Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2026 third 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 speakers' 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 third quarter 2026 earnings results. Yesterday, we issued our earnings release detailing our results, which are available at investor.alaskaair.com. Today, 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 third quarter GAAP net loss of $147 million, or $1.32 loss per share. Excluding special items and the impact of a revised tax rate, adjusted net income was $40 million, and adjusted earnings per share was $0.36. 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. 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. Just a few weeks ago, we laid out the next chapter for Alaska Air Group and our path to becoming a larger, more diversified, and more resilient business. Our third quarter results reinforce our confidence in that strategy, despite unprecedented fuel prices that are adding $1.8 billion in cost this year and pressuring our profitability. Demand remains healthy. Revenue performed in line with our expectations, and we continue to execute across our initiatives in Premium, Loyalty, Cargo, and International, all helping to drive a seven-point RASM- to- CASMex spread for the quarter, up from two points in Q2.
We continue to see strong momentum across the four strategic growth areas we highlighted at our investor day. We said the first chapter of Alaska Accelerate was about building the foundation, and the next chapter was about harvesting the value from it.
That transition is underway. The investments we've made over the last several years are driving greater scale, deepening our relevance with guests, and strengthening loyalty across our geographies. Diversified revenues now represent 54% of our total mix, up four points from last year and one point from last quarter. As this mix continues to grow, our earnings will become less dependent on fuel and more resilient. Premium demand remains robust, with revenues reaching more than 36% of our total mix, up three points year-over-year. That reflects the strength of our products and our growing relevance across the West Coast and beyond as we build toward our 40% target by 2030. Our international franchise in Seattle is growing rapidly. We're excited to announce that next spring, we'll launch year-round service from Seattle to Osaka, Japan, and Papeete, Tahiti.
That brings our nonstop international routes out of Seattle to nine as we build toward 15 and our goal of becoming Seattle's number one long-haul international carrier by 2030. We see even more opportunity ahead as we prepare to file with the DOT to join the Atlantic and Pacific Joint International Businesses in the coming weeks. Loyalty program cash grew 21%, another strong indication that the investments we're making are driving greater relevance and deeper loyalty with our guests. Lastly, cargo revenue grew 9%. We're optimistic about growing this business to a more meaningful level as we deploy our new 737 freighters in Alaska and Hawaiian next year and work toward renewing our partnership with Amazon with better economics and expanded service. Our focus remains on the things we can control, and as we're demonstrating, those things continue to move in the right direction.
We know we can do better than the results we're producing today. That's precisely why we're focused on the areas of the business we believe will drive higher and more resilient earnings over time. Premium, international, loyalty, and cargo are the path forward, and increasingly, we'll see the investments we've made over the last several years translate into tangible results across the business. We're doing it with a team that is engaged, energized, and excited about the future. I want to thank our employees for their continued commitment to our guests and to one another. Their dedication makes everything we're accomplishing possible, and it gives me tremendous confidence in the opportunities ahead. As we look to our next chapter, we're excited to welcome Amaresh Siva, our new Chief Information Technology Officer.
He brings deep experience and strong leadership to the role, and I know he'll be an important partner as we continue to build the capabilities that will support Air Group's future. We have a lot of work ahead of us, but I'm confident in our strategy and in this team. Now it's about execution and delivering the results. Andrew, over to you.
Thanks, Ben, and good morning, everyone. Today, I will walk through our third quarter financial performance, near-term demand and revenue, and the ways we are continuing to diversify and strengthen our revenues as part of Alaska Accelerate. In the third quarter, total revenues reached $4.3 billion, up 14% year-over-year, while capacity grew 2.4%. Unit revenue increased nearly 12%, in line with our expectations of low double-digit growth. Yield for the quarter grew 13.4%, with strong sequential improvement each month from 11% in July and finishing with a particularly strong September, up approximately 17% year-over-year. We achieved this result despite several factors impacting our coupon unit revenues, which we believe are temporary in nature, including approximately three points of pressure from strategic growth markets we outlined at Investor Day, which represent about 13% of our capacity and are growing more than 20%.
As this capacity matures, like trends we have seen in San Diego, we expect meaningful improvement in year two yields and loads, along with loyalty and corporate market share. Another one point of pressure from the rapid growth of our international long-haul flying. We expect this dynamic will continue near term as we add new routes, but we are encouraged by the progress we are seeing. As our international franchise matures, we see a clear opportunity to improve performance. A continued two-point headwind from Hawaii, excluding where we undertook double-digit capacity growth, which is included in my first point, as improvements in this market have been outpaced by those across the rest of the system. As we discussed before, this is one market where our competitive advantage is clear and differentiated.
