going to grow in the first half of the year, and we've pulled two points of growth out of the back half of the year.

Speaker Change: Good, good to see you guys. Good to hear from you. Um, a question for your maybe for Shane. Um, this year, I believe more than a typical year. You have some fixed costs. You know, you can't take out given the ongoing integration efforts, even as you cut capacity, just in investments in in um, merging the 2 operations. Can you help us? Think about how much of a drag that is the 2025 Outlook.

Shane Tackett: And to go one more click down, because I think it's important to understand, we pulled two and a half points of mainline capacity out, we actually added five points of regional capacity. And so there is a mix issue that's probably worth a half to a point, call it three quarters of a point of drag for the for the rest of the year. And then because we pulled the capacity just too close in, we were really not able to get the very, you know, much of the variable cost that that's not directly related to departing a flight out of the business.

Shane Tackett: And it's, it's, it's essentially a one for one hit. So a point of loss capacity is essentially hitting our CASMX by one point that that we do intend to not become the norm, we don't like building the company for a certain level of capacity and then not flying it. Although and I was, you know, as you might imagine, deliberate in my prepared remarks to mention, we're going to make decisions about capacity that are margin focused. And so if we if view it as a better margin outlook to cut capacity closer, and we will do that.

Yeah. Hey thanks Katie. Um yeah. No I appreciate the question. Uh just to get a couple of the facts out there. We essentially grew as we thought we were going to grow in the first half of the year and we've pulled 2 points of growth out of the back, half of the year uh and to to go 1, more click down because I think it's important to understand. We, we pulled 2 and a half points of Mainline capacity. Uh, we actually added uh, 5 Points of regional capacity and so there is a mix issue. That's probably worth a half to a point call. It 3 quarters of a point of draft uh, for for the, for the rest of the year. And then because we pulled the capacity, just too close in we, we're really not able to get the very, you know, much of the variable cost that that's not directly related to to departing a flight out of the business. Uh, and it's it's it's essentially a 1 for 1 hit. Um, so a point of loss capacity is is essentially uh hitting our capex by 1 Point um that that we do intend to not become the norm. We don't

Speaker Change: You know, as you might imagine. Deliberate in my prepared remarks to mention we're going to make decisions about capacity that are margin uh focused. And so if we if we view it as uh, a better margin,

Shane Tackett: But our goal going forward is to ultimately fly what we say we're going to fly. I think we came into the year with a really responsible amount of capacity that we we intended to deploy year over year.

Shane Tackett: And, and we're going to have a similar, very deliberate growth rate next year.

Speaker Change: Uh, Outlook to to cut capacity closer and we will do that. But our goal going forward is to ultimately fly. What we say. We're going to fly. I think we came into the year with a really responsible amount of capacity, uh, that we we intended to, to deploy year-over-year and and we're going to have a similar uh, very deliberate growth right next year.

Andrew Didora: Clear, and then maybe one for Andrew, can you just break down how demand has changed in recent weeks, maybe across the different segments, where are you seeing the biggest turnaround from a geography standpoint, like I think you mentioned some corporate uptick, can you help us think about, you know, by, maybe by geography, by traveler type, like what you've seen over the past couple weeks as things have accelerated? Yeah, thanks, Katie. You know, I would say it's, it's, it's across the board. And as Ben well articulated, the various factors, whether it's capacity coming down, our synergies and initiatives really starting to ramp.

A clear and then, maybe 1 for Andrew. Um, can you just break down how demand has changed in recent weeks maybe across the different segments? Um, were you seeing the biggest turnaround from a geography standpoint? Like, I think you mentioned some corporate uptick. Can you help us? Think about, you know, by Maybe by geography, by by traveler type. Like what you've seen over the past, couple of weeks of things of accelerated,

Andrew Didora: But I do think, you know, when you look at business demand in the last two weeks, it's been up double digit volumes, and revenues been up the same. We've seen lease agencies, they're actually up 7%. So all of these factors that we're seeing, are continuing to get stronger. I would say that, you know, as we said, in our prepared remarks, there was this real hard inflection point across the system, where, you know, yields, and volumes, all turned positive. So it's a it's a very encouraging, we're seeing it on the leisure side, we're seeing it on the business side, and as already been articulated, the capacity backdrop as we move into the back half of the year, I think is very constructive.

Andrew: Yeah, thanks, Katie. You know, I would say it's it's uh, it's across the board, um, and has has been well, articulated, the various factors whether its capacity coming down as synergies and initiatives, really starting to ramp. Um, but I do think, you know, when you look at, um, business demand in the last, uh, 2 weeks, it's been up double digit volumes, um, and revenues, being up the same. Um, we've seen Leisure agencies, they're actually up 7%. Um, so all of these, um, fact,

Andrew: Is that we're seeing um, a continuing to get stronger. I would say that, you know, as we said in our prepared remarks, there was this real uh hard inflection point uh across the system um where you know, yields and volumes. Um all turn positive, so it's a it's a very encouraging we're seeing it on the Leisure side we're seeing it on the business side and as already been articulated, the capacity backdrop, as we move into the back, half of the year, I think is very constructive.

