ALK 10-K & 10-Q changes, risk factors and insider trading
Alaska Air Group, Inc. · NYSE · Air Transportation, Scheduled · CIK 766421 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “The Company’s ability to use its net operating loss carryforwards to offset future taxable income for U.S. federal and state income tax purposes may be limited.”
Removed heading “As we evolve our brand we will engage in strategic initiatives that may not be favorably received by all of our guests.”
Removed heading “ACQUISITION AND INTEGRATION OF HAWAIIAN HOLDINGS, INC.”
Removed heading “We are expected to incur substantial expenses related to the acquisition and the integration of Hawaiian Airlines’ business.”
Removed heading “Our ability to use Hawaiian Airlines' net operating loss carryforwards to offset future taxable income for U.S. federal and state income tax purposes may be limited as a result of the previous ownership changes, this acquisition or taxable income if it does not reach sufficient levels.”
Largest changes
“Our sensitive information is securely transmitted over public and private networks. Our systems are subject to increasing and evolving cybersecurity risks. Unauthorized parties have attempted and continue to attempt to gain access to our systems and information, including through fraudulent misrepresentation and other means of deception. Methods used by unauthorized parties are continually evolving and may be difficult to identify. …”see in full comparison
Although we have historically been able to generate sufficient cash flow from our operations to pay our debt and other fixed obligations when they become due, we cannot ensure we will be able to do so in the future. If we fail to do so, our business could be harmed. Certain debt agreements and credit facilities contain customary financial covenants, including compliance with certain debt service coverage ratios and minimum liquidity requirements. If we fail to comply with any of these covenants and are unable to renegotiate the terms of the agreements, this could result in default and acceleration of our outstanding obligations or repossession of collateral by our lenders. If a default were to occur, this would have a material adverse impact on our financial position.see in full comparison
“As part of our core business, we are required to collect, process, store and share personal and financial information from our guests and employees. Under current or future privacy legislation, we are subject to significant legal risk should we not appropriately protect that data. Our presence in international locations and our membership in the oneworld alliance exposes us to incremental global regulation and therefore risk. In addition, we continue to expand our reliance on third-party software providers and data processors, including cloud providers. …”see in full comparison
“In addition, we continue to expand our reliance on third-party software providers and data processors, including cloud providers. Unauthorized access of personal and financial data via fraud or other means of deception could result in data loss, theft, modification, or unauthorized disclosure. …”see in full comparison
“Our sensitive information is securely transmitted over public and private networks. Our systems are subject to increasing and evolving cybersecurity risks. While we have not experienced a material breach of our systems and information to date, unauthorized parties have previously gained access to our systems and information, including through fraudulent misrepresentation and other means of deception. In June 2025, Hawaiian Airlines identified a cybersecurity incident affecting certain information technology systems. …”see in full comparison
“Although we have protocols in place to address cybersecurity incidents, unauthorized access to or misuse of the personal and financial information of our guests and employees as a result of a cyber-attack could result in substantial costs for response and remediation, adversely affect our operations and our reputation, and expose us to litigation, regulatory enforcement, or other legal action. …”see in full comparison
Full comparison: every changed paragraph (49)
Our use of outside vendors increases our exposure to several risks. Even though we strive to formalize agreements with these vendors that define expected service levels, we may not have the ability to influence changeperformance withof all vendors. In the event that one or more vendors go into bankruptcy, ceases operation, or fails to perform as promised, for reasons such as supply chain delays, or workforce shortages, replacement services may not be readily available at competitive rates, or at all. If one of our vendors fails to perform adequately, we may experience increased costs, delays, maintenance issues, safety issues, or negative public perception of our airline. Vendor bankruptcies, unionization, regulatory compliance issues, or significant changes in the competitive marketplace among suppliers could adversely affect vendor services or force us to renegotiate existing agreements on less favorable terms. These events could result in disruptions in our operations or increases in our cost structure.
We continue to face strong competition, mainly from other U.S. carriers. In many instances, our competitors have been able to grow and increase their competitive influence by merging with other airlines, as Alaska did with Virgin America in 2016 and Hawaiian Holdings, Inc. in 2024. Some competitors have also benefited from the ability to reduce their cost structures through the U.S. bankruptcy process and restructuring laws. Competitors have also improved their competitive positions by entering marketing alliances and/or joint ventures with other airlines. Certain airline joint ventures promote competition by allowing airlines to coordinate routes, pool revenues and costs, and enjoy other mutual benefits that can be extended to consumers, achieving many of the benefits of consolidation.
•maintaining productive and effective employee relationships and, in particular, successfully and promptly integrating seniority lists and achieving cost-competitive collective bargaining agreements that cover the combined union-represented work groups; and
•retaining key employees of our company
Our strategy involves a high concentration of our business in key West Coast markets. A significant portion of our flights occur to and from our stations in Seattle, Honolulu, Portland, and the Bay Area. In addition to these markets, the acquisition of Hawaiian Holdings, Inc. in 2024 significantly increases the concentration of our operation in Hawai'i, with Honolulu now representing Air Group's second largest hub.California.
AlaskaOur iscarriers are dependent on Boeing as its sole supplier for mainline aircraft and many aircraft parts. Horizon is dependent on Embraer. Each carrier is dependent on solelimited suppliers for aircraft engines for each aircraft type. Hawaiian is similarly dependent on a limited number of suppliers for its aircraft, aircraft engines, and many aircraft parts. As a result, we are vulnerable to issues associated with the supply of those aircraftaircraft, engines, and parts including design or manufacturing defects, mechanical problems, contractual performance by the manufacturers, or adverse perception by the public about safety that would result in customer avoidance or actions by the FAA. Should we be unable to resolve known issues with certain aircraft or engine suppliers, it may result in the inability to operate our aircraft for extended periods. Additionally, if effects of ongoing supply chain constraints cause our limited vendors to have performance problems, reduced or ceased operations, bankruptcies, workforce shortages, or other events causing them to be unable to fulfill their commitments to us, our operations and business could be materially adversely affected.
Should these suppliers be unable to manufacture, obtain certification for, and deliver new aircraft, we may not be able to grow our airlines' fleet at intended rates, which could impact our financial position. Boeing has significant production constraints for the B737 and B787-9B787 aircraft, as well as regulatory delays for certain B737 aircraft. Recently, Boeing was impacted by an employee strike which temporarily halted production of B737 aircraft. These challenges have impacted and will continue to impact the timing of deliveries. If we are unable to receive aircraft in a timely manner, our growth plans could be negatively impacted. Given Alaska's and Hawaiian'sour size relative to its competitors, these challenges may have a disproportionate impact on Alaska and Hawaiian.us. Additionally, further consolidation among aircraft and aircraft parts manufacturers could further limit the number of suppliers. This could result in production instability in the locations in which the aircraft and its parts are manufactured or an inability to operate our aircraft.