One of the reasons we remain confident in Hawaii over the long term is that no one is more invested in the market. The Big Four have less than 4% of their network invested, nor understands the travelers and their unique needs better than we do. Just as we have demonstrated in Seattle, our sustained focus and leadership have built a competitive advantage that is difficult to replicate and will only strengthen over time. To summarize, today, over 40% of our system is absorbing six points of unit revenue pressure that we do not expect to persist long term.
Many of these inve \stments across the network are necessary to increase our West Coast passenger share, capture more premium and corporate demand, and drive industry-leading loyalty in our geographies. As our growth annualizes and international markets mature, we see real opportunity for improvement starting in 2027.
Premium traffic remained one of our strongest revenue performers, growing approximately 24.5% year-over-year and reaching more than 36% of total revenue. That is up three points versus last year. With our narrow body premium retrofits complete, we will capture the full annualized benefit next year, and we still have meaningful runway ahead as we expand premium offerings across our wide-body fleet over the next few years, giving us confidence in our path towards a 40% premium revenue mix and the earnings opportunity that comes with it. Managed corporate revenues increased 30% in third quarter, and future bookings are also running approximately 30% above prior year levels, reflecting share gains across both business and large leisure agencies.
For London Heathrow, our business class cabin performance exceeded our fair market share by three points in the third quarter, demonstrating our ability to convert our strong domestic corporate performance into international share as we grow our international footprint and expand our premium portfolio, making us a more relevant partner and creating meaningful long-term share opportunities. Loyalty continues to be one of the strongest proof points that our strategy is working. Program cash remuneration of $721 million increased 21% during the quarter, supported by strong card spend and continued engagement across the ecosystem. We are particularly encouraged by the performance of our premium Summit card. Just one year after launch, roughly half of cardholders are new to our portfolio, 40% come from outside our core geographies, and international spend is running several times higher than the rest of the portfolio.
Although the strength of that card product launch creates a year-over-year headwind for us in the fourth quarter, we still anticipate strong annual program cash growth through 2030, in line with the targets we shared a few weeks ago. Looking ahead to the fourth quarter, the demand environment remains healthy, supported by continued strength in pricing and yield trends across much of the network. Held yields for each month in Q4 are currently up double digits versus last year. We expect capacity growth to moderate to approximately 1%-1.5% year-over-year, with most of that growth coming from international. With continued momentum across premium and corporate travel, we expect fourth quarter unit revenue performance that is broadly in line with the strength we saw in the third quarter, up low double digits. To close, the commercial strategy we laid out at Investor Day is working.
We've built tremendous scale and unrivaled leadership across the West Coast, and we're translating that scale into greater relevance through a more global network, stronger premium products, and deeper loyalty. Importantly, there is significant opportunity ahead as our international franchise matures. We refine our revenue management capabilities and complete our product offerings to fully serve our guests. While fuel remains a significant near-term headwind, it does not change our confidence in the strategy for the longer-term opportunity ahead. With that, I'll pass it to Shane.
Thanks, Andrew, and good morning, everyone. As Ben covered and is well understood, our third quarter results were significantly pressured by the current fuel environment, where we saw prices range from approximately $3.10 in early July to nearly $5 as we exited the quarter. The underlying business model transformation we are undertaking, however, is gaining traction, with premium international loyalty and cargo all contributing meaningful year-over-year revenue growth in the quarter. We are both committed to and confident in our strategic direction, and we will remain focused on delivering a structurally stronger business model in which earnings are more resilient over time. We ended the quarter with approximately $3.3 billion of liquidity and continue to maintain significant financial flexibility with $20 billion in unencumbered assets.
Debt to capitalization remains stable at 66%. As we improve earnings and generate free cash flow, restoring the balance sheet will be our top financial priority. Turning to third quarter performance, non-fuel unit costs increased 4.4% year-over-year on only 2.4% capacity growth in line with guidance. This was a strong sequential improvement from the 6.5% unit cost increase we saw in the second quarter. We continue to have opportunity to further optimize and lean out the business as we move through operational integration milestones. We are also focused on flying closer to our original capacity plans going forward as the operation benefits greatly from predictability in our schedules. Moving to fuel, our average price was $3.94 per gallon during the quarter, above our original July guidance of $3.75, driven by higher crude and refining costs.