Andrew Didora: Thanks, Katie.

Andrew: Thanks for that.

Brandon Oglenski: Our next question will come from Brandon Oglenski with Barkley.

Andrew: Thanks Katie.

Speaker Change: Our next question will come from Brandon ninski with barklay.

John Dorsett: Hi, this is John Dorsett on for Brandon. Thanks for the time today and congrats on the second quarter results. Just wanted to follow up on earlier question on the integration. On slide four, you kind of have bucketed the G's Initiative. The quantitative, I guess, targets for the integration, how far along are you with those? And what kind of progress should we expect into the fourth quarter?

Ryan John: Hey, John, it's Ryan. Thanks for the question. Yeah, that, so that Alaska Accelerate slide obviously has, it's a little bit more than just synergies, kind of like we shared back in December, some of this stuff we were working on even before the merger happened. But this year, you know, we had kind of said we were going to get probably 200 million of synergies. We sort of said that back in December. We're tracking ahead of that right now, which is encouraging to see. We've talked about how it's ramping up throughout the year. You know, the first quarter, we didn't get as much as we could have had, you know, the deal closed a lot sooner last year.

Speaker Change: Hi, this is John Dorset on for Brandon. Thanks for the time today. And, uh, congrats on the second quarter results. Um, just wanted to follow up on, uh, earlier question on the integration on slide 4. You kind of have bucketed the um, synergies initiatives and the uh, quantitative, I guess targets for the integration. How far along are you with those and what kind of progress should we expect into the fourth quarter?

Speaker Change: Hey John, it's Ryan. Thanks for the question. Yeah. That um so that Alaska accelerates slide obviously has. Um it's a little bit more than just synergies kind of like we shared back in December or some of this stuff we were working on even before um, the merger happened. But this year, you know, we had kind of said we were going to get probably 200 million of synergies. Um, we sort of set that back.

Ryan John: The fourth quarter, though, by far has the most. So you can sort of back into, you know, on a year over year basis, we're going to see the highest amount in the fourth quarter. If you certainly were to annualize that fourth quarter number, it's going to be much higher than 200 million. And so I'd say we're tracking very well, and it's been exceeding our expectations. So, you know, going into 26, you know, and as we bridge ourself to the $10 earnings per share, you know, next year, as we annualize a lot of this and add new things to it, it's going to get even better and better.

Ryan John: And, you know, we haven't even launched the new loyalty program or premium credit card yet, which we expect a nice uptick in the fourth quarter from as well.

Ryan John: Okay, great. And just to follow up, how's the progress going along with the single carrier certificate? Hey, John, what I'll say is it's going extremely well. We're on track for October and not just only on the Single Operating Certificate, but on the Single Reservation System. We're launching Single Loyalty next month, and we've commenced joint collective bargaining with all our unions. So as you guys know, this is not the first time we do this. And just a big shout out to all the teams. This is a lot of work while we work on all these initiatives.

Speaker Change: Remember, we're tracking ahead of that right now. Um, which is encouraging to see it. We've talked about how it's ramping up throughout the year, you know, the first quarter. We didn't get as much as we could have. Had, you know, the deal closed a lot sooner. Last year, the fourth quarter though by far has the most, um, so you can sort of back into, you know, on a year-over-year basis. We're going to see the the highest amount in the fourth quarter. Um, if you certainly were to annualize that fourth quarter number, it's going to be much higher than 200 million. And so I'd say we're tracking very well and it's been exceeding our expectations. So it, you know, going into 26, you know, and as we Bridge ourselves to the ten dollar earners, you know, next year as we annualize a lot of this and add new things to it, it's going to get even better and better. And you know, we haven't even launched the new loyalty program or premium credit card yet which we expect a nice uptick in the fourth quarter from as well.

Speaker Change: Okay, great. And, uh, just a follow-up. Uh, how is the progress going along with the single um, carrier certificate coming along?

Ryan John: So I'm super proud of our entire Alaska Air Group team for really executing well on all these milestones.

Hey John uh what I'll say is it's going extremely well. We're on track for October and and and not just only on the single operating certificate but on a single reservation system we're launching single loyalty next month. Uh and we've commenced joint Collective barring with all our unions. So as you guys know this is not uh the first time we do this uh and I just a big shout out to all the teams. This is a lot of work and while we uh uh work on all these initiatives. So I'm super proud of um our entire uh Alaska Air Group team for really

Speaker Change: Executing well on all these milestones.

John Dorsett: Great, thank you for the time. Thanks, John.

Speaker Change: Great, thank you for the time.

