ALK Issues Bearish Q3 View on High Fuel Costs, Operational Issues

Alaska Air Group, Inc. (ALK) has unveiled disappointing third-quarter 2025 guidance, citing issues related to higher fuel expenses and operational issues.

ALK now projects its third-quarter 2025 adjusted earnings per share to be at the low end of its previously guided range of $1.00-$1.40. The downside has been attributed to higher fuel costs, coupled with operational challenges during the summer, which have weighed on unit costs.

Notably, ALK has been witnessing high West Coast refining margins due to ongoing refinery disruptions. This has led to an increase in fuel cost expectations guidance to the range of $2.50–$2.55 per gallon from the prior view of nearly $2.45 per gallon.

Irregular operations, which include weather and air traffic control issues, have pushed up expenses related to overtime, premium pay and passenger compensation. Further, the July IT outage continues to have an anticipated impact of almost 10 cents per share on the company’s bottom line.

On the greener side, ALK has been enjoying solid revenue trends. Unit revenue is projected to be near the high end of the prior guidance of flat to low-single-digit growth. ALK witnessed positive year-over-year yield growth in August, on the back of premium cabin strength and a double-digit surge in corporate revenue on a sequential basis.

Meanwhile, the launch of ALK’s new Atmos Rewards loyalty program on Aug. 20 garnered major media impressions, which marked the maximum for any announcement in the history of ALK. Sign-ups for ALK’s new premium credit card, the Atmos Rewards Summit Visa Infinite Card, surpassed year-end target within two weeks, with solid traction beyond ALK’s core West Coast and Hawaii markets. This reflected the widespread popularity of ALK’s loyalty platform.

ALK currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Updated Q3 View of Other Airline Companies

In addition to ALK, Delta Air Lines (DAL) and JetBlue Airways Corporation JBLU have also provided updated third-quarter 2025 guidance.

Delta Air Lines

Delta Air Lines gave an improved projectionfor the third quarter of 2025, driven by the stabilization and improvement of air travel demand.Highlighting the improvement in air travel demand, Delta Air Lines, while presenting at the Morgan Stanley Laguna Conference, gave a better view of revenues for the third quarter of 2025. The airline now expects revenue growth in the 2-4% band in the September quarter from third-quarter 2024 actuals, which is in the upper half of the guidance range provided while releasing its second-quarter 2025 results. Adjusted revenues (excluding third-party refinery sales) are expected to be in the $14.9-$15.2 billion range.

In July, DAL had projected third-quarter revenues on an adjusted basis to either remain flat or increase up to 4% from the third quarter of 2024 level. Factors like stronger-than-expected demand and capacity discipline across the U.S. airline industry are responsible for the improved September quarter outlook.

JetBlue

JetBlue now anticipates available seat miles (ASMs) for the third quarter to be flat to up 1% year over year, compared with the prior guidance of down 1% to up 2%. Further, JBLU anticipates third-quarter operating revenue per ASM (RASM) to decline in the range of 1.5%-4% year over year, an improvement from the prior outlook of 2%-6% decrease.

Consistency in air travel demand continued from the summer season through August and the Labor Day holiday, all of which was reflected in the rising number of bookings within 14 days of travel. Strong operational performance during August, in addition to the carrier’s cost management actions, aided JBLU’s non-fuel unit costs. JBLU now expects third-quarter costs per available seat mile (excluding fuel and special items) to increase in the range of 3.5-5.5%, down from the prior expectation of a 4%-6% increase.

JBLU lowers its third-quarter 2025 average fuel cost per gallon guidance to the range of $2.45-$2.55 from the previously guided range of $2.50 to $2.65. Lower fuel costs should boost the company’s bottom line, as fuel expenses represent a key input cost for any airline company.

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