Alaska Air Group posts third-quarter net loss of $147 million on fuel costs

Alaska Air Group, Inc. (ALK) posted a third-quarter net loss of $147 million, or $1.32 per share, as aircraft fuel costs rose 60%, the company said in a regulatory filing Tuesday. The filing attached its third-quarter 2026 earnings release.

Here's how the company did:

• Net loss: $147 million, or $1.32 per share, vs. net income of $73 million, or 62 cents per diluted share, a year earlier
• Adjusted earnings per share, excluding certain tax impacts: 36 cents
• Operating revenue: $4,308 million vs. $3,766 million a year earlier
• Operating income: $82 million vs. $148 million a year earlier

The GAAP pretax margin was 0.4%, down from 2.9%. The adjusted pretax margin was 1.1%, versus 4.6%.

Revenue rose 14% from a year earlier on capacity growth of 2.4%, measured in available seat miles. Unit revenue, or revenue per seat mile, rose 11.7% to 17.21 cents.

Yield, or passenger revenue per passenger mile, rose 13.4% to 18.73 cents. September yield increased about 17% from a year earlier. Load factor, the share of available seats filled by revenue passengers, fell to 82.8% from 84.8%.

Diversified revenue, which the company defines as operating revenue outside the main cabin, reached 54% of total revenue. Premium revenue grew about 25% and made up more than 36% of the total. Loyalty program cash remuneration rose 21% to $721 million, and managed corporate revenue increased 30%.

"At Investor Day, we laid out a clear strategy for building a stronger, more diversified business, and we're executing it: growing premium, international, cargo and Atmos Rewards, and investing in the guest experience," said Alaska Air Group CEO Ben Minicucci.

"While we're not satisfied with this quarter's result or the $1.8 billion fuel headwind this year, we are confident in our ability to execute on the things we can control, including increasing the spread between unit revenue and unit costs excluding fuel," Minicucci said.

Fuel and tax effects

Economic fuel cost averaged $3.94 per gallon, up from $2.51 a year earlier and above the $3.75 the company had previously projected. Fuel gallons rose 1.7% to 308 million.

During the quarter the company cut its estimated annual effective tax rate after its full-year outlook moved from pretax income to a pretax loss, driven primarily by elevated fuel prices.

A cumulative catch-up adjustment of $75 million, tied to tax benefits recognized on first-half losses, reduced third-quarter adjusted earnings by 67 cents per share. Excluding it, adjusted earnings were 36 cents a share.

Adjusted income tax expense was $84 million. Without the adjustment it would have been $9 million. The company said the $75 million will be included in full-year 2026 adjusted results. The third-quarter adjusted effective tax rate was 18.4%, against an original guidance assumption of about 35%.

Wages and benefits rose 5% to $1,287 million, while average full-time equivalent employees fell 1.3% to 32,171. CASMex, the company's unit cost measure excluding fuel and certain items, rose 4.4% to 11.46 cents.

Operating cash flow was $755 million in the first nine months of 2026. The company held $3.3 billion in available liquidity, including unrestricted cash, marketable securities and undrawn credit facilities, and about $20 billion of unencumbered assets at Sept. 30, including 134 aircraft.

Adjusted net debt to EBITDAR was 5.5 times, compared with 2.9 times at Dec. 31, 2025. EBITDAR means trailing twelve-month earnings before interest, taxes, depreciation, amortization, the fixed portion of operating leases and special items. The company changed the calculation this year and recast prior periods.

Fourth-quarter outlook

Demand remains healthy, the company said, with commercial momentum continuing into the fourth quarter. Capacity is expected to rise 1% to 1.5% year over year, with the increase concentrated in international flying.

Unit revenue is expected to increase in the low double digits, and non-fuel unit costs are expected to rise in the mid-single digits. Fourth-quarter economic fuel cost is assumed at $4.65 to $4.85 per gallon, $650 million higher than the company's initial plan.

For the fourth quarter, the company expects an adjusted loss of $2.00 to $2.50 per share. That guidance assumes non-operating expense of about $70 million, a tax rate of about 20% and about 112.5 million shares outstanding.

For the full year, the company now expects an adjusted loss of $5.00 to $5.50 per share, inclusive of $1.8 billion in fuel expense above its plan. The filing does not state the prior full-year figure.

Network and product updates

Alaska plans nonstop service from Seattle to Athens, Paris, Osaka and Papeete beginning in spring 2027. The additions bring its Seattle international network to nine routes, out of 15 planned by 2030.

The company said it intends to join the Atlantic and Pacific Joint International Businesses with oneworld and global partners. It also unveiled the Aurora and Leihōkū premium cabins and Premium Reserve, a premium economy product set to debut in 2028.

Atmos Rewards members will be able to choose how they earn points and status points, by distance traveled, price paid or segments flown, on flights departing on or after Jan. 1, 2027. The company plans an Atmos debit card in early 2027.

Amaresh Siva was named Alaska's Chief Information Technology Officer. He joins from CVS Health and will serve on the company's Executive Committee.

The company will stream a conference call on the third-quarter results on Oct. 21 at 11:30 a.m. EDT.