Our airlines are parties to marketing agreements with a number of domestic and international air carriers, or “partners,” including an expanded relationship with American Airlines and other oneworld carriers. These agreements provide that certain flight segments operated by us are held out as partner “codeshare” flights and that certain partner flights are held out for sale as codeshare flights. In addition, the agreements generally provide that members of our airlines' loyalty programs can earn credit on or redeem credit for partner flights and vice versa. We receive revenue from flights sold under codeshare and from interline arrangements. The loss of a significant partner through bankruptcy, consolidation, or otherwise, could have a negative effect on our revenue or the attractiveness of our loyalty programs, which we believe is a source of competitive advantage. Additionally, we rely on partners to provide available space for credit redemption on their aircraft. Should partners not make available enough inventory within their cabins for our members, the attractiveness of our program may be decreased.
Alaska's membership in the oneworld global alliance may limit options to bring non-oneworld carrier partners into Alaska'sthe MileageAtmos PlanRewards program. Further, maintaining an alliance with another U.S. airline may expose us to additional regulatory scrutiny. Failure to appropriately manage these partnerships and alliances could negatively impact future growth plans and our financial position.
As we evolve our brand we will engage in strategic initiatives that may not be favorably received by all of our guests.
We continue to focus on strategic initiatives designed to increase our brand appeal to a diverse and evolving demographic of airline travelers. These efforts could include significant enhancements to our in-airport and on-board environments, increasing our direct customer relationships through improvements to our purchasing portals (digital and mobile), and management of our customer loyalty program. In pursuit of these efforts, we may negatively affect our reputation with some of our existing customer base.
We have a significant amount of debt and fixed obligations. These obligations could lead to liquidity restraintsconstraints and have a material adverse effect on our financial position. Additionally, increases in interest rates may mean that future borrowings are more costly for the Company, which could harm our future financial results.
Although we have historically been able to generate sufficient cash flow from our operations to pay our debt and other fixed obligations when they become due, we cannot ensure we will be able to do so in the future. If we fail to do so, our business could be harmed. Certain debt agreements and credit facilities contain customary financial covenants, including compliance with certain debt service coverage ratios and minimum liquidity requirements. If we fail to comply with any of these covenants and are unable to renegotiate the terms of the agreements, this could result in default and acceleration of our outstanding obligations or repossession of collateral by our lenders. If a default were to occur, this would have a material adverse impact on our financial position.
Fuel costs constitute a significant portion of our total operating expenses. Future increases in the price of jet fuel may harm our business, financial condition, and results of operations unless we are able to increase fares and fees or add ancillary services to attempt to recover increasing fuel costs. The price of jet fuel can be dependent on geographygeography, andas refining margins on the West Coast can be elevated compared to other geographic locations. Due to our concentration on the West Coast, the price of jet fuel may have a disproportionate impact on our operating results duecompared to ourother concentrationcarriers onwhich themay Westhave Coast.operations that span a larger geographic area.
In accordance with acquisition accounting rules, we recorded goodwill and identifiable intangible assets associated with the acquisitions of Virgin America and Hawaiian Holdings, Inc. on our consolidated balance sheet. Goodwill was recorded to the extent the acquisition purchase prices exceeded the net fair value of tangible and identifiable intangible assets and liabilities as of the acquisition date. Goodwill and indefinite-lived intangible assets are not amortized, but are tested for impairment at least annually. We could record impairment charges in our results of operations as a result of, among other items, extreme fuel price volatility, a significant decline in the fair value of certain tangible or intangible assets, unfavorable trends in forecasted results of operations and cash flows, uncertain economic environment and other uncertainties. We can provide no assurance that a significant impairment charge will not occur in one or more future periods. Any such charges may materially affect our financial results.
The Company’s ability to use its net operating loss carryforwards to offset future taxable income for U.S. federal and state income tax purposes may be limited.
At December 31, 2025, Air Group had $2 billion of gross U.S. federal net operating loss (“NOL”) carryforwards, which can be carried forward indefinitely. Air Group also had $1.7 billion of gross state NOL carryforwards which begin to expire in 2026. The Company’s ability to utilize these NOLs depends on generating sufficient taxable income in future periods. In addition, NOLs remain subject to examination and adjustment by federal and state taxing authorities. If future operating results or economic conditions are less favorable than expected, the company may be required to record additional valuation allowances against its deferred tax assets, which could be material.
We heavily depend on automated systems to operate our business. This includes our airline reservation system, website, telecommunication systems, maintenance systems, airline operations control systems, flight deck/route optimization systems, planning and scheduling, mobile applications and devices, and many other systems. These systems require significant investment of employee time and cost for maintenance and upgrades. Some of these systems are operated by government authorities, which limits our ability to switch vendors if issues arise. Failure to appropriately maintain and upgrade these systems may result in service disruptions or system failures. Additionally, as part of our commitment to innovation and providing an attractive guest travel experience, we invest in new technology to ensure our critical systems are reliable, scalable, and secure.
We continue to expand our reliance on third party providers for management or hosting of operational and financial systems. Should these providers fail to meet established service requirements or provide inadequate technical support, we could experience disruptions in our operation, ticketing or financial systems. All of our automated systems cannot be completely protected against events beyond our control, including natural disasters, computer viruses, cyberattacks, other security breaches, or telecommunications failures.
Substantial or repeated failures or disruptions to any of these critical systems could reduce the attractiveness of our services or cause our guests to do business with another airline. Disruptions, failed implementations, untimely or incomplete recovery, or a breach of these systems or the data centers/cloud infrastructure they run on could result in the loss of important data, an increase in our expenses, loss of revenue, impacts to our operational performance, or a possible temporary cessation of our operations.
We continue to monitor emerging technologies, including technologies which may have disruptive impacts which are out of our control. We will continue to work with regulatory agencies and other air carriers to mitigate potential impacts of these technologies on the safety and security of air travel.
As part of our core business, we are required to collect, process, store and share personal and financial information from our guests and employees. Under current or future privacy legislation, we are subject to significant legal risk should we not appropriately protect that data. Our presence in international locations and our membership in the oneworld alliance exposes us to incremental global regulation and therefore risk. In addition, we continue to expand our reliance on third-party software providers and data processors, including cloud providers. Unauthorized access of personal and financial data via fraud or other means of deception could result in data loss, theft, modification, or unauthorized disclosure. To the extent that either we or third parties with whom we share information experience a data breach, fail to appropriately safeguard personal data, or are found to be out of compliance with applicable laws, and regulations, we could be subject to additional litigation, regulatory risks and reputational harm. Further, as regulation of the collection and storage of personal and financial information continues to evolve and increase, we may incur significant costs to bring our systems and processes into compliance.