Thanks John.

Andrew Didora: We'll hear next from Andrew Didora with Bank of America. Hey, good morning, good afternoon, everyone. First question maybe for Andrew, maybe a point of clarification.

Speaker Change: We'll hear next, from Andrew dedora with Bank of America.

Andrew Didora: Maybe it's just me, but I was a little confused around your revenue intake commentary and your prepared remarks. I think you said July up double digits, August up low single digits and September flat. I guess what exactly does revenue intake represent? And I guess why would it be kind of decelerating as you go further out into 3Q? Okay, understood.

Your prepared remarks. I think you said July up double digits, August up low single digits in September flat. I guess what exactly does revenue intake represent and I guess why would it be kind of decelerating as you go further out into 3Q?

Yeah, thanks Andrew. Um, really what I'm talking about, bookings. And as we shared in the prepared remarks obviously, the closer in bookings are coming in the strongest. Um, and um, again, we're seeing very good bookings in August. And we're very, uh, you know, we booked a very low load Factor. Um, but again, all of these months, we're getting better than they were, you know, 3 weeks ago. So I fully expect to see those continue to improve, um, as we move forward.

okay, understood

Andrew Didora: I guess my second one for Andrew, there's been some some chatter about your kind of loyalty and cargo kind of success here. Can you may help us understand the trajectory on both of those into the back half of the year? And, you know, how should we think about incremental synergies to, you know, to unlock that helps drive the inflection and unit revenues as we head into 4Q? Thank you.

Speaker Change: Um, I guess my second 1 for, for Andrew. Um, there's been some uh, some chatter about your kind of loyalty and cargo I think I have success here. Can you may help us understand the trajectory on on both of those into the the back half of the year and, you know, how should we think about incremental synergies to, you know, to unlock that helps Drive the inflection in unit revenues? As we head into 4? Thank you.

Jason Berry: That's the cargo question. I think we're going to have Jason Berry answer. Yeah, Jason, just Andrew, Jason Berry leads Horizon and our cargo operation. So I'm going to get him to come in on cargo. Hey, Andrew. Yeah, the cargo piece is, as we talked about in December, you know, we're, we're, we're bullish on where we can go with this as we combine the two networks. And we're already seeing synergies from the Alaska Hawaiian combination, the Narita flight, we're bringing cargo directly to the mainland to connect across the lower 48. Our freighter franchise up in the state of Alaska, we're that we've got two new airplanes in the 2024.

Thank you. That's uh the cargo question. I think we're going to have Jason Barry answer that for us.

Jason Berry: Those are really now giving some outsized year over year performance, and we're gaining market share. And on the Amazon piece, you know, we finally got up to 10 aircraft, it took a while. And we're beginning to see now that that business start to finally spread its wings and really see what we can do. The Amazon team, we have a great relationship with them. They're our neighbors, they right up up the street from us. And we're working with them to to continue to build that out. And we're encouraged by where it's going. Got it. Thank you.

Yeah. Jason uh just Andrew Jason, Barry leads Horizon and our cargo operation. So I'm going to get him to come in on cargo. Hey Andrew. Uh, yeah, the cargo piece is, uh, as we talked about in December, you know, we're we're, we're bullish on where we can go with this as we combine the 2 networks and we're already seeing synergies from the Alaska, Hawaiian combination, the Narita flight. We're bringing cargo directly to the mainland to connect across the lower 48, our freighter franchise up in the state of Alaska. We're that we've got 2 new airplanes in in the 2024. Those are really now giving some outsized, uh, year-over-year performance. And we're gaining market, share. And then, on the Amazon piece, uh, you know, we've finally got up to 10 aircraft. It took a while and we're beginning to see now that that business start to finally spread its wings and really see what we can do. Uh, the Amazon team, we have a great relationship with them. There are neighbors, they are right up up the street from us. And we're working with them to to continue to build that out. And we're encouraged by where it's going.

Andrew Didora: All right, thanks, Andrew.

Speaker Change: Got it. Thank you.

Duane Pfennigwerth: And we'll move next to Duane Pfennigwerth with Evercore ISI. Hey, thanks. I was hoping we could go a little deeper on the margin opportunity from repositioning of your wide body aircraft.

Speaker Change: All right. Thanks Andrew.

Speaker Change: And we'll move back, move next to Dwayne fenor with evercore isi.

Benito Minicucci: You touched on it, but maybe give us an update on any kind of route profitability improvement anecdotes you have, you know, how do margins today on long haul compare to your system average now, and maybe the pre-merger baseline, and just remind us how big is this opportunity and how long will it take for you to realize it. Do we have, Andrew, give you some color, but probably not all of those details. I've had a lot of time to refine the question, so thank you. No, Duane, you know, a couple of things, you know, the white bodies, obviously, a large percentage are dedicated from Honolulu off to the West Coast, and those are experiencing strong uplift from network connectivity, from Synergies, and all the things that we've already discussed.

