Yesterday we issued our earnings release along with several accompanying slides detailing our results, which are available at investor.alaskaair.com. We will also refer to certain non-GAAP financial measures such as adjusted earnings and unit cost excluding fuel. As usual, we have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings release. 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 $1.78 exceeded the high end of our guidance. These changes drove our Hawaiian assets to its first profitable quarter since 2019 and just 10 months post acquisition. 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. A key driver of this growth is premium revenue, which continues to outperform.
To support this international growth, we've also ordered five additional Boeing 787s, bringing our future fleet total to 17 aircraft. 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. 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.
| Metric | Period | Current guidance |
|---|---|---|
| Adjusted EPS | Q3 2025 | $1.00-$1.40 (new guidance, includes ~$0.10 IT outage impact) |
| Adjusted EPS | FY 2025 | at least $3.25 (new full-year floor established) |
| Capacity growth | Q3 2025 | down about 1% year-over-year (lowered nearly two points from April expectations) |
| Unit revenue (RASM) | Q3 2025 | flat to up low single digits (new guidance) |
| Unit costs (CASMex) | Q3 2025 | similar to Q2 (up ~6.5%) (on 1% fewer ASMs vs 2.7% more in Q2) |
| Capacity growth | FY 2025 | around 2% year-over-year (Q4 flying reduced by ~2 points) |
| Fuel price | Q3 2025 | ~$2.45 per gallon (expected to remain stable) |
| Long-term EPS target | 2027 | $10 (reaffirmed) |
| Metric | YoY | Note |
|---|---|---|
| Adjusted EPS | $1.78 | exceeded guidance range; top-three industry pre-tax margin |
| Total revenue | +2% to record $3.7 billion | capacity growth of 2.7% with unit revenue down less than 1% |
| Hawaiian franchise revenue | +17% | synergies, network connectivity, joint brand strength, and stable industry capacity |
| Premium revenue | +5% | led by Hawaiian premium up nearly 19%; continued premium demand outperformance |
| Co-brand card cash remuneration | +5% to $558 million | robust card spend and acquisitions, active cards up 10% |
| Cargo revenue | +34% | two final Amazon A330 freighters in service and new Asia cargo from Seattle-Narita |
| Unit costs (CASMex) | +6.5% | airport real estate, maintenance, and new labor contracts |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Demand environment | abrupt pullback earlier in the year | stabilized with strong inflection since late June; July intakes up low double digits, August low single digits, September flat | Improving |
| Hawaiian integration | double-digit margin improvement in Q1 | first profitable quarter since 2019, revenues up 17% | Improving |
| Capacity discipline | full-year ~2-3% growth | Q3 down ~1%, Q4 cut ~2 points, full year ~2%, margin-focused | Tightening |
| Premium revenue | ~34% of revenue in Q1 | ~35% of revenue, seat share 26% to 27%, targeting 29% by next summer | Improving |
| International gateway | Seattle-Tokyo launched May 12 | June load factor >80%, RASM 18% above prior Honolulu-Narita; Seoul in September, Rome May 2026 | Improving |
| Share repurchases | ~$400 million in six months | $428 million in Q2, $535 million YTD, more than double original expectation | Accelerating but balancing |