Our sensitive information is securely transmitted over public and private networks. Our systems are subject to increasing and evolving cybersecurity risks. Unauthorized parties have attempted and continue to attempt to gain access to our systems and information, including through fraudulent misrepresentation and other means of deception. Methods used by unauthorized parties are continually evolving and may be difficult to identify. Because of these ever-evolving risks and regular attacks, we continue to review policies and educate our people on various methods utilized in attempts to gain unauthorized access to bolster awareness and encourage cautionary practices. However, the nature of these attacks means that proper policies, technical controls, and education may not be enough to prevent all unauthorized access. Emerging cybercrime threats include the loss of functionality of critical systems through ransomware, denial of service, or other attacks. A compromise of our systems, the security of our infrastructure, or those of our vendors or other business partners that result in our information being accessed or stolen by unauthorized persons could result in substantial costs for response and remediation, adversely affect our operations and our reputation, and expose us to litigation, regulatory enforcement, or other legal action. A cybersecurity attack impacting our onboard or other operational systems may result in an accident or incident onboard or significant operational disruptions, which could adversely affect our reputation, operation and financial position. The continued evolution and increased usage of artificial intelligence technologies may further increase our cybersecurity risks. Further, a significant portion of our office employees have maintained remote work arrangements, which increases our exposure to cyberattacks, and could compromise our financial or operational systems.
Airlines are subject to extensive regulatory and legal requirements, both domestically and internationally, that involve substantial operational impacts and compliance costs. In recent years, U.S. regulators have issued regulations or mandates concerning airline operations or consumer rights that have increased the cost and complexity of our business and involve greater civil enforcement and legal liability exposure. Regulators have also proposed legislation that could negatively impact revenue associated with our loyalty program.
In recent years, the state of California and the federal government have enacted and proposed, respectively, rules that significantly expand required disclosures discussing the impact of environmental change. Increased governmental regulation involving aircraft emissions and environmental remediation costs may be difficult to implement and the cost of compliance, or failure to comply, could adversely impact our operations and financial position.
ACQUISITION AND INTEGRATION OF HAWAIIAN HOLDINGS, INC.
•diversion of the attention of our and Hawaiian's management and other key employees;
•maintaining productive and effective employee relationships and, in particular, successfully and promptly integrating seniority lists and achieving cost-competitive collective bargaining agreements that cover the combined union-represented work groups;
•the increased scale of our operations resulting from the acquisition;
•retaining key employees of our company and Hawaiian; and
•obligations that we will have to counterparties of Hawaiian that arise as a result of the change in control of Hawaiian.
We heavily depend on automated systems to operate our business. This includes internally hosted technologies as well as third-party software solutions, such as our airline reservation system, website, telecommunication systems, maintenance systems, airline operations control systems, flight deck/route optimization systems, planning and scheduling, mobile applications and devices, and many other systems. These systems require significant investment of employee time and cost for maintenance and upgrades. Some of these systems are operated by government authorities, which limits our ability to switch vendors if issues arise. Failure to appropriately maintain and upgrade these systems may result in service disruptions or system failures. Additionally, as part of our commitment to innovation and providing an attractive guest travel experience, we invest in new technology to ensure our critical systems are reliable, scalable, and secure.
We continue to expand our reliance on third party providers for management or hosting of operational and financial systems. Should these providers fail to meet established service requirements or provide inadequate technical support, we could experience disruptions in our operation, ticketing or financial systems. All of our automated systems cannot be completely protected against events beyond our control, including natural disasters, computer viruses, cyberattacks, unexpected third party IT outages, other security breaches, or telecommunications failures.
Substantial or repeated failures or disruptions to any of these critical systems could reduce the attractiveness of our services or cause our guests to do business with another airline. Disruptions, failed implementations, untimely or incomplete recovery, or a breach of these systems or the data centers/cloud infrastructure they run on could result in the loss of important data, an increase in our expenses, loss of revenue, impacts to our operational performance, or a possible temporary cessation of our operations. In July and October of 2025, Alaska Air Group experienced IT outages that affected operations. Temporary ground stops were put in place for Alaska and Horizon. Following the outages, we brought in outside technical experts to diagnose our entire IT infrastructure. Although we are taking action to ensure the resiliency of our IT infrastructure, additional technology outages may occur in the future which could disrupt operations and may affect our results of operations.
We continue to monitor emerging technologies, including artificial intelligence, that may have disruptive impacts which are out of our control. We will continue to work with regulatory agencies and other air carriers to mitigate potential impacts of these technologies on the safety and security of air travel.
As part of our core business, we are required to collect, process, store and share personal and financial information from our guests and employees. Under current or future privacy legislation, both domestically and internationally, we are subject to significant legal risk should we not appropriately protect that data. Our increasing presence in international locations and our membership in the oneworld alliance exposes us to additional global regulations and risks. With our operations to Europe beginning in 2026, we will be subject to the European Union's General Data Protection Regulation, which imposes strict information security requirements and the potential for substantial non-compliance penalties. The regulatory environment may pose material risks to our business, including additional compliance costs, regulatory enforcement, and legal claims or proceedings.
In addition, we continue to expand our reliance on third-party software providers and data processors, including cloud providers. Unauthorized access of personal and financial data via fraud or other means of deception could result in data loss, theft, modification, or unauthorized disclosure. To the extent that either we or third parties with whom we share information experience a data breach, fail to appropriately safeguard personal data, or are found to be out of compliance with applicable laws, and regulations, we could be subject to additional litigation, regulatory risks and reputational harm. Further, as regulation of the collection and storage of personal and financial information continues to evolve and increase, we may incur significant costs to bring our systems and processes into compliance.
Our sensitive information is securely transmitted over public and private networks. Our systems are subject to increasing and evolving cybersecurity risks. While we have not experienced a material breach of our systems and information to date, unauthorized parties have previously gained access to our systems and information, including through fraudulent misrepresentation and other means of deception. In June 2025, Hawaiian Airlines identified a cybersecurity incident affecting certain information technology systems. Upon identifying this incident, we followed our response protocols and immediately took steps to safeguard our network by disconnecting impacted Hawaiian systems and applications. Access for all systems was restored. Hawaiian's flights were not interrupted and continued to operate safely throughout our response.
Although we have protocols in place to address cybersecurity incidents, unauthorized access to or misuse of the personal and financial information of our guests and employees as a result of a cyber-attack could result in substantial costs for response and remediation, adversely affect our operations and our reputation, and expose us to litigation, regulatory enforcement, or other legal action. Additionally, a cybersecurity attack impacting our onboard or other operational systems may result in an accident or incident onboard or significant operational disruptions, which could adversely affect our reputation, operation and financial position.
Methods used by unauthorized parties are continually evolving and may be difficult to identify. Because of these ever-evolving risks and regular attacks, we continue to review policies and educate our people on various methods utilized in attempts to gain unauthorized access to bolster awareness and encourage cautionary practices. However, the nature of these attacks means that proper policies, technical controls, and education may not be enough to prevent all unauthorized access. The continued evolution and increased usage of artificial intelligence technologies may further increase our cybersecurity risks. Further, a number of our employees have maintained remote or hybrid work arrangements, which increases our exposure to cyberattacks, and could compromise our financial or operational systems.
