Good morning, ladies and gentlemen. And welcome to the Alaska Air Group 2025 first quarter earnings call. At this time, all participants have been placed on mute to prevent background noise. Today's call is being recorded and will be accessible for future playback at AlaskaAir.com. After our speakers' remarks, we will conduct a question and answer session for analysts. I would now like to turn the call over to Alaska Air Group's Vice President of Finance, Planning and Investor Relations, Ryan St. John.

Thank you, operator, and good morning. Thank you for joining us for our first quarter 2025 earnings call. Yesterday, we issued our earnings release along with several accompanying slides detailing our results, which are available at investor.alaskaair.com. On today's call, you'll hear updates from Ben, Andrew, and Shane. Several others of our management team are also on the line to answer your questions during the Q&A portion of the call. Air Group reported our first quarter GAAP net loss of $166 million. Excluding special items and mark-to-market fuel hedge adjustments, Air Group reported an adjusted net loss of $95 million. Our comments today will include discussion of Air Group reported results and forward-looking guidance compared to prior year pro forma results as if Alaska and Hawaiian were a combined company for the full periods referenced. Lastly, as a reminder, forward-looking statements about future performance may differ materially from actual results. Information on risk factors that could affect our business can be found within our SEC filings. We will also refer to certain non-GAAP financial measures, such as adjusted earnings and unit cost excluding fuel. And as usual, we have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings release. Over to you, Ben.

Thanks, Ryan, and good morning, everyone. The challenging start to this year was not what we expected as air travel demand diverged from the strength we saw just a few months ago. However, what remains certain at Air Group is our unwavering confidence in our strategy, Alaska Accelerate. We are executing with discipline, focusing on long-term value creation, and taking the right steps to strengthen our business through any cycle. Regardless of what's happening today, we firmly believe in our ability to deliver performance and grow profitably, both now and in the years ahead. Air Group has a proven track record, not just of weathering downturns, but of emerging stronger every time. We're operating from a position of real strength, one of the industry's healthiest balance sheets, a diversified revenue base with nearly 50% generated outside the main cabin, market share leadership in our key hubs, and a substantial 15% cost advantage over our largest competitors. These advantages aren't just meaningful. They're decisive, and they position us to outperform in any environment. That said, the current landscape has been challenging to predict. While we're not updating our full-year guidance today, we remain confident in our outlook. Even in the event of a recession, we expect to remain solidly profitable in 2025 and are fully committed to our share buyback plan of $1 billion over the next four years. In fact, given where our stock price has trended, the current environment has provided a unique opportunity to accelerate our share repurchase program that is already underway. As we outlined at our Investor Day last December, winning in this industry requires scale, relevance, and loyalty. That fundamental belief is as relevant today as it was four months ago, and we have conviction in our ability to deliver $10 of earnings per share by 2027. We do not believe what's happening today jeopardizes that target. Our energy is fully committed to driving Alaska Accelerate and unlocking $1 billion in incremental profit as we continue to strengthen various aspects of our business. Importantly, what's in our control is going according to plan. This is evidenced by our year-over-year industry-leading unit revenue performance that is several points ahead of peers, even those peers who have greater exposure to international markets that are clearly outperforming domestic trends. Integration synergies are tracking slightly ahead of plan through the first quarter, and our Hawaiian assets are performing well. We delivered a seven-point margin improvement in our combined Q1 results year over year, including a double-digit margin improvement from our Hawaiian assets. Demand to, from, and within Hawaii remains strong, especially in premium cabins, supported by continued loyalty growth and the value we're unlocking through a larger, more efficient network. Hukai by Hawaiian memberships are up 90% since year-end, and Hawaiian card acquisitions have more than doubled year over year. We are well on our way to building the scale, relevance, and loyalty needed to lead as Hawaii's trusted airline in this premium leisure market. As we continue advancing our vision to connect guests to the world, we're just eighteen days away from launching our first intercontinental flight from Seattle to Tokyo Narita. This marks a major step forward in the evolution of our largest hub, as we chart a path to serving at least 12 intercontinental destinations by 2030. It's a bold move that positions Air Group to capture high-value international demand while deepening our relevance and loyalty across our network. We know that delivering a seamless end-to-end premium travel experience is a key differentiator, and we're fully committed to investing in every aspect of it, from our lobbies and lounges to premium cabins, food and beverage, and onboard service. Even in the current environment, our premium revenues continue to outperform, and our premium cabin retrofits are on track to increase our premium seat exposure to 29% by next summer. We're excited to expand our loyalty offerings. We'll be launching our uniquely branded single loyalty platform and our premium credit card later this summer, another exciting step in enhancing our guest experience. As we continue to diversify our revenue streams, our cargo operations are ramping to full capacity. We took delivery of two more Amazon A330 freighters for a total of eight, and our cargo revenue is up 36% year over year. In terms of execution, our integration milestones remain on schedule. Our teams are working through the process to achieve a single operating certificate by the fourth quarter of this year. Work is underway to bring both passenger service systems together by early 2026, and we're starting joint bargaining negotiations across our union groups. We know we have a good playbook in place, and we're focused on executing every step of the way. I also want to take a moment to thank our incredible employees. Their hard work and dedication are what make the Alaska Accelerate vision possible. We're currently wrapping up our annual employee engagement survey, and I'm thrilled to share that engagement scores are at record levels, higher than at any point since we began the survey fourteen years ago. That speaks volumes about the alignment and energy across our company. Our employees believe in our vision, and they're already helping us bring it to life. We are all energized by the opportunities ahead. Air Group is on a clear path to build scale, relevance, and loyalty, laying the foundation for strong long-term returns. I'll say this with complete confidence. Our company is significantly undervalued relative to where we're headed and the strength we're already showing in the areas fully within our control. And with that, I'll turn it over to Andrew.

