Alaska Air Group, Inc.

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 speaker's 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 gap 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 costs 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, Raina. 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 believe firmly 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 a billion dollars 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 and do not believe what's happening today jeopardizes that target in any way. Our energy is fully committed to driving Alaska Accelerate and unlocking a billion dollars 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. Hūkai'i by Hawaiian memberships are up 90% since year-end, And Hawaiian card acquisitions have more than doubled year over year, and 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 18 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 and 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. And 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 14 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.