Fuel has continued to move higher into the fourth quarter. We did see West Coast refining margins below Gulf Coast margins during September, while Singapore refining margins and fuel pricing have returned to being our lowest cost source in our network. Given recent trends, we expect our fourth quarter economic fuel cost to average between $4.65 and $4.85 per gallon. This versus our initial plan of $2.50 per gallon entering 2026. The more than $2 of additional per gallon cost is adding $650 million of expense to the business in the fourth quarter. As Andrew noted, capacity is sequentially lower in the fourth quarter, increasing 1%-1.5% year-over-year. This growth level is over two points below our original plan for the year and includes reductions we made to the schedule within the past two to three months.
The past six years have seen a trend of planning capacity higher than what we've actually flown, almost entirely due to external events. That pressures unit costs and is a phenomenon we are focused on reversing as we move into 2027 and beyond. We expect non-fuel unit costs to grow mid-single digits in the fourth quarter against our capacity growth of less than 1.5%. This is consistent with what we've shared in the past regarding baseline inflation in the business of 4%-5%, which requires similar capacity growth to fully offset. Cost drivers include higher airport and real estate costs, as well as additional engine maintenance expenses, consistent with what we see through the rest of the industry. We are encouraged by the improved spread between unit revenue relative to unit costs.
We generated approximately five points of sequential RASM- to- CASMex spread improvement in the third quarter and expect a healthy positive spread to persist into the fourth quarter. This is evidence that the commercial investments we're making are helping drive greater RASM as we progress toward our targets and translate those initiatives into higher earnings over time. Taken together, we expect to produce a fourth quarter adjusted loss per share of between $2.50 and $2, and that includes a more than $4 fuel headwind versus our original assumption. For the full-year, we now expect an adjusted loss per share of between $5.50 and $5.
As we outlined at our Investor Day, we're focused on building a business with more ways to generate earnings by building on our strong operational performance, safety and care, growing higher margin revenue streams, maintaining our cost performance, and restoring balance sheet strength.
We're already seeing progress in the underlying business with our diversified revenue mix reaching 54%, up three points from last year. The foundation is built. Our focus now is on fully turning that progress into stronger earnings and cash flow. Regardless of fuel, we are confident in at least $3 to $4 of core earnings improvement next year. To close, the earnings we're producing today are not indicative of what we expect the business to earn in a stable macro environment. Higher fuel is creating a significant near-term headwind, and we remain in the midst of a significant business model transformation that will produce higher unit revenues while we also drive more efficiency in our unit cost structure. With that, let's go to your questions.
At this time, I would like to invite analysts who would like to ask a question to please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question will come from Mike Linenberg with Deutsche Bank.
Oh, yeah. Hey, good morning, everyone. I want to just call out in your release this pressure from strategic growth market investments, and presumably that's the ramp-up of these international markets. I know you're at nine now, or you've announced nine and are flying a little bit less than nine, and you're on your way to 15. How long does it take to ramp those up to maturity to get to profitability? As sort of a part of that, Andrew, you called out this, call it market share outperformance in the Heathrow market, I think you said three points. Is that volumes or is that actually a revenue number? Thanks for taking my question.
Thanks, Mike. Maybe a couple of things, firstly. Of the six points I just shared in my prepared remarks, the growth that I'm referring to in three points of it is actually the markets that we grew 20%+ in, and that's going to be your Portlands and San Diegos and Los Angeles, and even some California, Hawaii markets. Again, we've seen great loyalty growth, great strength in corporates and all the rest of it. So that is good growth and that's what we sort of unpacked on Investor Day. On the international we shared, that was about a point.
Okay.
Of drag. Even that said, we saw a 7.5 point increase in load factor in the third quarter from our international, and our unit revenues were up 24%. So in the near term, it will continue to be a drag. Just to be clear on the international, and the London specifically, that's our fair share of the front Premium Class cabins. And we had a premium, and that's very exciting for us to see, which fits our thesis that people from Seattle and connecting into Seattle on our long-haul, they want to fly with us.
Great. Thanks for the clarification. Thank you.
Hey, thanks, Mike.
Our next question will come from Ravi Shanker with Morgan Stanley.
Great, thanks. Morning. The new international routes that you guys have ramped up obviously include a fair bit of fuel pass-through in the current pricing. Are you confident that can be the new baseline going forward, if/when fuel normalizes as well? And how are you thinking about the kind of unit economics there over time?
Hi, Ravi. I think international, just like domestic or any other, is basically going to be dictated by obviously the fuel cost and then demand. You can add all the sorts of fuel charges if you want, but at the end of the day, we need to see continued strength in demand. As I shared earlier, the good thing about where we're coming from is that we're just seeing nothing but ramping and upside as we get better about selling domestically and internationally, the connections, the product that's coming, the joint businesses that are coming. So we feel very good about the platform that we're growing from on the international basis.
Great. Thank you.