Airlines are subject to extensive regulatory and legal requirements, both domestically and internationally, that involve substantial operational impacts and compliance costs.The FAA will periodically issue directives or other regulations regarding maintenance or operation of aircraft, which could result in temporary groundings, delays, or adjustments to operations and consequently could negatively impact our financial results. Additionally, the FAA is responsible for the efficient and safe operation of air traffic. Any inefficiencies in air traffic control, including the failure to modernize the air traffic control system in a manner consistent with the growth of air travel, could adversely affect our operations. Access to airport slots can also be limited due to government regulation. Obtaining access to these slots to support our growth plans may require significant financial commitments.
In recent years, U.S. regulators have issued regulations or mandates concerning airline operations or consumer rights that have increased the cost and complexity of our business and involve greater civil enforcement and legal liability exposure. Regulators have also proposed legislation that could negatively impact revenue associated with our loyalty program.
Our operations are subject to federal, state, and international rules that require disclosures discussing the impact of environmental change. Increased governmental regulation involving aircraft emissions and environmental remediation costs may be difficult to implement and the cost of compliance, or failure to comply, could adversely impact our operations and financial position.
We are expected to incur substantial expenses related to the acquisition and the integration of Hawaiian Airlines’ business.
We are expected to incur substantial integration and transition expenses in connection with the acquisition of Hawaiian Airlines, including the necessary costs associated with integrating the operations of Alaska and Hawaiian Airlines. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including reservations, loyalty program, ticketing/distribution, maintenance, and flight operations. While we have assumed that a certain level of expenses will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These expenses could, particularly in the near term, exceed the financial benefits we expect to achieve from the acquisition, including the elimination of duplicative expenses and the realization of economies of scale and cost savings. These integration expenses likely will continue to result in us taking significant charges against earnings in future periods, and the amount and timing of such charges are uncertain at present.
Our ability to use Hawaiian Airlines' net operating loss carryforwards to offset future taxable income for U.S. federal and state income tax purposes may be limited as a result of the previous ownership changes, this acquisition or taxable income if it does not reach sufficient levels.
As of the acquisition closing date, Hawaiian Airlines had federal net operating loss carryforwards (“NOLs”) of approximately $817 million available to offset future taxable income, that have indefinite carryover, but are limited to 80% utilization, and state NOLs of approximately $1.0 billion. The majority of the state NOLs relate to the state of Hawai'i. Certain state NOLs will expire, if unused, beginning in 2025.
Hawaiian Airlines has experienced an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Section 382 of the Code imposes an annual limitation on the amount of pre-ownership change NOLs of the corporation that experiences ownership change. The limitation imposed by Section 382 of the Code for any post-ownership change year generally would be determined by multiplying the value of such corporation’s stock immediately before the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may, under certain circumstances, be increased by built-in gains or reduced by built-in losses in the assets held by such corporation at the time of the ownership change. Our use of NOLs generated after the date of an ownership change would not be limited unless we were to experience a subsequent ownership change.
Our ability to use the NOLs will also depend on the amount of taxable income generated in future periods. Certain state NOLs may expire before we can generate sufficient taxable income to utilize the NOLs.
Management's Discussion & Analysis (MD&A)
New heading “Cybersecurity incident”
New heading “Single operating certificate”
New heading “Loyalty program update”
New heading “Irregular operations”
New heading “2025 COMPARED WITH PRO FORMA 2024”
New heading “PRO FORMA OPERATING STATISTICS”
New heading “PRO FORMA OPERATING REVENUE”
New heading “PRO FORMA OPERATING EXPENSES”
New heading “Additional Segment Information”
New heading “Alaska Airlines”
New heading “Hawaiian Airlines”
New heading “Adjusted Income Before Income Tax Reconciliation”
New heading “CASMex Reconciliation”
New heading “Adjusted Capital Expenditures Reconciliation”
Removed heading “OPERATING STATISTICS SUMMARY (unaudited)”
Removed heading “2024 COMPARED WITH 2023”
Removed heading “Operating Revenue”
Removed heading “Operating Expenses”
Removed heading “Recognition of Goodwill and Acquired Assets and Liabilities”
Removed heading “Alaska Mileage Plan”
Largest changes
“Recognition of Goodwill and Acquired Assets and Liabilities”see in full comparison
“As previously disclosed in a Current Report on Form 8-K filed on June 27, 2025, on June 23, 2025, Hawaiian Airlines identified a cybersecurity incident affecting certain information technology systems. Upon identifying this incident, we followed established response protocols and immediately took steps to safeguard our network by disconnecting impacted Hawaiian systems and applications. Access for all systems was restored. Hawaiian's flights were not interrupted and continued to operate safely throughout our response. …”see in full comparison
“We have various contractual obligations that require material future outlays of cash. These obligations include the purchase of aircraft and other flight equipment, payments for Alaska's CPA with SkyWest, debt service payments, lease payments for aircraft and other property and equipment, costs for aircraft and engine maintenance, sponsorship and license agreements, and other miscellaneous agreements for services associated with operating and marketing our airlines. We also anticipate we may have material cash outlays associated with new technologies for the future of the business. …”see in full comparison
“We evaluate economic fuel expense, which we define as raw fuel expense adjusted for the cash we receive from counterparties for hedges that settle during the period and for the premium expense that we paid for those contracts. A key difference between aircraft fuel expense and economic fuel expense is the timing of gain or loss recognition on our hedge portfolio. Economic fuel expense includes gains and losses only when they are realized for those contracts that were settled during the period based on their original contract terms. …”see in full comparison
Full comparison: every changed paragraph (158)
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our company and the present business environment. MD&A is provided as a supplement to – and should be read in conjunction with – our consolidated financial statements and the accompanying notes. All statements in the following discussion that are not statements of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the risks referred to in this report’s introductory cautionary note and the risks mentioned in Item 1A. "Risk Factors" within this document. This overview summarizes the MD&A, which includes the following sections:
•Year in Review - highlights from 2025 outlining some of the major events that occurred during the period, as well as forward-looking statements.
•Results of Operations - an in-depth analysis of our financial and operational results for 2025.
•Liquidity and Capital Resources - an overview of our financial position, analysis of cash flows, and relevant material cash commitments.
•GAAP to Non-GAAP Reconciliations and Operating Statistics - reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis, as well as operating statistics we use to measure operating performance.
Dollar amounts in the MD&A are generally rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to our actual figures represented in the tables below.
This section of the Form 10-K covers discussion of 20242025 and 20232024 pro forma results, and comparisons between those years. For a discussion of the year ended December 31, 20232024 compared to the year ended December 31, 2022,2023, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.2024.
As Hawaiian Holdings, Inc. was acquired by Air Group on September 18, 2024, its financial results were not reflected in reported figures in the periods preceding the acquisition date. As a result, the reported results for 2025 and 2024 are not comparable. To assist with the discussion of 2025 and 2024 results on a comparable basis and provide more meaningful discussion, certain supplemental unaudited pro forma income statement information is provided for 2024. Pro forma historical results were included with the Form 8-K filed on January 22, 2025. This information does not purport to reflect what our financial and operational results would have been had the acquisition been consummated at the beginning of the periods presented.