Thanks, Ben, and good morning, everyone. My comments today will focus on first-quarter performance but more importantly, the successful trends we're seeing that underpin our Alaska Accelerate strategy. In the first quarter, total revenues reached $3.1 billion, up 9% year over year on capacity growth of 3.9%. Unit revenues finished strong, up 5%. First class, premium class, and importantly, main cabin all delivered positive unit revenues year over year. Loyalty continues to show strength. We generated $550 million in cash remuneration in Q1 from our co-brand cards, up 12% year over year. Importantly, new cards across the Alaska and Hawaiian networks increased 26%, with flown segments by our elites up 34%. These statistics demonstrate the power of our combined network and the incredible value that accrues to guests enrolled in our loyalty programs. Turning to premium, our revenues grew 10% and represent approximately 34% of our total revenues. Our continued investment in premium cabins is coming to life. By July of this year, 84 of our 900s and Dash 9s will have been retrofitted with six more premium class seats, with all 59 aircraft completed by year-end. In the next several weeks, we will receive our first three MAX 8s configured with 61 seats, including four more first-class seats. The conversion of our existing 59 800s into the same configuration begins this summer as we look to improve guest comfort while reducing costs and increasing revenues. Taking a step back, more than 200 of our Boeing 737 aircraft will have additional premium seats by the summer of 2026, and that's without removing any seats from these aircraft. This will add 1.3 million first and premium class seats per year and bring our premium seat mix to 29%, further strengthening our position in what we believe is a long-term driver of guest satisfaction and revenue and well-suited to our network's long stage length. Our synergy and revenue initiatives are on track despite near-term macroeconomic volatility. I want to share with you three leveraged commercial initiatives that illustrate Alaska Accelerate is working and why this deepens our conviction in our positioning over the next several years to deliver results. In Seattle and Portland, where we have leading market shares and the number one brand preference, our scheduled banking strategy is yielding significant positive results. We are increasingly more relevant to more guests and driving more connecting traffic through these two hubs. In the first quarter, connecting passengers were up 15% in Seattle compared to last year, and we see similar trends as we look forward. Our banking schedule in Portland rolled out this month, and connecting bookings for May and June are up more than 200%. In Hawaii, our recently acquired Hawaiian Airlines operations are producing strong results, including West Coast to Hawaii and Neighbor Island flying as we unlock the power behind a combined network, better utilization, and more connections. Unit revenues of our Hawaiian Airlines assets were up 9% year over year, nearly twice that of the system average. And not surprisingly, as a premium leisure market, we saw strength in premium revenues that were up 17%. Furthermore, we're continuing to grow our loyalty with State of Hawaii card acquisitions, up nearly 40%, making it one of our highest percentage growth markets. And as Ben mentioned, Hua Kaiba Hawaiian memberships for our exclusive Hawaii resident travel program are up 90% since December, and we now have well over 200,000 members in just five months since launch. In San Diego, a key focus market for us, we just announced a 30% increase in flights starting this fall, including new nonstop service to Chicago, Denver, and Phoenix. With these investments, we will have the highest network utility in San Diego by a wide margin and offer nonstop service to 44 destinations, 26% more than any other carrier. Credit card growth has surpassed our San Diego capacity growth, which is evidence that our network investments are driving outsized loyalty. In fact, San Diego now has the highest average card spend of any city we serve within the state of California. Our product and offerings are well-suited for San Diego, and we are excited to see San Diegans respond positively to our continued expansion and differentiated premium service. Now turning to our outlook. We expect our capacity to be up approximately 2% to 3% in the second quarter. Importantly, this growth is all driven by our Hawaiian Airlines assets, which are performing exceptionally well. Hawaiian asset growth is slated to be up double digits as we implement network changes and increase utilization, while our Alaska assets are not expected to grow at all this quarter. We still expect our full-year capacity growth to be approximately 2% to 3%. That said, we are currently evaluating certain off-peak capacity adjustments this fall as we continue to monitor the demand environment. Unit revenues are expected to be flat to down low single digits in the second quarter. Overall bookings have stabilized as we look forward, albeit at lower yields than originally planned. Hawaii continues to book well, with flat to positive loads and yields despite double-digit increases in capacity. Managed corporate revenue, after posting a record January, ended the quarter up 3% and has also stabilized. We've seen material improvements from two of our largest accounts in the last several weeks after a meaningful step back in February and March. Total forward bookings are up low single digits, improved from where they seemed to have bottomed out in March. Although the year has not started off as we'd envisioned, we remain focused on building scale, relevance, and loyalty through our commercial initiatives for long-term success. Our revenues are more diversified than ever, and this will only continue to grow as we execute our plan over the coming years, adding strength and resiliency to Air Group. Our yields, loyalty, traffic, and revenue growth all point to a strong foundation that will bring additional revenue upside as the environment further stabilizes and ultimately recovers. And with that, I'll pass it over to Shane.