Thanks, Ravi.
And we'll move next to Jamie Baker with JPMorgan.
Hey, good morning, everybody. For the fourth quarter, it looks like you trimmed about two points of flying from a one-time plan. Internally, what sort of financial metric do you use in deciding when to add that back? It's obviously marginal flying. You may characterize it as utilization flying. So, I assume that internal hurdle is different than me just looking at the output in my earnings model, for example.
Yeah. Hey, Jamie. Thanks for the question. I think number one, I would just say, and we mentioned it in the prepared remarks, I think increasingly we are focused on flying what we plan to. It's the best thing for the company long term, best thing for the operation. Once we structurally get ready to fly a certain schedule, it's hard to shift costs out if we're making cuts close in. I think in terms of once we've made some trimming to the schedule, when planes come back, there's actually many layers to that.
We have a lot of investments we're making into the fleet with things like Starlink, and obviously this year we went through incremental additions in the First Class cabin and the Premium Class cabin, and then on the wide-body fleet, we're going to start putting Premium Reserve in and remodeling the front of those cabins as well.
Once we decide that we're going to free up an aircraft or a line of aircraft, we tend to not just put them on the ground and let them be lazy spares. We go do something with them on the investment side or the maintenance side. So it's not just a pure internal economic exercise. Certainly, if we see demand kind of surge back in a way that a market needs more capacity, we have a lot of flexibility to move planes around and match that capacity.
Okay. I get it. I asked in kind of a clunky way, but that makes it clear. Second, look, it's hindsight, but the share repurchase program obviously hasn't worked out particularly well given your elevated leverage. I assume you may have some regrets in that regard. You can comment on that if you want, but more importantly, what's the lesson here? Does this imply more prudent capital allocation going forward?
Hey, Jamie. You always ask great, insightful questions. Look, I think if we had a crystal ball in the future and could have predicted where fuel prices were going to go, yeah, I think we would have thought about the share buyback differently, just to be honest. Even as we go into next year, we'll see what the price of fuel is, and we'll use the share buyback that is planned as perhaps conserving that cash for next year, just to be totally honest and candid. I think in a normal environment, this would have been very accretive. Again, given the earnings that we had planned both in 2025 and 2026, I think this would have been hugely accretive. The last two years have been unconventional, as you know, covering the industry so many years.
Going forward, I think at the end of the day, we're optimistic that if we drive the earnings that we're going to have, fuel will have to normalize to a certain level. The investments we're making across those four pillars we talked about, I think will put us in a good position. I think we won't regret having bought back, Emily, I don't know, what, 20 million shares? I think at the end of the day we're not going to regret buying back 20 million some odd shares, as we head into 2027 and 2028.
Okay. Thanks, Ben. I appreciate it. Take care.
All right. Thanks, Jamie. Sorry we missed you at Investor Day.
We'll now move to our next question. That'll come from John Godyn with Citigroup.
Hey, guys. Thanks for taking my question. In the prior question there from Jamie, Ben, I heard you use the phrase normal environment, and it kind of sounds like normal is lower fuel prices, but there are other airlines out there describing normal as a new normal of perpetually higher fuel prices. I was just hoping to kind of reflect on that for a second. At the Investor Day, you guys had a very wide range on your forward EPS, but maybe you can talk about how, if we find ourselves in a new normal with higher-for-longer fuel, what adjustments could be made to protect earnings and hit the outlook that you guys offered?
I'll start, then I'll hand it over to Shane. John, it's a great question. What we unveiled at Investor Day was a strategy to allow the company to be more resilient to not only oil shocks, but other economic shocks like tariffs. The investments we're doing in premium and international and the loyalty benefits we're going to get in cargo, those are going to really raise the earnings floor and have us become less vulnerable to these external shocks. I think it's that strategy that's, as it's ramping up here over the next two years, that's really going to help us, whatever that new normal is.
Nobody knows what that new normal is going to be, and we tried to give you a range at Investor Day, but we feel confident with our plan that once there is a new normal, that Alaska is going to be a winner in this industry. Shane, I don't know if you want to put any more context on that.
I thought that was perfectly said. The thing I would just add is, for the longest time at the company, I think we planned fleet economics on $3 of fuel, market economics on $3 of fuel, and for five or six years, we paid $2.50. We're not really here to predict what's going to go on in that part of the market. I think, as Ben said, we're going to build a business that can be responsive to whatever type of fuel environment we see over the long term.