Hey thanks. Um, I was hoping we could go a little deeper on the margin opportunity from repositioning of your widebody. Aircraft

Speaker Change: Uh, you touched on it, but maybe give us an update on any kind of Route profitability Improvement. Anecdotes you have.

Speaker Change: you know how to margins today on Long, Haul compared to your system average now and maybe the pre merger Baseline

And just remind us how big is this opportunity and how long will it take for you to realize it?

Speaker Change: Thank you, Andrew. Give you some color but probably not all of those details.

Benito Minicucci: But, you know, Ben was just talking to an agent the other day, and we're launching a white body out of Anchorage at 2 a.m., completely full. So Mark, it's like 20 flights a day between Seattle and Anchorage. The white bodies have been really good. We're continuing to look at all the white bodies, the 330s specifically, obviously, and where they're directed and how they're dedicated, but we still continue to see upside in optimization of that aircraft, both from a utilization perspective, revenue configuration, and, you know, maybe some marginal tweaks around the edges there on the actual network.

Speaker Change: Message understood, Shane, and was going, we had a lot of, I've had a lot of time to refine the questions. So thank, you know, uh, Dwayne, you know, uh, a couple of things, you know, the white body is obviously a large percentage uh dedicated uh from Honolulu off to the West Coast. Um, and those are experiencing strong uplift from network, connectivity, from synergies. Um, and all the things that we've already discussed, um, you know, Ben was just talking to an agent the other day and uh we're launching a wide body out of Anchorage at 2 a.m. completely full. So um Mark it's like 20 flights today between Seattle and Anchorage.

Speaker Change: The wide bodies have been, um, really good. We're continuing to look at all the wide bodies, um, the 330 specifically, um, and, and where they're directed and how they're dedicated, but we still continue to see upside in optimization of that aircraft both from a utilization perspective, Revenue configuration. And, you know, if maybe some marginal tweaks around the, the edges there on the actual Network itself,

Benito Minicucci: I mean, are we barking up the wrong tree? Is that is that one of the most significant margin movers you have going forward? I wouldn't say it's the most significant. I think that the 321s, obviously, you're seeing a lot of benefit from that with this much higher utilization, and obviously, we're going to be reconfiguring the 330 and increasing the first class cabin, the J cabin, we're going to be putting premium, international premium economy seats on that. So those over the next few years will generate significant more revenue than they do today. We have about 24 of those Great.

Speaker Change: I mean, are we barking up the wrong tree? Is that is that 1 of the most significant margin movers, you have going forward?

Speaker Change: The 3 2, 1 s.

Benito Minicucci: And then just to follow up on just broadly on fleet simplification, again, from a margin opportunity perspective, what are the biggest opportunities and any thoughts on timing? Thank you. Thanks, Duane.

Benito Minicucci: That presupposes we're going to do fleet simplification, which I don't think we've talked much about, but I appreciate the question. We do have some decisions to make on the long-term sort of contours of the fleet. We're, as you know, very committed to Boeing and the MAX aircraft. We're excited to get the Dash 10 into the fleet, hopefully later next year or early the year after. We're really excited about getting our next and fifth 787 into the fleet. Those aircraft are going to be cornerstones of the Seattle geography for us. I think we expect to have the rest of the fleets here for a while.

Speaker Change: Uh, thanks. Dwayne, that presupposes. We're going to do Fleet simplification, which I don't think we've talked much about, but I appreciate the question. Um, we do have some decisions to make on the long term, uh, uh, sort of Contours of the fleet were, as, you know, um, very committed to to Boeing and the max aircraft were excited to get the dash 10, uh, into the into the fleet, hopefully, um, later next year or early the year after, um, we're really excited about, uh, getting our our next and fifth 787 into the fleet, um, those, those aircraft are going to be cornerstones of the Seattle, uh, uh, um, geography for us.

Benito Minicucci: The 717s are really, really well-suited to the neighbor island flying that they do. Very hardy airplanes, great engines for that environment. And, you know, I think Hawaiian had made good decisions in terms of the narrow-body fleet. The A321 works really well into the West Coast for them, and obviously the A330 is the backbone of what they do flying internationally and off to the West Coast. So nothing imminent to talk about. We're retiring our oldest 900s on the Alaska side. We're in the middle of doing that. We'll need to retire our 700s next. I do think, you know, five years from today will probably be simpler than we are today.

Duane Pfennigwerth: But we've got some time to go and make those decisions and make sure they're optimized for the network we see ourselves flying in the future. Okay, thank you.