Cybersecurity incident
As previously disclosed in a Current Report on Form 8-K filed on June 27, 2025, on June 23, 2025, Hawaiian Airlines identified a cybersecurity incident affecting certain information technology systems. Upon identifying this incident, we followed established response protocols and immediately took steps to safeguard our network by disconnecting impacted Hawaiian systems and applications. Access for all systems was restored. Hawaiian's flights were not interrupted and continued to operate safely throughout our response. We engaged the relevant authorities and experts to assist in our investigation and remediation efforts. Based on the results of the investigation, the incident did not have a material impact on Hawaiian's business, results of operations, or financial condition. For a discussion of our risk factors associated with cybersecurity threats, please refer to Item 1A. "Risk Factors" within this document.
We reported pretax income under GAAP of $146 million in 2025, compared to $545 million in 2024. On a pro forma basis, pretax income in 2024 was $228 million. Refer below for a more detailed discussion of the items impacting these results.
Single operating certificate
On October 29, 2025, Alaska and Hawaiian obtained a single operating certificate from the FAA, officially recognizing Alaska and Hawaiian as one airline under the Alaska certificate.
In 2025, Alaska flight attendants, represented by the Association of Flight Attendants (AFA), ratified a new three-year Collective Bargaining Agreement (CBA). Hawaiian flight attendants, represented by AFA, ratified a three-year extension to their existing CBA. Horizon technicians, represented by the Aircraft Mechanics Fraternal Association (AMFA) ratified a four-year CBA. McGee Air Services employees, represented by the International Association of Machinists and Aerospace Workers (IAM) ratified a five-year CBA.
Horizon is negotiating with its pilots represented by the International Brotherhood of Teamsters (IBT), flight attendants represented by the Association of Flight Attendants (AFA), and dispatchers represented by the Transport Workers Union of America (TWU) for updated collective bargaining agreements. A mediator from the National Mediation Board is involved in negotiations with AFA and TWU.
With one exception discussed below, Alaska has begun negotiations for joint collective bargaining agreements (JCBAs) covering each represented Alaska and Hawaiian workgroup. The process for determining which union will represent the combined technicians and related workgroup remains ongoing and, as a result, JCBA negotiations have not begun concerning that workgroup. Alaska intends to initiate those negotiations after the representation issue has been resolved. At December 31, 2025, Transition and Process Agreements have been negotiated for certain workgroups which define the process for negotiating JCBAs and set forth interim agreements until a JCBA is reached.
Loyalty program update
In August 2025, we launched Atmos Rewards, a single loyalty program combining Alaska’s Mileage Plan and Hawaiian’s HawaiianMiles. We also launched a new premium Atmos Summit co-branded credit card. These launches drove significant new card acquisitions, consumer spend, and member redemptions. In September 2025, amendments to the Atmos Rewards co-branded credit card agreement with Bank of America became effective, resulting in changes to the separately identifiable performance obligations.
Irregular operations
In 2025, we experienced multiple operational disruptions. Technology incidents in July and October, involving both internal IT systems and an external third-party cloud services provider, resulted in temporary ground stops, flight cancellations and delays, and periods of irregular operations. These outages negatively impacted pretax earnings by approximately $50 million. In addition, a government shutdown in October led to FAA‑mandated flight reductions and associated cancellations. Although operations normalized quickly after the government reopened, the disruption negatively impacted pretax earnings by approximately $30 million.
Looking ahead to 2026, we expect to continue to realize value from Alaska Accelerate initiatives and synergies from the Hawaiian integration, which remain on track or ahead of plan relative to our initial expectations. We expect capacity growth for the year of 2% to 3% compared to the prior year. Given the inherent uncertainty of the macroeconomic environment, we remain focused on disciplined cost management, strong productivity, and delivering on our initiatives.
2025 COMPARED WITH PRO FORMA 2024
PRO FORMA OPERATING STATISTICS
Below are operating statistics presented on a pro forma basis, which assumes Hawaiian is included in both 2024 and 2025.
(a) The Hawaiian column reflects results prior to the consummation of the merger, comprising the period January 1, 2024 to September 17, 2024.
PRO FORMA OPERATING REVENUE
On a pro forma basis, total operating revenue increased $460 million, or 3%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized in the following table:
(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.
The table below presents operating revenue details by principal geographic region (as defined by the U.S. Department of Transportation), and the percentage change of certain operational results on a pro forma basis for the twelve months ended December 31, 2025.
On a pro forma basis, Passenger revenue increased $333 million, or 3%, as traffic increased by 1% and yield grew by 2%. Hawaiian passenger revenue improved meaningfully, driven by demand environment strength in the state of Hawai'i, as well as benefits from our integration synergies and commercial initiatives. Increased premium cabin revenues, corporate travel, and loyalty program award redemption on our airlines contributed to higher yield. Additionally, prior year results were negatively impacted by $150 million due to the B737-9 grounding in the first quarter of 2024.
On a pro forma basis, Loyalty program other revenue increased $38 million, or 5%, due to higher commission revenue from bank card and third party partners, which was driven by increased consumer spend and incremental credit card acquisitions from the launch of the Atmos Rewards program and Summit Visa Infinite premium credit card.
On a pro forma basis, Cargo and other revenue increased $89 million, or 19%, primarily driven by increased revenue under the ATSA with Amazon following the addition of the four remaining contracted A330-300F aircraft to our cargo fleet in 2025. Increased international cargo volumes driven by the launch of our Seattle-Seoul route also contributed to the increase.
PRO FORMA OPERATING EXPENSES
On a pro forma basis, total operating expenses increased $467 million, or 3%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized below. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:
(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.
Alaska and Hawaiian previously used crude oil call options to hedge fuel expense. Alaska's fuel hedge program was suspended in 2023 and all remaining positions were settled in 2025. Hawaiian's fuel hedge program was suspended in 2025, with all remaining positions settled later in the year. No hedge positions remain open as of December 31, 2025.
We evaluate economic fuel expense, which we define as raw fuel expense adjusted for the cash we receive from counterparties for hedges that settle during the period and for the premium expense that we paid for those contracts. Management considers economic fuel costs to be the best estimate of the cash cost of fuel.
On a pro forma basis, aircraft fuel expense decreased by $166 million, or 5%. Raw fuel expense decreased 5% compared to pro forma 2024, primarily driven by lower per gallon costs on crude oil. Decreases were partially offset by higher fuel consumption consistent with increased capacity and higher refining margins associated with the conversion of crude oil to jet fuel.
Losses recognized for hedges that settled during the year were $4 million in 2025, compared to losses of $44 million in pro forma 2024. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement.
The table below summarizes our operating expense line items, excluding fuel and other special items, on a pro forma basis. Generally, increases to these expenses are driven by capacity increases and growth of the Company's operations. Significant or unusual changes compared to 2024 on a pro forma basis are more fully described below.