Thanks, Andrew. For the first quarter, we reported an adjusted loss per share of $0.77, which was $0.07 or just $10 million of profit below our guide. This was a strong result given our more than 90% domestic exposure and the rapidly changed demand backdrop the entire industry experienced in the quarter. More importantly, execution of the very early stages of our 27 Alaska Accelerate vision we shared at Investor Day last year is going extremely well. The only disappointment in the first quarter was the softening macro environment. Our synergy ramp, our commercial initiatives, and our cost performance were right on or better than our plan, and our domestic unit revenue led the industry. These are strong initial steps on our path to achieving at least $10 in earnings per share. Moving to our balance sheet and liquidity. Our total liquidity, inclusive of on-hand cash and undrawn lines of credit, stood at $3.3 billion at quarter-end. Scheduled debt repayments for the quarter were $155 million and are expected to be approximately $100 million in the second quarter. Our debt to cap stood at 58% with our net leverage at 2.1 times. Share repurchases have totaled $149 million year to date, and nearly $400 million in the last six months, or approximately 5% of our market capitalization. We plan to continue to execute repurchases aggressively at our current low market valuation, given our conviction and our ability to drive future earnings, and we'll do so while maintaining our commitment to a healthy balance sheet. First-quarter unit costs were up 2.1% year over year, coming in better than expected and reflecting the new contract we ratified with our Alaska flight attendants in February. Our cost expectations remain unchanged and on track for the year, with the largest areas of year-over-year increases in wages and real estate costs, as we've discussed before. Also, as indicated last call, the second quarter will be the most pressured this year with improving unit cost trends in the second half of the year. For the second quarter, unit costs are expected to be up mid to high single digits, consistent with our original plan and on capacity growth of just 2% to 3%. Our fuel price averaged $2.61 per gallon, consistent with our original expectation. While crude prices came down recently, West Coast refining margins spiked in the last three weeks of the quarter to well above $0.70, due to unplanned refinery maintenance events. Margins have since come back down over the past two weeks. For the second quarter, we expect EPS of $1.15 to $1.65, reflecting approximately six points of revenue impact from the demand backdrop. Absent this softer outlook, the areas of our business within our control are performing well and remain in line with our prior expectations. While we've started to see stabilization, the environment remains challenging to predict, and for now, we will pause on providing an update to our full-year expectations. To provide some context to the rest of the year, however, we have seen a five-point deterioration of revenue for the first half, and if this continued throughout the rest of the year, we still expect to be solidly profitable and expect to continue to outperform on a domestic unit revenue basis. Demand fluctuations are not new for our industry or our team. We are well-versed in navigating these environments, and we will again continue to focus on building strength into Alaska, so when demand returns to more robust levels, we are poised to capitalize on it and outperform our peers. We have an exciting future ahead of us with many unique drivers of value and are pleased with the initial stages of delivering on both integration and our Alaska Accelerate commercial and synergy initiatives this quarter. We believe we have a business model that can outperform in any industry backdrop and have the best domestic setup for the long term. And with that, let's go to your questions.

Thank you. At this time, I'd like to invite analysts who would like to ask a question to please press star then the number one on your telephone keypad. And our first question will come from Catherine O'Brien with Goldman Sachs.

Good morning, everyone. Thanks so much for the time. I just want to dig in on the 2Q guide a little bit, if you'll allow it. Can we just talk about some of the moving pieces underlying that six-point headwind in the flat to down RASM guidance? Maybe first, just to set the baseline, how much of that quarter is already booked? And then it sounds like corporate's moved off the bottom. International is getting a little better, cargo's growing. You've got a new premium card launching this summer. Hawaiian synergies are ramping ahead of schedule, you noted in the prepared remarks. So, you know, a couple of positives that we go into 2Q. Just trying to get a sense of how you're assuming trends in some of these buckets evolve in the second quarter and what's offsetting the positives? I know, obviously, the macro is a little bit worse, but just how all those pieces fit together would be super helpful.

Hi, Katie. Good morning. Thanks for the question. So a couple of things. We're about 62, 63% booked for the quarter. I would say a couple of things about the environment. And number one, I think holistically, it is about the general environment is where we're seeing all the softness. It's not in any of our synergies, our initiatives. We're seeing all of our hub banking working. We're seeing strong loyalty growth. We're seeing strong Hawaiian assets. The industry is growing at 2x domestically compared to what it was in the first quarter. And the other important thing is I think we're very excited about we might have reached a new baseline for RASM for the first quarter as we have really worked hard to change the seasonality and get to a better place. So as we sit here today, the macro environment is about the only thing that is weighing us down. And on the business side, again, we're sort of seeing a stabilization there of bookings. There are some areas in manufacturing and high-tech that are still soft, and then there are others in professional services that are doing well. So, overall, flat to down mid-single digits is sort of what we're seeing today.