The the I think we we we expect to have the rest of the fleets here for a while. The 717s are are really really well suited to the neighbor island flying that they do. Um, very hearty airplanes great engines for that environment. Um, and, you know, I think Hawaiian had made good decisions in terms of the, the narrow body Fleet. The a321 works really well, uh, into the West Coast for them and and obviously the 8330 is the backbone of of what they do flying uh internationally and off to the West Coast. So nothing imminent to talk about. We're we're retiring our our oldest 900s on the Alaska side. We're in the middle of doing that. We we'll need to retire 700's next. Um, I do think you know, 5 years from today we'll probably be simpler than we are today but we've got um, some time to go and make those

Speaker Change: Decisions and make sure they're they're optimized for the network. We we see ourselves flying in the future.

Michael Linenberg: Thanks, Duane. And we'll hear next from Mike Linenberg with Deutsche Bank.

Speaker Change: Okay.

Dwayne Fenor: Thanks. Thanks, Dwayne.

Shannon Doherty: Hi, this is Shannon Doherty on for Mike. Thanks for taking my question. I mean, for the first one, can you guys discuss some competitor dynamics out of Seattle? We saw some responses to your launch of Rome next year, which is probably expected, but I'm just curious to know if you're seeing any particular yield pressure in response to the build out of the hub? And then can you talk about some of the benefits you're seeing from increasing the network connectivity through Seattle and Portland? Yeah, so a couple of things. We are being very pleased with where we see things are at.

Dwayne Fenor: From Mike, linenberg with Deutsche Bank.

Dwayne Fenor: Hi. This is Sean and Dory on from Mike. Thanks for taking my question. I mean, for the first 1, can you guys discuss the some competitor, Dynamics out of Seattle. We saw some responses to your launch of Rome next year, which is probably expected. But I'm just curious to know if you're seeing any particular yield pressure in responsibility of the Hub and then, can you talk about some of the benefits you're seeing from increasing the network, connectivity, through, Seattle, and Portland,

Benito Minicucci: Just to be very clear on Seattle, the way we're positioned, our loyalty, our network, our share, we are extremely well positioned to be very successful in any long haul that we endeavor out of Seattle, especially with the 787, as well as our one world partners and connectivity. And you've heard about changes that are coming in the loyalty program. So overall, we're very bullish on the Seattle situation. As far as hubs goes, we've been growing Portland and San Diego, which have been very successful. You heard in my prepared remarks that there's 200 plus percent of increasing connecting passengers over Portland.

Dwayne Fenor: Yeah. So, um, so a couple of things, um, we, uh, been very pleased, um, with where we see things are at, um, just to be very clear on Seattle. Um, the way we're positioned our loyalty, our Network, our share, we are

Dwayne Fenor: Extremely well, positioned to be very successful in any long haul, um, that we Endeavor, out of Seattle, especially with the 787, um, as well as our 1, World partners and connectivity. Um, and you've heard about changes in that are coming in a loyalty program. So, overall, uh, we have very bullish on the Seattle situation. You know? We've, as far as hubs goes, um, we've been growing Portland and San Diego, which have been, um, very successful. Uh, you heard in my prepared remarks that there's, you know, 200 plus percent of increasing,

Benito Minicucci: We've had high single digit over Seattle, and I think there's more optimization work to be done there. We're feeling a little bit of pressure in San Francisco because industry seats there are up. But overall, given the dynamic of our growth, our revenues, and initiatives, and the network, and then the industry's sort of lower level of growth, we feel very good about the construct as we move into the back half.

Shannon Doherty: Thanks, that's great.

Dwayne Fenor: Connecting passengers over Portland. We've had um, High single digit over Seattle, and I think there's more optimization work to be done there. We're feeling a little bit of pressure in in San Francisco because industry seats, there are up but overall um, given the dynamic of our growth, our revenues and initiatives um and the network and then the industries sort of lower level of growth. We feel very good about the the construct as we move into the back half of this year.

Benito Minicucci: And, you know, maybe just a follow up to Katie's question, can we dig more into the corporate revenue backdrop? You know, you call that some green shoots from large managed corporates with business demand and volumes up double digits. But then you noted in the script that West Coast exposure is a headwind. Shouldn't you guys be best positioned to capitalize on a corporate travel recovery that's like lagged in this region? Or do you think that corporate travel patterns just on the West Coast have structurally changed? So I think if you really look at it, Shannon, you've got the four technology behemoths, which are very significant to us in our corporate travel.

Thanks, that's great and you know maybe just a follow-up to this.

Dwayne Fenor: More into the corporate.

Revenue backdrop, you know you call that some green shoots from large man manage corporates with business demand and volumes up double digits. But then you noted in the script that West Coast exposure is a headwind. Shouldn't you guys be best positioned to capitalize on a corporate travel recovery? That's like lagged in this region or do you think that corporate travel patterns just on the west coast have structurally changed?

