Alaska Keeps its Swagger
On a relative basis, Alaska says it's doing fine. And, it still says it can meet its aggressive 2027 financial targets.
Dear readers,
Like their competitors, Alaska Air Group executives flagged weaker-than-expected demand for economy class seats during their first quarter earnings call and indicated they will deploy discounts to fill them. But even in a recession, CEO Ben Minicucci assured investors that his company should be “solidly profitable” in 2025, and CFO Shane Tackett added that "we still think we're going to be amongst the top three industry margin producers."
I believe them. Yes, Alaska Air Group lost $166 million in the first quarter on revenues of $3.14 billion (the first three months of the year are always rough for the company), but focusing on that loss misses the broader point.
For the last couple of years, when industry insiders talk to me about the three U.S. airlines that matter most to the health of the industry, they’re usually referring to United, Delta, and Alaska. Insiders like (or merely respect) Alaska because the company has a clear strategy, and it often sticks to that strategy with good results. Or, if it strays from its plan (as it did when incorporating Virgin America) there’s a good reason. It’s why Minicucci is among my top three most competent U.S. airline executives, next to Scott Kirby and Glen Hauenstein.1
However, Alaska’s next test may be a big one. It’s one thing to be “solidly profitable” — as Minicucci is promising — in a downturn. But I remind you that the company set very aggressive medium-term goals at its investor day in December, just weeks before demand softened. Yet the company still assures analysts it will produce $10 in earnings-per-share in 2027, more than twice its 2024 haul. To reach its goal, it must boost profits by $1 billion through merger-related synergies and new revenue opportunities.
“We have conviction in our ability to deliver $10 of earnings per share by 2027 and do not believe what's happening today jeopardizes that target in any way,” Minicucci told analysts last week.
While some of the extra profit should come from merger synergies that so far are on target2 (Alaska acquired Hawaiian for a low price, and it can profitably use many of its assets elsewhere, including Seattle), the rest needs to come from increased revenues. And those goals might be tough to reach if economic uncertainty continues:
Insiders and investors are accustomed to watching Alaska keep its promises, but this is no simple task. Why are Alaska executives so confident they can pull it off? And what’s going on more broadly at the company?
Let’s take a look at highlights from last week’s earnings call.