Okay, guys. Appreciate that. If I could just ask a nit here on the 737-10 recently certified. You guys had to kind of juggle a little bit during the Investor Day amid a lot of uncertainty about it. I recall you guys saying, however this plays out, it doesn't really change our fleet plan. Given that it was just certified, maybe you could just remind us, when do you expect first delivery, what's the latest thinking, and any update on the fleet plan in light of that? Thank you.
Yeah. Thanks, John. I was at the certification ceremony yesterday. It was a thing of beauty. Actually, that 737-10 MAX, just looking at it, looks fantastic. It looks like it's going to be a great-looking airplane out on the tarmac. Next year, we're going to have 22 deliveries. We plan to start taking them sometime late in the first quarter. Just to remind you, the first tranche of airplanes are going to be in our standard domestic configuration. Then in 2028, the second tranche is going to be in what we call our Aurora configuration with the lie-flat seats, which we're really excited about. So right now, all systems are go for next year in terms of delivery. Twenty-two MAX 10s that will fit beautifully into our fleet.
Thanks, guys. Appreciate it.
Thanks, John.
We'll move next to Savi Syth with Raymond James.
Hey. Good morning. Maybe Andrew, just following up on the pressures that you called out. I understand that long-haul rapid growth there, that pressure will continue for some time here, but curious how you're thinking about the forward direction of the three points from strategic growth markets. When does that subside? On Hawaii, when does that either subside or you start to anniversary?
Yeah. Thanks, Savi. So a couple of things. Obviously, the growth that we saw this year on the core will annualize going into next year and start materially annualizing as we get into the second quarter and beyond. We have core growth next year of a couple of points that's all gauge on the -10s that Ben just talked about on international, which we believe is solid growth. Hawaii, just to touch on that, it's been a challenging year for Hawaii, as we all know. But I have real optimism for 2027, and there's really three reasons for that. The first one is I don't really expect multiple generational storms that impacted Hawaii. We actually had negative unit revenues in the second quarter and the third quarter from the West Coast to Hawaii.
But I'm looking at 2027 right now, and even in January and February, which is early days, I'm seeing double-digit unit revenues there. So that's headed in the right direction. Secondly, as you know, we transitioned to a single PSS in April, and that got rid of all sorts of friction, network connectivity challenges, and Hawaiian brand joined the oneworld. Then the third area is industry capacity is appearing constructive as I sit here today. The industry actually grew mainland capacity to Hawaii by 6% this past year, which is very significant. But as I look into next year, Q1, it's up about 1.9%, and second quarter it's actually down over 4%.
So as we stand back and look at Hawaii and our number one utilization market share departures, non-stops, Premium Class cabin, we feel like the setup for Hawaii next year with the annualization of obviously our growth markets and we feel optimistic.
That's helpful, Andrew. Can I ask just on the fourth quarter guide, low double digits means like a similar as in as the third quarter, but you are having slower capacity growth. Is that just a tougher comp that's being reflected there, or is there something worsening somewhere or some seasonality.
Yeah.
International that's kind of causing?
Right. I actually appreciate you asking that, Savi, because that's an important note is, if you look at our core coupon revenues, actual passenger fares paid, they're actually continuing to accelerate into the fourth quarter. So we had sort of like three points from Q2 to three and Q3 to four. Our coupon is actually accelerating nearly three points. What it's being masked with a little bit is a comp issue and noise, as you suggested. When we launched Atmos last year, it was a huge launch, both the Summit card and the Ascent card. And there's also some movement in some of the loan bonuses. So bottom line is there's a headwind in the fourth quarter just on the annualization of the Atmos launch, but the core coupon business continues to accelerate into the fourth quarter.
Very helpful. Thanks.
Thanks, Savi.
Our next question will come from Atul Maheswari with UBS Securities.
Good morning. Thanks a lot for taking my question. Shane, you talked about normalized capacity next year. In that backdrop, what's a realistic CASM growth rate to expect for next year? What is your expectation around core inflation, and what are some of the other puts and takes around non-fuel costs for next year that we should be mindful of?
Thanks, Atul. I will steer clear of guidance, but we'll talk about some of the components, and I think we've been open about these over the last several calls. I think we want to get to, over time, a growth rate that's in the 4% range. I think that's very consistent with what we've said for a while. But I think we've been sharing for a couple of years, core inflation is between 4% and 5%. There are years that it could be accelerated. There may be years it's slightly less. But that seems to be kind of a new normal in the airline industry, across the industry.
Same drivers as everybody else. Labor has been a part of that. Airport cost investments, which largely are needed and enhance the guest experience are part of that. And engine maintenance costs are part of that as well.