Benito Minicucci: And then, of course, you've got a big air manufacturer, and it's very widely publicized right now that those businesses are going through some change, and their travel has been down. My comments specifically refer to business in general, including some of these large corporations, the changing direction, and just in the last few weeks, the bookings volumes have been up double digits. Most of our corporate and business travel, obviously, is off the West Coast, but I will say that as we enter into new contracts globally, and we're already talking to our largest corporate contracts, the new global gateway is also going to be helpful for us to actually build even further our diversity and spread of corporate travel.

Dwayne Fenor: So, I think if you really, um, if you really look at it Shannon, you've got the 4 technology behemoths, um, which are very significant to us and our corporate travel. Um, and then of course you've got a big error manufacturer, um, and it's very widely. Publicized right now that those businesses are going through some change, um, and their travel has been down. Um, my comments specifically, refer to, um, business in general including, um, some of these uh, large corporations.

Dwayne Fenor: The changing direction. And the in just in the last few weeks, the the bookings volumes have been up double digit. Most of our corporate and business travel obviously is uh you know, off the West Coast. But I will say that as we enter into new contracts globally and we're already talking, you know, to our largest corporate contracts. Um the new global gateway is also going to be helpful for us to actually build even further our diversity and spread of corporate travel.

Benito Minicucci: Thank you, Shannon.

Dwayne Fenor: Shannon.

Dan Mckenzie: Our next question comes from Dan McKenzie with Seaport Global. Oh, hi. Thanks, guys. Congrats on the second quarter.

Our next question comes from Dan McKenzie with Seaport global.

Dan Mckenzie: The demand commentary has been really helpful, but bigger picture, if we just put a little bit of a finer point on How immune or resilient is the consumer today to, say, really bad headlines or really bad macro news? And is it the leisure travel that's more impacted or is it the corporate traveler? And I guess just tied to this, just to put a finer point on it, are the idiosyncratic revenue initiatives in the fourth quarter, you know, if you can just help us understand how many percentage points of RASM they might contribute.

Oh hi. Thanks guys. Congrats on the second quarter. Um, the demand commentary has been really helpful, but bigger picture. If we just put a little bit of a finer point on it, how immune, or resilient is the consumer today to say really bad headlines or really bad macro news. It's and is it the leisure travel that's more impacted? Or is it the the corporate Traveler?

Shane Tackett: Hey, Dan, I'll maybe sort of take this high level. I don't think we're going to share the specific contribution outside of, you know, synergies alone are meant to be at least 200 million. And as Ryan said, you know, exiting the year at much higher than that, and then we have initiatives on top of it. So it's not, you know, it's an important, very important part of our revenue trajectory, both the commercial roadmap items and the synergies. On the commercial initiatives, I just want to remind folks, we're largely doing things that that have been already done in the industry.

Dwayne Fenor: and I guess just tied to this just to put a finer point on it are the idiosyncratic Revenue initiatives in the fourth quarter um you know if you can just help us understand how many percentage points of raasm yeah they might contribute

Shane Tackett: And so we're super excited to get to a single loyalty program later this summer. And along with that, launch our premium credit card that that is a product that others have have been successful with. And we have every expectation we will be successful with as well. We continue to increase the number of premium seats on aircraft at a really low cost to capital by just sliding in extra rows on both the 800s and 900s. And so we're doing, you know, things that I think have a very high likelihood of being successful and being, you know, at or better than our original estimates.

Speaker Change: Hey Dan. I'll maybe, um, sort of take this high level but I I don't think we're going to share the specific contribution, um, outside of of, you know, synergies alone are meant to be uh, at least 200 million. And as Ryan said, you know, exiting the year at at much higher than that. And then we have initiatives on top of it. So it's not, you know, it's a important very important part of our Revenue trajectory both the the commercial roadmap items in in the synergies on the commercial initiatives. I just want to remind folks, we're largely doing things that that have been already done in the industry. And so we're super excited to get to a single loyalty program later this summer and along with that launched our premium credit card that that is a a product that others have have been.

Successful with and we have every expectation, we will be successful with as well. We continue to increase the number of Premium seats on our aircraft uh at a really low cost of capital by just sliding an extra rows on both the 800s and 900s. Um and so we're we're doing, you know,

Shane Tackett: And that's what we've seen throughout the first half of the year.

Shane Tackett: In terms of the overall consumer, it's, I think everybody's questioned, Dan, and I don't know that we're smarter than anybody else on it. But I'll tell you, and this is similar to other airlines, and I think just, you know, generally in the economy, the folks who are, you know, more oriented towards, you know, purchasing into our premium cabins have been super resilient. And, and it's, it's sort of persisted through the first and the second quarter and continues to look like it's going to persist into the third and the fourth. And then if the overall sort of consumer feels better about the forward look, which I think they do, I think it's more stable looking forward than it was, you know, 90 days ago, it feels like they're more willing to, you know, begin traveling again at higher numbers.

