ALK Cuts Q3 Outlook Due to High Fuel Costs and Operations Struggles

Alaska Air Group Faces Challenges in Q3 2025 Guidance

Alaska Air Group, Inc. (ALK) has released its updated third-quarter 2025 guidance, which reflects a disappointing outlook due to rising fuel costs and operational difficulties. The company now expects its adjusted earnings per share for the quarter to fall at the lower end of its previous range of $1.00 to $1.40. This downturn is primarily attributed to increased fuel expenses and ongoing operational issues during the summer season, which have led to higher unit costs.

One significant factor affecting ALK’s performance is the high refining margins on the West Coast, driven by refinery disruptions. As a result, the airline has raised its fuel cost expectations to a range of $2.50–$2.55 per gallon, up from the previous estimate of nearly $2.45 per gallon. These higher costs are expected to impact the company's financials significantly.

Operational challenges, including weather-related disruptions and air traffic control issues, have also contributed to increased expenses. These include overtime pay, premium compensation for employees, and payments to passengers affected by delays or cancellations. Additionally, an IT outage in July is anticipated to reduce the company’s bottom line by nearly 10 cents per share.

Despite these challenges, ALK has seen positive revenue trends. Unit revenue is expected to be near the high end of its prior guidance, which ranged from flat to low-single-digit growth. August brought strong year-over-year yield growth, supported by robust premium cabin performance and a double-digit increase in corporate revenue compared to the previous quarter.

In a positive development, ALK launched its new Atmos Rewards loyalty program on August 20, which generated significant media attention. This was the most impactful announcement in the company’s history. The Atmos Rewards Summit Visa Infinite Card, a new premium credit card, exceeded its year-end sign-up targets within just two weeks. The program has gained traction beyond ALK’s traditional markets on the West Coast and in Hawaii, indicating broad appeal.

ALK currently holds a Zacks Rank #3 (Hold). Investors looking for top-performing stocks can explore the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.

Updated Q3 Outlook for Other Airlines

In addition to ALK, other major airlines have also provided updated guidance for the third quarter of 2025.

Delta Air Lines

Delta Air Lines (DAL) has revised its third-quarter 2025 outlook upward, citing improved demand for air travel. At the Morgan Stanley Laguna Conference, Delta highlighted the stabilization and growth in air travel demand, leading to a more optimistic revenue forecast. The airline now expects revenue growth in the 2-4% range for the September quarter, compared to the third quarter of 2024. Adjusted revenues (excluding third-party refinery sales) are projected to fall between $14.9 billion and $15.2 billion.

Previously, DAL had estimated that third-quarter revenues would either remain flat or grow by up to 4% from the same period in 2024. Strong demand and disciplined capacity management across the U.S. airline industry have contributed to this improved outlook.

JetBlue Airways Corporation

JetBlue Airways Corporation (JBLU) has also updated its third-quarter 2025 guidance. The airline now anticipates available seat miles (ASMs) to be flat to up 1% year over year, compared to its previous guidance of a 1% decline to a 2% increase. JBLU also expects third-quarter operating revenue per ASM (RASM) to decline between 1.5% and 4%, an improvement from its earlier forecast of a 2% to 6% decrease.

Continued demand for air travel through the summer and into August, including the Labor Day holiday, has resulted in increased bookings within 14 days of travel. Strong operational performance in August, along with effective cost management strategies, helped keep non-fuel unit costs stable. JBLU now expects third-quarter costs per available seat mile (excluding fuel and special items) to rise between 3.5% and 5.5%, down from its previous expectation of a 4% to 6% increase.

JBLU has also lowered its average fuel cost per gallon guidance for the third quarter to $2.45–$2.55, down from the previous range of $2.50 to $2.65. This reduction in fuel costs is expected to positively impact the company’s profitability, as fuel expenses are a major component of airline operating costs.