Okay. Got it. And maybe just to focus in on Hawaiian for a moment, you know, 14 margin improvement; that's impressive in this environment. Is there some element of a longer booking curve helping in that business in the first quarter? Or are you expecting a similar level of improvement in 2Q? And with Hawaiian being a more premium leisure destination, are you seeing any negative impacts on bookings, or is that holding a little bit better in the system? Thanks so much for the time.

Yeah. The Hawaii franchise and this sort of 25% mainland of our ASMs have actually been bucking the trend. The neighbor islands are up double-digit unit revenues. The international franchise in Hawaii actually, margins improved 15 points. And the mainland, with all the connections, the banking, and the selling of each other's metal, it's just been performing very well, and we're actually seeing positive unit revenues in that regard. So it’s a very good place there.

And, Katie, it's Ben. And what we're forecasting—and all the pent-up demand of the macro environment evolves—but the last three quarters for Hawaiian should be close to breakeven. So we're feeling extremely positive about how our acquisition is performing.

And our next question will come from Tom Fitzgerald with Cowen and Company.

Hi, everyone. Thanks so much for the time. Wondering, thinking about demand, if we could talk about California for a little bit and maybe comparing and contrasting San Diego with San Francisco and LA and how you'd characterize the competitive environment in those markets?

Yeah. Thanks, Tom. I think you can see publicly in the tape, there's been a very significant increase in ASMs in San Francisco as a major carrier there gets back above pre-COVID levels. So I think, you know, we're sort of seeing pressure there. But I will say that in San Diego, and that's why you see us leaning into that, it's just performed very, very well on our growth. It's performed very, very well. So that's a place that we're going to continue to invest in.

Okay. Okay. That's really helpful. And then I guess, I don't know. Has there been any change in how you're thinking about just the premium product overall and the retrofits just given the softening demand and given there's been a lot of growth in that market just your latest thinking there, given all the change in the macro. Thanks again for the insights.

Yeah. Thanks. If anything, I'm actually very excited that we actually did that for a couple of reasons. Number one, just looking at our first-class cabin, it's sort of been unaffected by the macro environment right now. We've seen very strong double-digit increases in revenue. We've also had, obviously, given the acquisition, a very big change as well as some program changes, and a big step up in our elites. And so we need to make sure we continue to have premium class seats available for our top elites that they can upgrade into. And, again, overall, as I shared in my prepared remarks, we've not removed any seats from our airplanes. In fact, on the 800, we've increased the seats. So we feel very well positioned with how we're rolling out our premium product.

Thank you, Tom.

And our next question comes from Connor Cunningham with Melius Research.

Everyone. Thank you. Just on the $10 earnings number by 2027. Surprised you guys have so much belief. Sound like you have a ton of conviction around that. So I'm just curious if you could just unpack what you're seeing that will bridge us from here till then. It just seemed obviously, the macro is different, but you've had more time to integrate the two companies. You're seeing how the competition's responding to your long-term plans. If you could just talk about why you feel so confident in the outlook come 2027. Thank you.

Connor, this is Shane. Thanks. Appreciate the long-term oriented question, which I love to talk about. Look. I think, and you heard a lot of this on the script. All of the things that we laid out at Investor Day in terms of commercial initiatives, the synergy ramp, integration milestones, cost management—we delivered on that in the first quarter. In fact, each one of those things was on plan or better than plan. And, you know, we tend to be very focused on delivering the things that we set the company down a path to go and execute, and we're really happy with how we performed in the first quarter. So if you look at the $1 billion of incremental profit from initiatives and from synergies, there's no reason to think that we can't go deliver all of those. We're also gonna buy a lot of shares back if the price remains undervalued like it is today. And so look. We're not gonna predict a three-year recession. That's super deep. So if we believe that the macro environment will come back, it'll rebound. I don't know when, in the second half of this year or if it's sometime next year. But when it does, there's no airline better positioned domestically to ultimately capitalize on that, and that will be happening while we're still executing on this billion-dollar ramp of initiatives and synergies. So there's no reason for us to believe we can't go get at least $10 of EPS by '27.

Okay. Love that. And now I'm gonna ask you a really short-term question. So I'm so sorry. Can you just talk, maybe to Katie's original question? I'm just trying to—I think we're all trying to understand how the booking curve and pricing in general is moving throughout the quarter. You know, from what I think about, like, March, you guys probably had a lot of that booked in February before things really started to change. So, like, as you sit here today, are people discounting in June more aggressively than they are in April? And I mean, I'm just trying to understand, like, what's contemplated within the near-term outlook as you try to manage through things in general? Thank you.

Yeah. Andrew will answer it. One just piece of context, I think, I think we said it. We had a three-point revenue sort of headwind from macro in Q1, and we believe it's six points in Q2. That is really what's driving the short term. I think it's consistent on a domestic basis with what we've heard from others. So I don't think we're in any different situation, but Andrew can maybe say more about sort of where we were booked a few weeks ago for Q2 and what we're seeing in terms of stabilization and fare environment?

