Alaska Air (ALK) shares were down early Wednesday after the airline issued a third-quarter earnings outlook below market estimates and swung to a loss in the second quarter year over year as higher fuel costs weighed on results.
The company expects its bottom line to be in a range of breakeven to adjusted earnings of $1 per share for the ongoing quarter, it said late Tuesday. The current consensus on FactSet is for non-GAAP EPS of $1.30. The stock declined 1.7% in the most recent premarket activity.
"Our second-quarter results were defined by a fuel spike outside our control - but underneath it, this company is executing better than ever," Chief Executive Ben Minicucci said. "Absent the fuel headwind, we would have delivered a solidly profitable quarter."
For the three months through June, Alaska Air posted an adjusted loss of $0.92 a share, compared with earnings of $1.78 the year before. The Street had estimated a non-GAAP loss of $0.99. Operating revenue rose 10% to $4.07 billion, slightly below the average analyst estimate of $4.09 billion.
Fuel cost surged 85% year over year to $4.43 per gallon, resulting in an incremental fuel expense of $600 million, the airline said. Total operating expenses rose to $4.23 billion from $3.43 billion.
Revenue per available seat mile, or unit revenue, climbed 8.6% on an annual basis in the second quarter on capacity growth of 1%. Passenger revenue inclined 9% to $3.64 billion, while loyalty program and cargo and other revenue advanced 23% and 17%, respectively.
The March rainstorms in Hawaii had a substantial impact on spring break travel in April and weighed on Alaska Air's system unit revenue by about three points in the quarter. However, demand remained resilient outside Hawaii, the company added.
For the third quarter, revenue per available seat mile is expected to be up by low-double digits, supported by robust yields and demand, although Hawaii remains a two- to three-point headwind to the metric, according to the airline. Capacity is set to gain by 2% to 3%.
"Loads are recovering and new bookings are coming in at system level yields, showing demand returning to historical levels in September," the carrier said in its earnings release.
Alaska Air anticipates a fuel price of $3.75 per gallon in the current quarter, reflecting fuel costs of $3.60 per gallon this month and average spot prices of $3.85 for August and September. "While fuel prices remain volatile, economic fuel cost is expected to come down from second quarter levels as refining margins have recently moderated," according to the company.
Last week, United Airlines (UAL) forecast about $6 billion in additional fuel expense for 2026. Earlier in July, Delta Air Lines (DAL) said it expects an all-in fuel price of about $3.15 per gallon in the September quarter.
Crude prices have remained elevated following renewed tensions between the US and Iran.