So those are the basic components as we start to think about capacity relative to cost growth in the company that are going to drive most of the unit cost narrative. What you will see from us now that we are getting further through the integration milestones, and you have seen it this year, we actually have a over quarter, and we are starting to be able to more aggressively optimize where we can. We will focus on the same things we always have, productivity across every component of the business, utilization of the aircraft fleet are going to be important things for us to focus on.
But we are going to make investments in this strategy going forward, things that we need to do to enhance the guest experience and really earn the premium fares that we are expecting to as we go down the path of further premium, further international, and further investments in the loyalty program and base. So those are the basic components. We will get more specific guides out to you guys in January on that call.
Great. Thanks for that. It is very helpful. Then just as my second question, which is around CapEx, the plan I think that you laid out at the Investor Day is around $1.9 billion for next year. The question I have is that, do you have flexibility to push it lower in case fuel is simply higher for longer and that is a drag on the free cash in the near term? Then just overall, how are you thinking about balancing near-term balance sheet leverage versus the long-term investment needs for the business?
Yeah. Thanks, Atul. To answer the first question, we do have flexibility. We have got a phenomenal partner in Boeing. We have never run into a situation where they were not willing to work with us if we needed to, and vice versa, we support each other. So we intend to take all of the aircraft, I think, on a just aircraft- over- aircraft basis. The MAX 10 is much more fuel efficient, higher gauge, better financial performer than the 737-700s that they will ultimately replace as those retire. Then obviously the 787s are really key to the build-out of the international strategy.
So those are what we are still looking to continue to invest in the strategy, and both Ben and I mentioned that in the prepared remarks. We have a lot of focus on the balance sheet. The debt- to-c ap is 66%. It is still relatively healthy.
We want to get that back down going the other direction. In terms of leverage, just so you all know the math, $0.75 of fuel price is worth four turns of leverage or something like that, three to five turns of leverage in the business today. So it's very correlated with fuel price concern very, very quickly. In terms of managing liquidity and overall sort of debt on the balance sheet, we haven't made decisions entirely about how we're going to finance the company next year. We have access to traditional debt methods, mortgage debt, capital markets if we want to go that route. We could do sale-leasebacks. There's other terms of alternative financing available to us. We'll be deliberate about that.
We'll be thinking about that over the next couple of months as we finalize our plans. But I think the thing I'd leave everybody with is we're really focused on maintaining the core discipline around financial or balance sheet discipline in the near and long term. And our first financial priority as earnings turn and cash flows turn is to restore balance sheet strength to our targets.
Great. Thank you, Pat, and good luck with the fourth quarter.
Thanks, Atul.
Our next question will come from Duane Pfennigwerth with Evercore ISI.
Hey, thank you. You touched on Hawaii, some very weird, unusual weather this year, abnormal weather, elevated industry supply, which sounds like it's correcting a bit. If we think about the entirety of Hawaii headwinds to this year, how would you size the headwind either in system RASM points or total pre-tax?
Hi, Duane. Yeah, I think it's consistent. It's been through the year. I think at the highest level, a couple of points on the unit revenues for Hawaii would be where we would baseline it. But again, as I've shared, I think there's some real constructive setup for next year. Also, we're a lot smarter. When challenging times hit and things happen, causes the teams to double down and really look hard. We've sharpened the pencil on all the critical elements of the Hawaii franchise, so we've got a lot of things in the hopper, and so we feel very ready for next year.
Thanks. Just to check that's two points to system.
Yes.
Yep. Great. With the greater segmentation of your credit card portfolio and the premium lounges that you highlighted at your Investor Day, I just wonder when you would expect contribution from those maybe more premium co-brand cards really start to drop. Is that maybe late next year or more 2028? Thanks for taking the questions.
I think if you're referring, Duane, to the Summit card, which we dropped a year ago, as I shared in my prepared remarks, it's grown remarkably well. Those economics are already coming through. As I shared, 40% of members are outside of our core. With all this new growth that we're doing, as well as Starlink and the new member sign-ups, the whole machine around loyalty members and growth and maturity into cardholders is really working really well. Again, with our longer-term double-digit increases in bank cash through the decade, that's still where we're headed, and it still looks very solid.
Yeah. Duane, just to add on that, remember, this is an entire ecosystem. We said that we want to get diversified revenues up to 60% at Alaska. We've got one point improvement quarter-to-quarter. We're at 54%. You'll start seeing this wheel of inertia starting to gain momentum quarter-over-quarter, and we'll let you know where we are on that. But we're very optimistic. These things work all together jointly as a system.
Thank you.
Thanks, Duane.
Our next question will come from Conor Cunningham with Melius Research.