Yes. I think just on the sequential, I think April's gonna be a little stronger, and I think we've seen some good close-in demand, just to be frank, as we move into April. And a little bit softer in May and June where ASMs are up a bit more and have been more fully exposed to the fullness of this downturn that sort of happened in February. So that's really what's going on. And I think, again, we sit here today. If you look at our load factor in the first quarter, what we believe our loads are gonna be in the second quarter, volume we're not concerned about. I think we've got good solid demand for our product. It's just working out where the industry pricing is going and what we need to do to fill those seats.

Appreciate the detail. Thank you.

Thanks, Connor.

Your next question comes from Andrew Didora with Bank of America.

Hi, good morning, everyone. Shane, both I guess you and Ben have spoken several times about the potential for accelerating your buybacks. Just curious, like how should we think about the potential size of what you could accelerate here? Or I guess kind of your comfort level of how that could be? Like, are there any kind of balance sheet or liquidity guardrails that we should be aware of that could be somewhat limiting factors in the near term? Just trying to think about, you know, what the buyback potential could be kind of very near term here.

Hey, great question, Andrew. I'll start, and then I'll give it to Emily to provide some context on the liquidity questions you had. Look. I said in my script, I think we're significantly undervalued. You know, we announced our billion-dollar share buyback at Investor Day. And we were, you know, again, in the $60-$70 range. So this is just a significant opportunity for us to accelerate. We've done some math. I'll just hand it over to Emily just to give you some context on how we're thinking about it here in the next few months.

What the opportunity is to accelerate this program this year and the balance sheet impact that that would have, it really will be de minimis in terms of where we're at today with debt to cap and our net debt to EBITDAR metric. So we could do up to half the program and have essentially no change in trajectory for those metrics.

Got it. Very, very helpful. And then Shane, maybe a little bit of a longer-term question. So you may not like it. I know you're not guiding to '25, but I guess I'll ask the '26 question. The flat CASM that you put in your slide deck in Q4, should we think of that as a good exit rate into 2026 or any puts and takes you would like to add right now? Thank you.

Thanks, Andrew. If you're asking if we're gonna have a flat CASM ex in 2026, I can't answer that question. Although our head of FPGA was just setting up the budget review calendar already for later this year, yesterday. But I think, look. We'd like to grow a little bit more. Obviously, we're planning to take a good number of Boeing aircraft at the end of the year. We've got some more 787s coming. You know, we continue to look forward to expanding internationally out of Seattle next year. And I think we gotta get, you know, into that growth range we talked about at Investor Day, somewhere around 3% or 4%, to have more of a flattish mindset around unit cost. But the thing, and you guys I know we talk about this all the time, we will always talk about this. Our relative cost performance, I think even this year, will be among the best in the industry, if not the best, one of the lower growth rates. Lots of synergy opportunities, lots of opportunities to get productivity out of the aircraft assets from Hawaiian and all of our folks as well. And we're gonna go execute on those. So I think from a cost-competitive position, we're gonna be really, really well positioned over the next few years. And that's gonna serve us well, ultimately in terms of driving earnings.

Hey. And I would just add. This is Ryan. Some of our cost synergies really ramp up in the fourth quarter. So a lot of that will annualize in 2026. So I do think we'll have a pretty good tailwind on at least the cost synergies side next year, which will obviously help offset, sort of any, you know, core inflation.

That's great. Thanks, everyone.

Thanks, Andrew. Thanks, Andrew.

And we'll move next to Jamie Baker with JPMorgan.

Hey. Good morning, everybody. So obviously, Air Group's first downturn ever. But, obviously, one difference to this downturn is that several of your competitors are already struggling with profitability. So, you know, ordinarily, I might be thinking about Alaska coming out the other side even stronger than if the downturn hadn't happened. You know, never let a good crisis go to waste, all that kind of stuff. But your plate seems pretty full at the moment. So I guess my question to Ben is, you know, if one of your lieutenants came to you with an incremental idea, and I'm not talking M&A. I'm thinking more from a network perspective, you know, taking advantage of operational pressures. Do you think you'd execute, or is the preference just to kind of keep your head down and power through? I'm just trying to decide if the downturn structurally helps you longer-term, and it's not clear to me if it does.

You know, Jamie, I love your questions. I think, you know, they're actually very thoughtful. Like, I think if you were deeper in our team, our team mindset is we never look a great idea away, and we will make trade-offs to what is best long-term for Alaska Air Group. So if we saw an opportunity and we needed to make a trade-off and move something off to the right so we can put another initiative in that we think would have greater value to the company, we would do that. We would weigh all the possibilities and make a move. We are nimble. We are decisive, and I think we have the team to go pull it off. So that's just how we think.

Okay. And then my follow-up, you know, what would be the avgeekiest thing you've ever done? Oh, no. Wait. Sorry. You were asked that at the Wings Club. On slide 10, you know, progress underway with the FAA on the single operating certificate in the fourth quarter. It seems, you know, and I'm not in the weeds, but it seems that everything involving the FAA takes longer these days than anticipated. So if that timing slips, does it push the other two milestones to the right? I could see maybe it would do that for the RET system, but it wouldn't preclude the collective bargaining momentum. Is that the right way to think about it if the second milestone does shift to the right?