Dan Mckenzie: And then with that, we have corporate coming back on top of it. So it's, it's, it's all sort of looking good right now. And let's hope it continues. Yep, thank you for that.

Speaker Change: Things that I think have a very high uh, likelihood of being successful, and being, you know, at or better than our original estimates. And that's what we've seen throughout the first half of the year. Um, I I, in terms of the overall consumer it it's I think everybody's questioned in and, and I don't know that we're smarter than anybody else on it. But I I'll tell you in, this is similar to other Airlines and I think just, you know, generally in the economy, um, the the the folks who are, you know, more oriented towards, um, you know, purchasing into our premium cabins have been super resilient and, uh, and it's, it's, um, sort of persisted through the first and the second quarter and continues to look like it's going to persist in into the third and the fourth, uh, and then, if, if the overall sort of consumer feels better about the the forward, look, which I think they do, I think it's more stable looking for than it was, you know, 90 days ago. It feels like they're they're more willing to to, you know, begin traveling, again.

Speaker Change: At higher numbers. And then with that, we have corporate coming back on top of it. So it's, it's it's all sort of looking good right now and let's hope it continues.

Benito Minicucci: Second question. Where is Alaska making investments in machine learning? And you know, how do we think about the multi year productivity story? I guess, you know, how many years off in the future is it, you know, before we might see AI in the cockpit, for example?

Benito Minicucci: Hey, Dan, it's Ben. Look, I, I think our focus on AI right now, and we're excited about it, like everyone is, is really on the safety and operations side. And we started this well before anybody else in 2018, 2019, with our flight planning, with a company called Flyways. And, you know, that's just about the safety and efficiencies of our flight plans. We're looking at how it improves operations, our safety data. And the other thing is, we're looking at initiatives that put really, the guest experience at the center of it all. And those are the things that really excite us a lot.

Yep, thank you for that. Um, second question. Um, where is Alaska making investments in machine learning? And, you know, how do we think about the multi-year, productivity story? I guess, that, you know how many years often in the future? Is it? You know, before we might see AI in the cockpit, for example.

Benito Minicucci: So that's where it's going to be our focus now, whether that's, you know, in call centers, you know, and improving the experience of call centers, the experience in lobbies, the experience through the app, those are all things we're looking at, in terms of improving the guest experience. And in parallel, how do we improve safety and operations. So that's all our thinking around AI. That's where we want to drive it. That's where we think we can have the biggest bang for our buck, with this exciting new technology. Thanks for the time, you guys. All right, thanks, Dan.

Hey Dan. It's been uh look I I think our F focus on AI right now and we're excited about it. Like everyone is is really on the safety and operation side and we started this well before anybody else in 2018, 2019 with our flight planning with a company called flyways. Um, and you know, that's just about the safety and efficiencies of our flight plans. Uh, we're looking at how it improves operations, our safety data. And the other thing is we're looking at uh, initiatives that put really uh the guest experience at the center of it all and those are the things that really excite us a lot. So that's where it's going to be our Focus. Now whether that's, you know, in call centers, you know, and uh improving the experience of call centers uh the experience and and lobbies The Experience through the app. Those are all things we're looking at, in terms of proving the guest experience, and in parallel, How do we improve safety and operations? So, that's all our thinking around AI. That's where we want to drive it. That's where we think we can have the, the biggest bang for our buck.

Speaker Change: Uh, with this exciting, new technology.

Operator: All right, I think we have time for one more question. Thank you.

Speaker Change: Thanks for the time, you guys.

Speaker Change: All right. Thanks Dan. All right. I think we have time for 1 more question.

Ravi Shanker: That comes from Ravi Shanker with Morgan Stanley.

Benito Minicucci: Hi guys, thanks for squeezing in here. I know it's early days on the international routes, but do you have data on what kind of traveler you're attracting here? Is it an Alaska fan who is now flying international with you? Are you taking share from international or domestic mainline peers? Is it corporate? Any data that will be helpful?

Thank you. That comes from Robbie chancre with Morgan Stanley.

Benito Minicucci: No, Ravi, let me start just giving you context about our Seattle Global Hub. So, you know, just for context, we have the largest domestic network out of Seattle 2x, you know, beyond anybody else, you know, our loyalty program we have. So we were just named for the 11th year in a row best, you know, loyalty program in the country. So between having the largest domestic share, you know, a great loyalty, we always said scale relevance and loyalty really drives results. We believe we're going to get the leisure passenger, the business passenger to fill these airplanes.

Robbie Chancre: Hey guys, thanks for squeezing me in here. Uh I know it's early days on the international routes but uh do you have data on what kind of traveler you're attracting here? Is it uh an Alaska fan who is now flying International with you? Are you taking share from International or domestic Mainline period? Uh any any data that will be helpful.