Hi, everyone. Thank you. In the quarter, I think you had a two-point decline in load factor. You're obviously pushing yields. I'm just trying to understand your willingness to give up load factor into 2027 for higher yields. I assume some of the third quarter stuff was related to Hawaiian cancellations and whatnot, but just again, trying to understand volumes versus yields and how you want to manage that going into next year. Thanks.
Yeah. Thanks, Conor. That is the question, and our teams understand clearly the goal is to maximize unit revenues. Of course, you've got the yield and the loads there. We're watching the loads right now from where we sit, the load trade-off from the increase in yields we feel really good about. Again, as we get into next year, that's something that we're continuing to monitor by region. Right now given what I see, there will be continued load pressure about where we sit. Again, we will make the right adjustments along the way if we believe that it's more revenue accretive to take a little bit more load and a little bit less yield. That's the fine balance that the team's working.
Okay. Andrew, I've been thinking about the potential of the international JVs and really how that changes your profitability of your international franchise. I mean, one, can you provide a timeline on how you think that will all play out and just really how you think that will change the structure of that business going forward? If you wanted to give any color around, I know you've talked about the drag from unit revenue, but on profitability overall, I think that could be helpful in the construct of as we start to think of the benefits going forward.
Yeah.
Thank you.
Yeah. We expect to file in this fourth quarter. I think you know how these joint businesses work, but I think especially, we are prepared and ready to continue to grow for the foreseeable future. Obviously, the international franchise under our own steam. But once we get into joint businesses and especially leveraging the distribution strength of our global partners, and the ability to look at capacity and pricing, there's just a lot of strength in our economics. Although I'm not going to share the numbers with you as u pside to today. Again, 85% of all transatlantic traffic today is in a joint business. We just see this as nothing but a strengthening and upside in our ability to continue to fuel our growth.
Andrew, I might just add, Conor, what we're really doing here is adding a lot of competitive capacity out of Seattle. The more successful that is, the more we can build domestic competitive capacity. So this is a really good thing for the West Coast and for our core customer base, and we're excited to go forward and hopefully partner more deeply with our oneworld partners.
Appreciate it. Thank you.
Thanks, Conor.
Our next question comes from Catherine O'Brien with Goldman Sachs.
Hey, good morning everyone. Thanks for the time. I just wanted to come back to some of the network investments that you're making and how you expect to see growth in places like San Diego and Portland, going forward, where at Investor Day you flagged you're looking to increase share between now and 2030. I guess just trying to think philosophically how you're weighing the longer-term strategic value of that growth versus some of the shorter-term pressure it's putting on results as you make those investments.
Thanks, Catie. I think, just for clarity, the growth is already in there, that's been put in. You're seeing it. That's my shared remarks. You're going to see that abate next year. Without going into any other detailed perspectives on where our growth is, but we've got San Diego and especially Portland and some of the moving around in Hawaii to a place where we feel really good as we shared about having the relevant scale and loyalty and being able to capture the local market share in the areas that we operate in. Again, our growth next year will primarily be focused on gauge with these -10s coming in, and some of the restructuring of our hubs. Again, most of the growth that we've been talking about has already been put into the system.
Maybe just a quick follow-up on that and then one more on next year's capacity. I guess, Andrew, are you saying that you feel you have the right the network is at the size to capture that eight points higher share in Portland by 2030, the five points higher share in San Diego, and so that's follow-up and then quickly just.
Yeah.
You've spoken about getting to 4% growth. Is that meant to be a 2027 comment or that's just a medium-term comment, just where capacity.
Yeah
That are maxed completion? Thank you.
I will let Shane comment on the capacity for next year, but this is all about phased and phasing and really the near term and sort of phase one as we get done this year and just roll over into 2027 has been to stand up the Portland and San Diego growth. We have got some California, San Francisco, Los Angeles growth in Hawaii, and of course, structuring the hub in Seattle and Portland to work better together. That work is mostly being put into place, and we expect to harvest our results from that next year.
Yeah, and Catie, we are not giving a guide for 2027, but, such as it is, I think we have talked openly about sort of focusing on getting to our long-term target somewhere around 4% over the next several years. I think that was consistent with what we laid out in 2024's Investor Day, and I think we reiterated a few weeks ago. So, that is our high-level thinking, and we will refine specific numbers over the next couple of months.
Okay. Thanks, guys.
Thanks, Catie.
We'll move next to Tom Fitzgerald with TD Cowen.
Hi, everyone. Thanks so much for the time. I wanted to ask about cargo, and I guess part A, at Investor Day, you talked about tripling revenues by the end of the decade in that segment. Is that linear or lumpy, or are there any kind of contractual or things that could affect the timing of that? Then maybe as part of that, just where things stand with the Amazon contract and improving the economics of that.