Yeah. I think that's the right way to think about it. Right now, what I'll say is the single operating certificate, we just completed our second submission. The third one is in. The single operating certificate is really tracking the plan, so we're really confident by the October date. Our PSS, as you know, we did it last time. That is really well in hand with our team. The joint bargaining is just beginning right now. So they really are not interrelated. We're starting those independently of the other milestones, and you know, we've done this before, so we know how to go do this. The playbook is clear for us, and I have a lot of confidence. The team really knows how to go do this. And the other thing I'll say is our employees are excited, like I mentioned in my script. They want this integration to happen. They want to get it behind us and look forward to a combined company that's going to do big things.

Okay. Perfect. Thanks for the answers, Ben. Appreciate it. Take care.

Your next question will come from Scott Group with Wolfe Research.

Hey. Thanks. Morning. So I think you talked about premium and main cabin unit revenue both positive in Q1. You just talk about, like, directionally the spread between the two? And to what extent, or how much does that spread widen into Q2?

Thanks, Scott. I think what I would say on that is that the first-class cabin—and I'm not gonna get into specific spreads here—but the first-class cabin actually is really doing strong and outperforming. I think, as you know, with the premium class, it's undergirded by main cabin seats. So the real opportunity there is the roughly 15% of revenues on the upsell. And I think as we go into Q2, I guess that's why we're very focused on keeping full airplanes; full airplanes result in premium class performing better than it would when they were not full. So I would say, though, that PC is probably a little softer than certainly first class. But overall, we see the relationship holding as we go in. And just to say it on the saver side, we still have very generous availability on that around 60%. But in the first quarter, we were able to actually expand our upsell from Sabre in the main cabin. So we got pricing and yield from that. So we're getting better and smarter about how to manage saver in this downturned environment.

Yeah. I think first of all, if the situation we see today persists, we still think we're gonna be among the three industry margin producers. So, hence the comment in the script that will be solidly profitable still. The synergy ramp is pretty, I think, firm. We've got a really—and just to the question Jamie asked on integration and timelines, I mean, these things are pretty tight in terms of each of the initiatives we need to execute for integration. And as we integrate, we unlock some of those synergies. Now like, the things that we have done first, like coding across each other's network and sort of turning on connectivity, those have been working really, really well and maybe even a little better than planned. So there is a chance that we'll find out that the initiatives, even as they come in on time, are a little bit more valuable than we had thought before. And certainly, we hope for that, but we won't know until we sort of cross those dates.

Alright. Thank you.

Thanks, Scott. Thanks, Scott.

And we'll move next to Brandon Oglenski with Barclays Capital.

Hey, good afternoon. Thanks for taking the question. So Ben, maybe if I can just merge Andrew and Jamie's question together and ask maybe a little bit more directly. I mean, we see a lot of unsustainable airline business models out there and maybe more treacherous balance sheets across the industry. I mean, why accelerate a share repurchase in this environment, especially not knowing where demand's gonna end up? And potentially, like, other industry opportunities that could present themselves over the next few years. You guys have been the most acquisitive of anyone, I think, you know, in the last decade.

Yeah. Great question. And it's good to push us on this. Look. I just think we know where we're gonna be with our long-term plan in 2027. So we're so confident where that's gonna deliver. So we just think it's a significant opportunity. Everything else we're doing is in our control. We're executing, and you know, we believe that we're gonna get through this turbulence. And if you look at past downturns, you know, whether it was in 2002, 2008, the Great Recession, or before that, these things will last six to twelve months, and we want to be on the right side of it. And, you know, airlines always make that same mistake, Brandon, that we buy back stock when it's high and don't buy back stock when it's low. So we're not gonna make that mistake this time. And I think we're convicted that, you know, the company's undervalued. And I think we have enough assets and a balance sheet that have other opportunities where to come up, I think we can take advantage of those in addition to what to buying back stock.

I appreciate the message there. And, Andrew, I know you've gotten a lot of questions on competition, but maybe just specific to Hawaii and, you know, a big competitor change with their pricing structure coming up later. I'm not asking you to talk to their change, but just how do you see the industry competitive dynamics, especially going into peak summer months here?

Yeah. I think, you know, number one, our growth is low, and I think the industry right now is in the business of reducing capacity, not increasing it. And I think when you see in times of softness, people go to their strength. And I think the way I look at this right now is that we are playing to our strengths. And so I feel pretty good about the macro network landscape as it sits here today.

And we'll move to our next question from Duane Pfennigwerth with Evercore ISI.

Hey, thanks. Most of my questions have been asked, but maybe we could just play back what happened in March. It feels like—and maybe this is a misinterpretation by us—but it feels like your tone was relatively more constructive at that time when some of your peers were guiding down. So what shifted for you? Was it perhaps later? Was it more of a corporate or leisure dynamic? Can you just walk us through the timeline since mid-March?