(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.
The primary components of wages and benefits, including a reconciliation of 2024 on a pro forma basis, are shown in the following table:
(a) The Hawaiian column reflects results prior to the consummation of the merger, comprising the period January 1, 2024 to September 17, 2024.
On a pro forma basis, wages and benefits increased $442 million, or 10%, driven by increased headcount and higher wage rates across multiple labor groups in 2025. Increases were partially offset by nonrecurring wages from irregular operations following the B737-9 grounding in the first quarter of 2024.
On a pro forma basis, medical and other benefits expense increased $26 million, or 5%, driven by an increase in the cost of medical services and higher costs associated with our pilots long-term disability plan. Defined contribution plan expense increased $32 million, or 10%, driven by higher contribution rates for pilots and flight attendants.
On a pro forma basis, variable incentive pay expense decreased $104 million, or 28%, driven by a lower payout percentage for the Company's Performance-Based Pay program compared to the prior year, partially offset by an increased wage base and inclusion of Hawaiian employees in the plan.
On a pro forma basis, aircraft maintenance expense increased $68 million, or 8%, primarily driven by incremental maintenance projects and material costs on cabin refresh initiatives. Also, Horizon engine maintenance increased due to additional coverage under its power-by-the-hour engine maintenance agreement during the year.
On a pro forma basis, landing fees and other rental expense increased $186 million, or 20%, primarily driven by increased terminal rents due to higher rates and growth throughout the combined network. Increased volume of departures and landed weight, as well as nonrecurring favorable settlements received from certain airports in 2024 also contributed to the year-over-year increase.
On a pro forma basis, contracted services expense increased $51 million, or 9%, driven by higher rates charged by vendors as well as increased departures and passengers throughout our combined network.
On a pro forma basis, selling expenses decreased $32 million, or 7%, primarily driven by lower marketing costs in comparison to pro forma prior year. Increased credit card vendor rebates driven by higher consumer spend also contributed to this decrease.
On a pro forma basis, depreciation and amortization increased $56 million, or 8%, primarily due to the addition of 23 owned aircraft to our fleet during the year. Incremental depreciation on ground service and other equipment also contributed to the increase.
On a pro forma basis, food and beverage service expense increased $28 million, or 8%, primarily driven by a 5% increase in departures and higher costs for food, food service supplies, and transportation.
On a pro forma basis, third-party regional carrier expense, which represents payments made to SkyWest under the CPA with Alaska, increased $29 million, or 12%, driven by incremental departures and block hours operated by SkyWest.
Other expenses
On a pro forma basis, other expense increased $24 million, or 2%, driven by higher professional services and software costs. Increases were partially offset by gains of $57 million from the sale of 12 B737-900 aircraft and certain nonrecurring passenger remuneration and crew hotel costs associated with the B737-9 grounding in 2024.
On a pro forma basis, special items decreased $113 million, or 31%, driven by decreased integration costs associated with the Hawaiian acquisition and nonrecurring costs in 2024 associated with Alaska flight attendant retroactive pay, the retirement of Alaska's Airbus and Horizon's Q400 aircraft, and certain litigation matters. Contractual changes to Alaska flight attendants' sick leave benefits in 2025 partially offset this decrease. Refer to Note 15 to the consolidated financial statements for details.
Additional Segment Information
Refer to Note 13 to the consolidated financial statements for a detailed description of each segment. Below is a summary of each segment's results.
Alaska Airlines
Alaska Airlines reported a pretax profit, excluding special items and other adjustments, of $526 million in 2025, compared to $744 million in 2024. The $218 million decrease was primarily driven by a $407 million increase in non-fuel operating expenses, largely attributable to higher wages and increased variable costs, net of a $136 million decrease in variable incentive pay. These impacts were partially offset by $39 million in increased revenue and $185 million in lower fuel costs due to lower per gallon costs.
What changed in the latest 10-Q
Risk Factors
See Part I, Item 1A. "Risk Factors," in our 2025 Form 10-K for a detailed discussion of risk factors affecting Alaska Air Group.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “COMPARISON OF THREE MONTHS ENDED JUNE 30, 2026 TO THREE MONTHS ENDED JUNE 30, 2025”
New heading “Landing fees and other rentals”
New heading “Selling expenses”
New heading “Food and beverage services”
New heading “Special items - operating”
New heading “COMPARISON OF SIX MONTHS ENDED JUNE 30, 2026 TO SIX MONTHS ENDED JUNE 30, 2025”
New heading “OPERATING REVENUE”
New heading “Passenger revenue”
New heading “Cargo and other revenue”
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New heading “Non-fuel expenses”
New heading “Wages and benefits”
New heading “Food and beverage service”
Removed heading “COMPARISON OF THREE MONTHS ENDED MARCH 31, 2026 TO THREE MONTHS ENDED MARCH 31, 2025”
Removed heading “Loyalty program other revenue”
Removed heading “Third-party regional carrier expense”
Largest changes
“Wages increased by $121 million, or 7%, driven by higher wage rates across multiple labor groups. Payroll taxes increased due to higher wages and payroll tax expense associated with a one-time employee recognition award. Medical and other benefits increased $38 million, or 15%, driven by higher claim volume and large value claims. Defined contribution plans increased $16 million, or 9%, consistent with wage increases.”see in full comparison
“COMPARISON OF THREE MONTHS ENDED MARCH 31, 2026 TO THREE MONTHS ENDED MARCH 31, 2025”see in full comparison
“COMPARISON OF THREE MONTHS ENDED JUNE 30, 2026 TO THREE MONTHS ENDED JUNE 30, 2025”see in full comparison
“COMPARISON OF SIX MONTHS ENDED JUNE 30, 2026 TO SIX MONTHS ENDED JUNE 30, 2025”see in full comparison
Full comparison: every changed paragraph (70)
•FirstSecond Quarter Review - highlights from the firstsecond quarter of 2026 outlining some of the major events that occurred during the period.
•Results of Operations - an in-depth analysis of our financial and operational results for the three and six months ended MarchJune 31,30, 2026.
FIRSTSECOND QUARTER REVIEW
We reported a $214 million loss before income tax under GAAP for the firstsecond quarter of 2026 of $317 million,2026, compared to $233a $238 million profit for the firstsecond quarter of 2025. Refer below for a more detailed discussion of the items impacting these results.
Second quarter results were adversely impacted by elevated fuel prices, which increased 85% year-over-year. However, a portion of the incremental fuel expense was offset by strong underlying demand trends that remained resilient throughout the quarter. Revenue increased 9.7% year-over-year, driven by an 8.6% increase in RASM, continued strength in our premium and loyalty products, managed corporate travel, and network optimization initiatives. CASMex increased 6.5%, reflecting higher labor and operating costs associated with continued growth, the absence of a $25 million gain recognized in the prior-year period from the sale of four B737-900 aircraft, and a one-time employee recognition award related to the successful implementation of a single passenger service system.
