Alaska Air Group posts $76M loss as fuel costs surge 85%

Alaska Air Group reported a Q2 adjusted loss of $102 million as an 85% surge in jet fuel costs overwhelmed revenue growth of 10%.

"Absent the fuel spike, this would have been a solidly profitable quarter," Chief Executive Officer Ben Minicucci said.

Revenue reached $4.07 billion, up 10% from a year earlier but below the $4.09 billion consensus. Unit revenue rose 8.6% and accelerated each month, from 5.5% in April to 11% in June. The company swung to a GAAP net loss of $76 million, or 68 cents per share, from year-ago earnings of $172 million, or $1.42 per share. Fuel expense added roughly $600 million versus the prior year.

The Seattle-based carrier guided for third-quarter earnings between breakeven and $1 per share, assuming fuel costs of $3.75 per gallon. That fell short of the $1.47 per share analysts had expected. Shares fell 2.1% in after-hours trading.

Economic fuel cost averaged $4.43 per gallon in the quarter, slightly better than the company's $4.50 internal forecast. The airline raised $1 billion in financing through a $500 million senior unsecured note offering and a $500 million term loan secured by assets tied to its Mileage Plan loyalty program, bringing total available liquidity to $3.8 billion.

Premium revenue rose 15% and now represents 35% of total revenue, with more than half of every revenue dollar coming from outside the main cabin. Co-brand loyalty remuneration reached $663 million, up 19% year over year. Active Mileage Plan members increased 15%, while attrition fell more than 30%.

The company completed its migration to a single passenger service system during the quarter, which Minicucci described as one of the most consequential operational milestones in the company's history. Alaska led the industry in on-time performance year to date and improved five points year over year in the second quarter.

Hawaii operations remained a drag. Historic rainstorms in March reduced system unit revenue by about three percentage points in the quarter and are expected to be a two-to-three point headwind in the third quarter. The company plans to retire its 717 fleet beginning in 2028 and transition Neighbor Island flying to Boeing 737s.

The adjusted loss of 92 cents per share beat the consensus estimate of a 97-cent loss, marking the second time in four quarters the company has surpassed earnings expectations. Revenue missed by 0.73%.

The guidance range implies a weaker second half than Wall Street anticipated, even as fuel costs ease from second-quarter peaks. Alaska will provide an update on full-year earnings guidance at an Investor Day scheduled for Sept. 29 in Seattle.

This article is for informational purposes only and does not constitute investment advice.