Hey, Duane. Thanks. Interesting interpretation. I think that wasn't intentional at all. I don't think we feel incrementally worse about the business today than we did in March. In fact, we've seen, as we mentioned, a lot of stabilization in the demand backdrop. We're gonna sell airplanes in the summer. We're gonna run load factors consistent, I think, with historically what we do in the summer. So I'm not sure what the venue was or why we sort of came off that way. We did make a choice to not update guidance in the midst of the quarter. We weren't at sort of some of the conferences that others were using to update, and maybe we should have. But what we're seeing is like very similar trends to everybody else. We also have unique drivers of value going forward. And so we're feeling as excited about the long term as we were in December. And we can't wait for, you know, the demand environment to get back to the really robust place it was in Q4 and Q1, and whether that happens this year or next, we'll be ready for it.

I appreciate that. And then just for Maui specifically, I don't know if you have this data in front of you, but how recovered is your capacity to Maui from maybe the pre-wildfire baseline? And what is the booking curve look like into the summer for Maui versus last year? Are you seeing how booked up are you? And what do yields look like? Thank you for taking the questions.

Yeah. I would say just in Maui, specifically, I think the horrific fires and all of that obviously was terrible is really from a demand standpoint behind us. Hawaiian never really at that time, really pulled down much of their capacity at all. And given what we're doing now, we've pretty much restored it. And as Maui versus Honolulu, it all sits in the same ecosystem. So those things are behind us, and I think what we're doing right now is looking to continue to make more connections and grow.

And just on the booking curve?

Yeah. I'm not seeing any—in general, booking curves are holding out to where they were before. I think the question a little bit is, gets a little complicated because now we're playing a little bit with yield to maintain the bookings coming in on traditional curves. So, but again, not seeing anything majorly unusual there.

And, Duane, I think overall what we're seeing is Hawaii is a bright spot for us. That's the big takeaway. It's just a bright spot. Everything we're doing is ahead of expectations.

Very good. Thanks, Ben.

Thanks, Duane.

And we'll move next to Mike Linenberg with Deutsche Bank.

Yes, hey, good afternoon. Well, good morning for you guys. Andrew, comments about the San Diego buildup and the network and you know, now being in a position where you sort of offer the most utility to the customer base in that market, I found that interesting. It does look like that it's being funded by pulling down some markets that I would have thought were core to last like Alaska to DC, excuse me, San Francisco to DC and San Francisco to Chicago. And so it does seem like that San Diego's gain is San Francisco's loss because it does seem like it would reduce the utility of your product in the SFO market. How should I think about it? And are those the types of moves that we should expect from you going forward? From a network perspective?

Yeah, Mike. That's a very perceptive question. Thank you for looking at the details behind it. But here's what I would say is number one, we continue to reshape California to make sure that it's in the best place possible. I would say if you're referring to places like Dallas, we fly lucrative DCA market. So we've not really lost the utility there. We have a great partner in American Airlines. Chicago, we're our lead can earn and accrue miles and all of that. And, Nassau, just to be honest with you, was a COVID post-COVID market that is more of a cruise stop destination. We couldn't work. So we used those loss-making markets. We reinvested them in San Diego, which has actually been more profitable. So net-net, we're doing it smart. We're doing it incrementally, and I think overall, Air Group and our guests are gonna benefit from this.

And, Mike, just let me be clear. San Francisco and Los Angeles are still a key part of our California strategy, in no way interpret these moves as putting less focus on SFO and LAX. It's SFO, LAX, and San Diego. Part of the strategy.

Great. Makes sense. And just my second question, you know, I'm obviously seeing all the—you put out a release about the co-location and you and Hawaiian coming together, in some of these key airports. Are there any airports in your system where you're gonna run into real estate constraints? It looks like San Diego is actually going to be a huge opportunity because they're building out. I'm sure you're getting a lot of gates there. But are any of the other key airports in your system, not just California, but like SeaTac, Portland, where you're gonna run into some real estate constraints over the next year or so? Thanks for taking my questions.

I think just from a network, I would sort of say no. I think certainly on the infrastructure, we get great economies of scale with the Hawaiian assets flying on all the cities on the West Coast. We just absorb those into our network. I think we're in a really good position in our core hubs and managing capacity and gates. So big picture, I don't see any material issues with bringing the networks together and being able to have adequate space. And, Mike, just to remind you, like, at Investor Day, we said Portland is a huge opportunity for us. It's got a ton of capacity, and it's a great relief valve for Seattle as we bring international flying into Seattle. And so we're creating a connecting complex in Portland. So Portland, there's a huge investment. There's a phenomenal lobby. If you haven't seen it, I think it's the nicest lobby in the country. And we've invested heavily in it. So see us invest more in Portland as we create that connecting complex as an opportunity to help offload Seattle a little bit.

Great. Thanks, everyone.

And we'll move next to Tom Wadewitz with UBS Financial.

Yeah. Thank you for, thank you for giving me some questions here on the call. I wanted to get your maybe higher-level—a lot of the questions you've had on kind of premium. How do you think about the, I guess, macro backdrop that would give you greater concern on weakening in premium and first-class and that, you know, kind of broader category? You know, I think we were thinking that, you know, a big step down in the equity market could cause some pressure, some risk. Could be going into a mild recession. But I guess you could say, well, maybe that income cohort is so well-protected that could do a mild recession. You go into a mild recession, and maybe you would still be resilient. So just wanted to see if you could offer some thoughts about how you think about how premium would go through a downturn and an economic downturn and how resilient it might be?