It's a hockey stick, Tom. No, it's not. Jason can talk you through it.
Thanks, Tom. We did say we're going to triple cargo, and it is definitely not a hockey stick. It is linear, but we have a few milestones. We expect to get four new freighters next year on the narrowbody side. That's going to double our capacity on the narrowbody freighter fleet, which we're excited to do in Hawaii and Alaska. We also have the delivery of these widebody aircraft, the 787s in particular. As those come on, we're seeing direct benefit to the entire network as we build those out. So we're building out our base and continuing to grow. It is very linear and steady, and we're confident in the course we're headed.
Yeah, and on Amazon, we have been really enjoying getting closer in partnership with them. We are optimistic about our ability to partner more deeply. We do not have anything to share today, but hopefully in the course of the next few months, we will have more clarity on what that looks like going forward. But really excited about the future of the cargo business, for all the reasons Jason laid out and what Ian shared at Investor Day.
Okay. That is really helpful. Then just a quick follow-up on the technology side. You made a new hire there this week. I think it was at Katie's conference last December, you were talking about, I think it was hygiene areas to improve more resilience and redundancy. Could you just speak to where things stand on that front, and what some of the focus areas on the technology side are for the team in 2027? Thanks again for the time.
Thanks, Tom. Thanks for listening in on Katie's conference last year. Yeah, we had a lot of focus and investment in the sort of infrastructure stability side of the business. We have been executing that plan for more than 12 months at this point. It is going really well. I think we have seen much more sort of reliable stability in the system in our sort of Tier 1 operational critical systems. And we are going to continue to invest in that side, obviously. Lots going on in the outside world around technology and AI, and it is definitely a place that we want to continue to focus, invest in, build up our capability and talent in, which is one of the reasons, amongst many, that we created the CITO position, and Ben can speak more to that briefly here.
Yeah. Tom, technology is moving more from a support function to being really a competitive advantage in how you operate and how you grow. Look, we are a big company now. We are in excess of $15 billion, and so we are excited to bring Amaresh, who comes with a phenomenal background of technology and innovation, and like Shane said, with AI and cyber being such a big part of how companies like ours, they are so technology-dependent, operate. So we are excited to welcome him on board, and I think you will see a lot of great things on the technology front from Alaska in the next few years.
All right. I think we have time for about one more question.
That question will come from Brandon Oglenski with Barclays Capital.
Hey, good morning, everyone. Shane, I guess I'll give you maybe a more critical one, so maybe you didn't want to take this last one from me. I think you said core non-fuel earnings improvement of $3-$4, and I'm just trying to square that with closer to a $5 loss this year. Especially if we just take a snapshot of energy futures right now, fuel prices could actually be higher in 2027 than they are averaging for you in 2026. I don't know. Is this just a case where if fuel is going to be, as energy futures suggest today, just another loss-making year because you're making these structural changes in your network that are just hard to reverse at this point, or is there incremental things you can do looking into next year?
Thanks, Brandon. No, I'm happy to take this. Obviously, this is another thematic thing from Investor Day. What we were trying to be clear on is the underlying improvement in the business, which is really about all of the investments that we are making, that Andrew spoke to, and I spoke to, and Ben have spoken to, both network-wise in places like Portland and Hawaii and San Diego, certainly international, out of Seattle and premium. Those are where the real revenue growth is going to come from those investments. So you have to make those. You can't blink in the face of a really difficult backdrop. As you know, we make 20, 30-year decisions with these things, and we're very committed to it. We have the financial wherewithal to withstand the current backdrop and the balance sheet.
I think if fuel is structurally higher at anything close to what we see today, I would anticipate, much like the industry has always done, it will have to react to that. At some point, we will have to fully recover all of the fuel price. I do not have any reason to believe that will not happen. We can all sort of make gloomy predictions about the macroeconomy and the backdrop of demand. But I think the things that we are focused on are what we are seeing in demand today, which is really strong. People are still wanting to travel. They are still allocating dollars to experiences and going and seeing friends and family. We see really strong business travel. I guess I would just end with saying we are hopeful that the forward fuel curves and futures are wrong.
I think for the broader economy and for the country, we want to see lower energy prices, of course. But if they are elevated, the industry will structurally have to respond to that, and we are well-positioned to participate in whatever environment we face next year.
I will leave it at one. Thanks, Shane.
Thanks, Brandon.
Thanks, Brandon, and thank you for joining us, everyone, and we'll talk to you next quarter.
This concludes today's conference call. Thank you for attending. The host has ended this call. Goodbye.