Alaska Air Group, Inc. Q2 FY2025 earnings call

• Acknowledged IT outage earlier in the week, apologized to impacted guests, and mentioned teams are working to restore operations.
• Delivered strong second quarter results with adjusted earnings per share of $1.78 exceeding guidance. Alaska Accelerate is working, with Hawaiian assets becoming profitable 10 months post-acquisition.
• Total revenue reached a record $3.7 billion, up 2% year-over-year on 2.7% capacity growth. Unit revenue performance is expected to lead the industry.
• Retrofitted nearly 90 of 737 aircraft for premium experience. Launching new loyalty program and premium credit card next month. Launched Seattle to Tokyo Narita flight in May, with strong load factor and RASM.
• Cargo revenues up 34% year-over-year, with Airbus 330 Amazon freighters in service.

Air Group generated a record $3.7 billion in revenue. Adjusted earnings per share were $1.78. Hawaiian assets achieved their first profitable quarter since 2019, 10 months post-acquisition. Premium revenues were up 5% year-over-year, with Hawaiian assets seeing premium up nearly 19%. Cargo revenues were up 34% year-over-year. Revenue contribution: total revenue at $3.7B, with various segments contributing like premium, Hawaiian operations, etc.

• Expect to deliver at least $3.25 in adjusted earnings per share in 2025.
• Q3 capacity down about 1%, unit revenues flat to up low single digits.
• Expected adjusted earnings per share for Q3 between $1 and $1.40, incorporating $0.10 impact from IT outage.
• Full year unit costs expected up mid-single digits on 2% full year capacity growth.

• Operational disruption due to IT outage earlier in the week.
• Forward-looking statements may differ materially from actual results; risk factors in SEC filings could affect business.

Q: Reflecting back on flagging industry issues in June and July, what's underpinning the bullishness from 3Q to 4Q?

A: Positive momentum starting late June/early July, tailwinds from synergies compared to last year's Q4.

Q: Thoughts on buyback given stock undervaluation?

A: Will continue to be aggressive on capital allocation if stock is undervalued and earnings come back.

Q: Outperformance in Hawaiian franchise, how much from synergies vs competitive dynamic?

A: Synergies from network connection, joint brand, and industry capacity stability contributed.

Q: When might premium overtake 50% of total revenue?

A: Currently ~35% premium, on track with premium seat expansion and other initiatives to reach higher, likely mid-50s outside main cabin.

Q: Progress on single carrier certificate and reservation system?

A: On track for October, including single reservation system, launching single loyalty next month, and joint collective bargaining with unions.