During the quarter, we achieved a significant integration milestone with the successful implementation of a single passenger service system, while continuing to execute our Alaska Accelerate initiatives. Additionally, we expanded the fleet with the delivery of six B737-8 aircraft at Alaska and two E175 aircraft at Horizon, and launched our first transatlantic routes from Seattle to Rome, London Heathrow, and Reykjavik.
Subsequent to quarter-end, Alaska executed leases for four B737-800 freighter aircraft, to support the continued expansion of our cargo business in Alaska and Hawai'i. The aircraft are expected to enter service in the first half of 2027.
First quarter results were negatively impacted by multiple external factors. Fuel prices increased dramatically as a result of ongoing geopolitical events and market disruptions. Civil unrest in Puerto Vallarta and historic rainstorms in Hawai'i reduced demand in key leisure markets ahead of the peak spring break travel period. These markets represent approximately 30% of Air Group capacity. Despite these headwinds, demand remained resilient and the company continued to execute on its Alaska Accelerate initiatives.
During the quarter, Alaska Airlines entered into a multi-year extension and expanded partnership with its co-branded credit card bank partner, Bank of America, enhancing loyalty program economics and long-term growth. The agreement drives incremental cash remuneration in 2026 and beyond. Alaska Airlines also reached an agreement with Amazon that improves the economics of cargo operations under the ATSA.
In April 2026, the Company implemented a single passenger service system, an integration milestone that consolidates reservation and customer service platforms across Alaska and Hawaiian. Also in April, Hawaiian officially joined the oneworld alliance, which will bring significant global travel benefits to guests and will help the company in its continued global expansion efforts.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2026 TO THREE MONTHS ENDED MARCH 31, 2025
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2026 TO THREE MONTHS ENDED JUNE 30, 2025
The table below presents total operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) and the percentage of change of certain operational results for the three months ended MarchJune 31,30, 2026.
Passenger revenue increased by $289 million, or 9%, primarily driven by higher yields supported by increased premium revenue, loyalty program award redemption on our airlines, and managed corporate travel. Premium revenue reflected strong demand, the completion of cabin retrofits that added additional first and premium class seats, and additional revenue from newly launched transatlantic service from Seattle to Rome, London Heathrow, and Reykjavik. These increases were partially offset by softer demand in certain leisure markets, including Hawai'i, where significant rainfall earlier in the year impacted spring break and peak summer bookings in the second quarter.
Passenger revenue increased $112 million, or 4%, primarily driven by higher yield from premium cabin demand and strong managed corporate travel. These increases were partially offset by temporary demand softness in Puerto Vallarta and Hawai'i during the peak spring break travel period.
Loyalty program other revenue
Loyalty program other revenue increased by $20$48 million, or 10%,23%, primarily due to the launch of the Summit Visa Infinite premium credit card and the Atmos Rewards program in August 2025. The launch drove higher commission revenue from bank card and third-party partners, supported by growth in total active members and higher consumer spend. Additionally,The Alaskaincrease extendedalso reflected continued benefits from the extension and expandedexpansion itsof Alaska's co-branded credit card agreement with Bank of AmericaAmerica, duringexecuted in the quarter,first whichquarter alsoof contributed to the increase.2026.
Cargo and other revenue increased by $31$24 million, or 25%,17%, primarily driven by higherimproved revenueeconomics under theAlaska's ATSA with Amazon,Amazon asresulting two additional A330-300F aircraft were added tofrom the fleet since the first quarter of 2025 and an amendment to theamended agreement executed in the first quarter of 20262026. resultedGrowth in improved economics. In addition, higherinternational cargo volumes associatedsupported withby servicesexpanded tolong-haul Tokyoservice and Seoulincreased cargo connectivity across the combined network also contributed to the increase.
Total operating expenses increased $245by $806 million, or 7%.24%. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:
Aircraft fuel expense increased $115$605 million, or 17%,86%, due to higher per gallon fuel costs driven by elevated refining margins and crude oil prices. Incremental fuel consumption resulting from additional capacity also contributed to the increase.
Future fuel cost expectations are highly sensitive to disruption in crude oil supplies and refineries, which have been significantly impacted by recent geopolitical events. We expect that fuel costs will remain elevated forand somevolatile time.until these disruptions are resolved.
Headcount growth of 6% drove increases across multiple wages and benefits components. Wages increased $82$39 million, or 10%,4%, driven by higher wage rates across multiple labor groups. Payroll taxes increased due to higher wages and payroll tax expense associated with a one-time employee recognition award. Medical and other benefits increased $24$14 million, or 20%,11%, driven by higher claim volume and large value claims. Defined contribution plans increased $9 million, or 10%, consistent with wage increases.
Landing fees and other rentals
Landing fees and other rentals increased by $27 million, or 10%, primarily driven by higher terminal rents resulting from rate increases and growth across the network. Landing fees increased primarily due to higher landed weights.
Selling expenses
Selling expenses increased by $10 million, or 10%, primarily driven by higher credit card commissions and distribution costs associated with increased bookings and higher fares. The increase was partially offset by improved rates on credit card vendor rebates.
Food and beverage services
Food and beverage services increased by $10 million, or 10%, driven by additional onboard offerings and higher costs for food, food service supplies, and transportation.
Other expense
Other expense increased by $55 million, or 22%, due to a $25 million nonrecurring gain recognized in 2025 from the sale of four B737-900 aircraft, a $20 million one-time employee recognition award, and increased software costs.
Special items - operating
In the second quarter of 2026, we recorded $42 million of operating special items compared to $56 million in the same period in 2025. Refer to Note 10 to the condensed consolidated financial statements for details.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2026 TO SIX MONTHS ENDED JUNE 30, 2025
OPERATING REVENUE
Total operating revenue increased by $524 million, or 8%. The changes are summarized in the following table.
The table below presents total operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) and the percentage of change of certain operational results for the six months ended June 30, 2026.
Passenger revenue
Passenger revenue increased by $401 million, or 7%, primarily driven by higher yields supported by increased premium revenue, loyalty program award redemption on our airlines, and managed corporate travel. Premium revenue reflected strong demand, the completion of cabin retrofits that added additional first and premium class seats, and additional revenue from newly launched transatlantic service from Seattle to Rome, London Heathrow, and Reykjavik. These increases were partially offset by softer demand in certain leisure markets, including Puerto Vallarta and Hawai'i, during spring break and peak summer travel in 2026.
Loyalty program other revenue increased by $68 million, or 16%, primarily due to the launch of the Summit Visa Infinite premium credit card and the Atmos Rewards program in August 2025. The launch drove higher commission revenue from bank card and third-party partners, supported by growth in total active members and higher consumer spend. In addition, Alaska extended and expanded its co-branded credit card agreement with Bank of America in 2026, which also contributed to the increase.
Cargo and other revenue
Cargo and other revenue increased by $55 million, or 21%, primarily driven by improved economics under Alaska's ATSA with Amazon resulting from the amended agreement executed in 2026. Growth in international cargo volumes supported by expanded long-haul service and increased cargo connectivity across the combined network also contributed to the increase.