No, right. Let let me start just giving you a context about our Seattle Global Hub. So,

Andrew Didora: And so we're super confident we're getting 17 787s in our fleet over the next five years, five, six years, we're going to have up to 12 global destinations. And if we can win, we're going to win in Seattle, because that is our hometown, it's our hub. And it's where we have strength. Understood.

Robbie Chancre: Context. We have the largest domestic Network out of Seattle, 2x, you know, beyond anybody else. You know, our loyalty program. We have. So we were just named for the 11th year in a row. Best, you know, uh, loyalty program in the country. So between having the largest domestic share, you know, a great loyalty. And we always set scale, relevance and loyalty really drives results. Uh, we believe we're going to get the Leisure passenger, the business passenger, uh, to fill these airplanes. And so we're super confident, we're getting 17787, uh, in our Fleet over the next, uh, 5 years, 5, 6 years. Uh, we're going to have up to 12 Global destinations and if we can win, we're going to win in Seattle because that is our hometown. It's our Hub and uh it's where we have strength.

Shane Tackett: And maybe as a follow-up, I know it was great to see that you're tracking ahead of plan on Hawaiian synergies. And I know that your original plan was pretty conservative when it came to the recovery of the market there itself. Kind of any color there on how that market's recovering versus your expectations, and whether some of the new kind of tourism rules there are like helping or hurting with that. Yeah, and I think thanks, Ravi. Yeah, I just want to parse that a bit. I think what we didn't assume was a large recovery in sort of Asia into into Honolulu, just given, you know, currency, exchange rates and and those sorts of things.

Maybe it's a follow-up, kind of, I know. Uh, this is great to see that you're tracking ahead of plan on uh, Hawaiian synergies. Uh, and I know that your original plan was pretty conservative when it came to the recovery of the market there itself. But if any color there on how that market is recovering versus your expectations, uh, and whether some of the new kind of Tourism rules there or like helping, or hurting with that,

Andrew Didora: So that that wasn't part of our forecast. I'll have Andrew speak to how those those markets are doing. I think we did expect and we are seeing, you know, Hawaii to the west coast and neighbor island flying to continue to improve and and that's, you know, why that network and those assets have moved into a place where they were profitable for the first quarter since 2019.

Robbie Chancre: Yeah and I I think thanks Robbie. Um yeah it just want to parse that a bit. I think what we didn't assume was a large recovery in sort of Asia, into into Honolulu, just giving, you know, uh currency uh, exchange rates and and those sorts of things. So that, that wasn't part of our forecast. I'll have Andrew speak to how those those, uh,

Andrew Didora: But on the on the Honolulu International, Andrew. Yeah, thanks, Shane. Robbie, the international, I would say, is still, you know, on the softer side with the existing headwinds. But again, there's sort of like six flights a day. There's all sorts of different markets. One thing I will say, though, on that is that, you know, we are starting to connect more folks over Honolulu on some of those international markets. And we haven't talked about it yet, but Hua Kaii by Hawaiian, our local loyalty program has really grown in leaps and bounds. So as we move forward, and we're working with distributors, we're working across all of our loyalty levers with Qantas, putting code on the Hawaiian medal now.

Markets are doing. Um, I think we did expect and we are seeing, you know, Hawaii to the West Coast and and neighbor island flying uh to continue to improve. And and that's you know why? Uh, that Network and those assets have have moved into a a place where there were profitable for the first quarter since 2019. But on the on the Honolulu International, uh Andrew

Yeah, thanks Shane. Uh, Robbie the international I would say is still, you know, on the softer side with the the, the, the existing headwinds. Um, but again, um, there's sort of like 6 flights a day. Um, there's all sorts of different markets. Um, 1 thing I will say though on that is that, you know, um, we are starting to connect more folks over Honolulu on some of those International markets and um, we haven't talked about it yet, but uh, who I who? Okay? You buy Hawaiian our local uh, loyalty. Uh, program is really grown in Leaps and Bounds. So um as we move forward and we're working with Distributors, we're working.

Shane Tackett: So we have a lot of tools in our tool chest that we continue to work to continue to move the international at Honolulu. Yeah, no, I'll just close out by saying that that that's a source of potential upside for us as those markets come back stronger. It's really not in any of our forward looking numbers.

Robbie Chancre: Across all of our loyalty levels with Qantas putting code on the Hawaiian metal now. So we have a lot of tools in our tool chest that we continue to work to continue to move the international out of Honolulu forward.

Unknown Executive: Thanks, everybody. Thanks for joining us. We'll talk to you next quarter.

Yeah, I'll just close. That's a source of potential upside for us as those markets, come back stronger. It's it's really not in any of our forward-looking um uh numbers.

Operator: This concludes today's conference call. Thank you for attending. The host has ended this call.

Robbie Chancre: Thanks everybody, thanks for joining us, we'll talk to you next quarter.

Goodbye.

Speaker Change: The host has ended this call goodbye.