Alaska Air Group, Inc.

Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2025 Second 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. Thanks for joining us today to discuss our second quarter 2025 earnings results. 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 a second quarter gap net income of $172 million. Excluding special items and mark-to-market fuel hedge adjustments, Air Group reported adjusted net income of $215 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 our 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. First, I want to acknowledge the operational disruption we experienced earlier this week due to an IT outage. To our guests whose travel plans were impacted, I sincerely apologize. Safety is always our top priority and upon identifying the issue, we made the decision to pause operations until it was safe to resume. Our teams worked around the clock to restore operations as quickly as possible. We are actively partnering with our hardware vendor to investigate the root cause and will take appropriate action once the review is complete. Now turning to our earnings. We delivered a strong second quarter result, marking another step forward in achieving our long-term ambitions. Our adjusted earnings per share of $1.78 exceeded the high end of our guidance, clear evidence of our team's disciplined execution and unwavering focus on what we can control. delivering a remarkable guest experience, driving operational excellence, and unlocking the value of our newly combined network and commercial platform. Alaska Accelerate is working. The powerful combination of these two networks and the changes we've made are already delivering greater utility and choice for Hawaii residents and visitors alike. These changes drove our Hawaiian assets to its first profitable quarter since 2019 and just 10 months post-acquisition. We're excited to continue building scale, relevance, and loyalty as Hawaii's trusted airline. In total, Air Group generated a record $3.7 billion in revenue with year-over-year unit revenue performance that we are confident will lead the industry. As we continue to implement our initiatives, our sights are set on diversifying our revenues even further from the 50% we generate outside the main cabin today. A key driver of this growth is premium revenue, which continues to outperform. We've now retrofitted nearly 90 of our 737 aircraft, expanding our ability to deliver a more premium experience as part of a seamless end-to-end journey for our guests. Next month, we're launching our newly branded loyalty program and premium credit card, uniting Alaska Mileage Plan and Hawaiian Miles. This will better reflect the expanded reach of our combined networks, strengthen loyalty, and connect with more guests. In May, we launched our inaugural intercontinental flight from Seattle to Tokyo Narita, marking the first step in establishing an international gateway at our hometown hub. As Andrew will share shortly, the route has gotten off to a very successful start. This September, we'll begin service from Seattle to Seoul Incheon, followed by the launch of our first transatlantic route to Rome next May. To support this international growth, we've also ordered five additional Boeing 787s, bringing our future fleet total to 17 aircraft. With a Boeing 787 crew base established in Seattle, we're laying the foundation to expand our international operations to at least 12 destinations from Seattle in the coming years. Beyond our targeted initiatives at Air Group, the broader industry is also making necessary and meaningful changes. Capacity adjustments continue to align more closely with current demand trends, creating a more favorable setup for the second half of the year and providing further upside. Although demand remains softer than initially expected, it has stabilized and consumer sentiment is gradually improving amid the broader macroeconomic environment. We're also encouraged by the recent uptick in bookings, early signs of positive demand momentum, and the potential for easing fuel prices. all factors that position us well for stronger performance in the latter half of the year. Given this improving outlook, we expect to deliver at least $3.25 in adjusted earnings per share in 2025, an important step on our path to reaching $10 in earnings per share by 2027, a target we remain fully confident in. Our focus remains on executing Alaska Accelerate and unlocking a billion dollars in incremental profit over the next two years. Early results are promising, with synergies and key initiatives tracking ahead of plan. In closing, there's a renewed sense of energy and purpose across our company, driven by our shared vision to transform Alaska Air Group into a larger global airline. With the Alaska Accelerate plan as our guide, our people are moving forward with clarity, confidence, and a deep commitment to what we're building together. I want to thank all our incredible employees for their dedication and hard work on this journey. The opportunities ahead are significant, and we're eager to capitalize on them and position Air Group for long-term growth, success, and value creation. And with that, I'll turn it over to Andrew.