I think, Tom, it's the question I know has been asked a few ways. I think we're just not seeing it. I'd just be clear about that. We are not seeing any pressure, certainly in the front cabin. And I think as we've shared in Investor Day, we have the long, if not the longest domestic stage length of any carrier in the United States. So when you look at a quarter of our capacity, Hawaii alone is flying six hours, let alone everything else. There is a real demand for our premium and first-class product where most of our network is flying four to five hours on any given day.

So then I guess you're—my question was more if you had further weakness, not what you're currently seeing. But it sounds like you think even if you saw, you know, an actual recession, you think it would still be resilient.

Sure. Well, I think if, you know, at some point there may be, you know, softness in those fares. But, again, as I've shared, it's not like we've removed any seats from our airplane, and our unit costs went up, and we're banking on that. We still have the same amount of seats. So, yeah, there will probably be yield pressure if we saw that turn. But I think we're very well positioned versus other carriers who are just literally taking seats off airplanes.

Yeah. Tom, this is Ryan. I think our theory based on what we've seen is the relative gaps between first, pre-PC, main, and saver would likely remain. Of course, if the overall environment got worse, everything may come down by some amount. But I still don't I think we're gonna see first in PC outperform the main cabin, you know, even in a downturn.

Yeah. Right. Okay. That makes a lot of sense. And then just a second one would be, how do you think about capacity in the second half? It sounds like a maybe more careful approach on it, but are you what would you kind of need to see to really take it down more aggressively? Or do you think you're kind of even if you saw some further weakening in the main cabin, you would kind of stick with the capacity plan for the second half?

You know, the good thing a little bit is the second and especially the third quarter are our lowest growth quarters already, so we've got a natural hedge there. And as I did share in my prepared remark, we are already, you know, looking at some of the fall and beyond and looking at some capacity cuts. I will say that as we have shown and we demonstrated that if there is continued weakness, we would definitely be looking at capacity and how we ensure that we position this airline well for that.

Yeah, Tom. Just our history is we will respond quickly. If there is a massive quick downturn, we will take the appropriate action. As you know, Alaska, you know, our growth for the whole year was 2% to 3%. It was never high and was really baked on utilization. A lot of other airlines have brought down their capacity, which I think will benefit in the second half of the year, and we'll see how that pans out based on what happens.

Alright. Okay. We got Thank you for one more. Yeah. One more question? Okay.

Thank you. That question will come from Ravi Shanker with Morgan Stanley.

Great. Thanks. Good morning. Thanks for squeezing me in here. Just a few high-level questions on Hawaii, kind of going back to the earlier commentary on the booking curve. There's no speculation that U.S. travelers may not want to go international as much as maybe the last couple of years. Do you see any potential or evidence that Hawaii may be an alternative there? And also, there's some talk locally in Hawaii of maybe restricting the number of tourists coming in. Is that an opportunity on mix or a risk on volume?

Hey, Ravi. Andrew can jump in too. I look. We've talked about this a bit over the last twelve months. We think international's, you know, doing great right now over the last couple of years, and it's certainly helping those folks who have a lot of capacity pointed that way. We've always thought it's gonna normalize over time. And it's one of the reasons we love the partnership and acquisition of Hawaiian. It's a premium leisure market. It fits our network perfectly. I think, you know, folks want to go to Hawaii. Many of us off the West Coast go there regularly, and we did before, you know, the acquisition. So I think it's a durable premium market we're gonna serve really well. We have over 50% of the market share today. And, yeah, as folks, for whatever reason, decide to not travel as much internationally, I think Hawaii is a great destination for those folks, and we'll be the ones who are carrying them there.

Got it. I need a quick follow-up on that as well. Can I have good see the momentum in Hawaii loyalty there? Is that something we would we should expect to see be really strong out of the gate? Of this acquisition? Or does that is that something that will accelerate later on once you've completed the, you know, operating certificate, PSS, loyalty program combination? Is that gonna add to gonna peak later, or is that, like, the most you see now?

Yeah. I think we're very excited. We just think loyalty is gonna continue to accelerate. We go to a single loyalty program this summer, and we have— we’re making continual changes to our program, which will be announced, and we also have a premium card. And then elites will get full access across the breadth and depth of both metal, you know, as we get to single, you know, PSS. So we're just excited that there will be continued momentum on the loyalty side.

And, Ravi, if you remember from an Investor Day, one of our big priorities on our Alaska Accelerate vision was to be Hawaii's trusted airline. This is the trusted airline that will take people, you know, between neighbor island travel, which is hugely important. That are gonna take them internationally out of Honolulu, and we'll connect people from the islands to the West Coast to our massive network from the West Coast to the rest of the Continental US. So we're seeing gains. I, to be honest, think we just scratched the surface on this. I think we're gonna see this accelerate more as the year progresses. And when we become on one single reservation system, a single loyalty program, which is gonna be in place here by August, I think you're gonna see this continue to grow, and then we'll achieve that vision of being Hawaii's trusted airline. Thank you.

I think we're out of time, so I want to thank everyone for joining us. And we'll follow up with any questions from anybody, and we'll talk to you next quarter. Thank you so much.

And this concludes today's conference call. Thank you for attending.