OPERATING EXPENSES
Total operating expenses increased by $1.1 billion, or 16%. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:
Aircraft fuel
Aircraft fuel expense increased by $720 million, or 52%, due to higher per gallon fuel costs driven by elevated refining margins and crude oil prices. The elements of the change are illustrated in the table:
(a) Includes taxes and other into-plane costs.
Non-fuel expenses
The table below summarizes our operating expense line items, excluding fuel and other special items. Generally, we expect these expenses to increase in line with capacity, fleet size, and growth of the Company's operations. Significant or unusual changes compared to 2025 are discussed in more detail below.
Wages and benefits
Wages and benefits increased by $189 million, or 8%. The primary components of wages and benefits are shown in the following table:
Wages increased by $121 million, or 7%, driven by higher wage rates across multiple labor groups. Payroll taxes increased due to higher wages and payroll tax expense associated with a one-time employee recognition award. Medical and other benefits increased $38 million, or 15%, driven by higher claim volume and large value claims. Defined contribution plans increased $16 million, or 9%, consistent with wage increases.
Variable incentive pay decreased by $32$28 million, or 52%,23%, primarily driven by a lower assumedexpected payout percentage forunder the Company's Performance-Based Pay programprogram, comparedreflecting lower profitability driven by elevated fuel prices in the first half of 2026. The decrease was also due to a pause in the priorCompany's year,Operational Performance Rewards program for 2026. These effects were partially offset by ana increasedhigher wage base.base in 2026.
Landing fees and other rentals increased by $49$76 million, or 20%,15%, primarily driven by higher terminal rents resulting from rate increases and growth across the network. Landing fees increased primarily due to higher landed weights. Non-recurringNonrecurring favorable settlements received from certain airports in 2025 also contributed to the year-over-year increase.
Food and beverage service
Food and beverage service increased by $20 million, or 11%, driven by additional onboard offerings and higher costs for food, food service supplies, and transportation.
Third-party regional carrier expense
Third-party regional carrier expense decreased by $8 million, or 13%, primarily driven by a 12% reduction in departures flown by SkyWest as compared to prior year.
Other expense increased by $97 million, or 19%, due to a $25 million nonrecurring gain recognized in 2025 from the sale of four B737-900 aircraft, a $20 million one-time employee recognition award, and increased software costs.
Other expense increased by $42 million, or 16%, driven by higher software and professional services costs. Additional pilot training costs, associated with the ramp up of international flying, also contributed to the increase.
In the first quartersix months of 2026, we recorded $35$77 million of operating special itemsitems, compared to $91$147 million in the same period in 2025. Refer to Note 10 to the condensed consolidated financial statements for details.
ALK insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 25,000 shares, about $1.0M) and open-market sales in 1 filing (1 insider, 1 trade date, 5,300 shares, about $263.3K). Net open-market shares: 19,700 (purchases minus sales); net value about $738.2K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-29 | Birkett Rakow Diana |
Option exercise | 313 | — | — |
| 2026-09-29 | Birkett Rakow Diana |
Shares withheld for tax | 148 | $39.30 | $5.8K |
| 2026-09-29 | Levine Kyle B |
Option exercise | 210 | — | — |
| 2026-09-29 | Levine Kyle B |
Shares withheld for tax | 83 | $39.93 | $3.3K |
| 2026-09-23 | Berry Jason M |
Shares withheld for tax | 792 | $39.70 | $31.4K |
| 2026-09-23 | Berry Jason M |
Option exercise | 2,010 | — | — |
| 2026-09-22 | Schneider Andrea L |
Shares withheld for tax | 499 | $41.91 | $20.9K |
| 2026-09-22 | Schneider Andrea L |
Shares withheld for tax | 48 | $41.91 | $2.0K |
| 2026-09-22 | Schneider Andrea L |
Option exercise | 48 | — | — |
| 2026-09-22 | Schneider Andrea L |
Option exercise | 499 | — | — |
| 2026-09-22 | Harrison Andrew R |
Option exercise | 869 | — | — |
| 2026-09-22 | Harrison Andrew R |
Shares withheld for tax | 869 | $41.91 | $36.4K |
| 2026-09-22 | Minicucci Benito |
Shares withheld for tax | 2,698 | $49.91 | $134.7K |
| 2026-09-22 | Minicucci Benito |
Option exercise | 2,698 | — | — |
| 2026-08-20 | Minicucci Benito |
Open-market purchase | 25,000 | $40.06 | $1.0M |
| 2026-08-03 | Harrison Andrew R |
Open-market sale | 5,300 | $49.67 | $263.3K |
| 2026-06-01 | Sievert G Michael |
Grant/award | 4,258 | $44.52 | $189.6K |
| 2026-05-13 | Hogan Kathleen T |
Grant/award | 5,186 | $38.56 | $200.0K |
| 2026-05-13 | Yeaman Eric K |
Grant/award | 5,186 | $38.56 | $200.0K |
| 2026-05-13 | Shimer Peter A |
Grant/award | 5,186 | $38.56 | $200.0K |
| 2026-05-13 | Sandvik Helvi Kay |
Grant/award | 5,186 | $38.56 | $200.0K |
| 2026-05-13 | Lofton Adrienne Rochelle |
Grant/award | 5,186 | $38.56 | $200.0K |
| 2026-05-13 | Elwell Daniel Kevin |
Grant/award | 2,593 | $38.56 | $100.0K |
| 2026-05-13 | Elwell Daniel Kevin |
Grant/award | 2,593 | $38.56 | $100.0K |
| 2026-05-13 | Conner Raymond L. |
Grant/award | 5,186 | $38.56 | $200.0K |
| 2026-05-13 | Beer James A |
Grant/award | 5,186 | $38.56 | $200.0K |
| 2026-05-13 | Bedient Patricia M |
Grant/award | 6,483 | $38.56 | $250.0K |
Well-known investors holding ALK (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| PRIMECAP Management | 2026-06-30 | 3,227,329 | $168.5M | 0.1% | Reduced 1% |
| Semper Augustus (Chris Bloomstran) | 2026-06-30 | 1,793,627 | $93.6M | 10.58% | Added 6% |
| Millennium Management (Israel Englander) | 2026-06-30 | 1,189,406 | $62.1M | 0.04% | Added 7% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 1,084,977 | $56.6M | 0.03% | Added 30% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 549,485 | $28.7M | 0.07% | Added 9988% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 410,656 | $15.1M | — | Sold out |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 274,933 | $14.4M | 0.01% | Added 127% |
| Two Sigma Investments | 2026-06-30 | 101,628 | $5.3M | 0.0% | Reduced 24% |
| Bridgewater Associates | 2026-06-30 | 101,832 | $3.7M | — | Sold out |
| D. E. Shaw & Co. | 2026-06-30 | 33,463 | $1.2M | — | Sold out |