Alaska Air Group (ALK) Q4 FY2025 Earnings: Key Metrics to Validate UBS Buy Rating

Based on my comprehensive analysis of Alaska Air Group’s (ALK) Q4 FY2025 earnings outlook and UBS’s investment thesis, I will provide investors with a detailed framework of the key metrics to watch when evaluating the validity of UBS’s Buy rating.

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Alaska Air Group is scheduled to report its Q4 FY2025 earnings on

, after market close. UBS analyst Atul Maheswari has reiterated a with a , representing approximately from current levels [0][1]. The stock is currently trading at $49.12, reflecting a 52-week range of $37.63 to $78.08 [0]. With 81.5% of analysts rating ALK as a Buy, the consensus price target stands at $70.00 [0][1].

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UBS’s constructive outlook on Alaska Air is built upon several strategic growth drivers that investors should closely monitor in the upcoming earnings report:

UBS identifies Alaska Air’s

as a key underappreciated catalyst for structural growth [1][2]. The thesis centers on the airline’s ability to capture higher-yielding premium cabin revenue through fleet modernization and route optimization.

The August 2025 launch of

, combining Alaska’s Mileage Plan with Hawaiian’s HawaiianMiles, represents a significant milestone in loyalty program consolidation [0][3]. UBS views this integration as a potential driver of enhanced customer lifetime value and recurring revenue streams.

International route development, particularly the

and broader Pacific network expansion, is seen as an underappreciated growth driver [0][1]. However, recent results show Pacific routes faced headwinds, making this metric particularly important to track.

The September 2024 acquisition of Hawaiian Airlines is a pivotal element of UBS’s thesis. The combined entity’s ability to achieve

will be critical to validating the upgrade thesis [0][3].

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Metric	Q3 FY2025 Actual	Q4 FY2025 Consensus	YoY Growth
Revenue	$3.77 billion	$3.64 billion	+3.1% estimated

Revenue performance relative to consensus estimates is paramount. Alaska Air has demonstrated an , having outperformed the Zacks Consensus Estimate in two of the preceding four quarters, with an average beat of 27.03% [4]. Q3 revenue of $3.77B slightly beat estimates of $3.76B [0].

Metric	Q3 FY2025 Actual	Q4 FY2025 Consensus	Prior Year
EPS (GAAP)	$0.62	$0.11	$0.97 (Q4 FY2024)
EPS (Adjusted)	$1.05	—	—

The Q4 EPS consensus of $0.11 represents a significant sequential decline from Q3 levels, typical for the seasonally weaker fourth quarter [0][4]. UBS’s thesis requires evidence that earnings power remains robust despite near-term pressures from IT disruptions and labor cost inflation.

Metric	Q3 FY2025	Q3 FY2024	Change
GAAP Operating Margin	2.9%	10.7%	-780 bps
Adjusted Operating Margin	4.6%	13.0%	-840 bps
Adjusted Pretax Income	$173M	$399M	-56.6%

The substantial margin compression in Q3 reflects integration costs, labor rate increases, and IT disruption impacts [0][3]. Investors should assess:

• CASMex trends
  (unit costs excluding fuel)
• Progress on cost synergy realization
• Labor cost trajectory
  given recent contract ratifications

Metric	Q3 FY2025	YoY Change (Pro Forma)
RASM	15.41¢	+1.4%
PRASM	14.00¢	+0.6%
Yield	16.51¢	+1.6%

UBS specifically cites RASM improvement as a key 2026 tailwind, noting the industry experienced a “350 bps deviation from normal” in 2025 due to disruptions [2]. If Alaska Air demonstrates RASM stabilization or improvement, it would validate UBS’s bullish sector view.

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Metric	Q3 FY2025	Q4 FY2025 Guidance
ASM Growth	-0.7% (Pro Forma)	+2% to +3% YoY
Load Factor	84.8%	TBD
RPMs (Traffic)	20,739 million	TBD

Alaska Air expects and (CASMex) for Q4 [0]. The disciplined capacity growth (+2% to +3%) supports margin protection if executed properly.

• Q3 Pretax Profit (Ex-Special Items):
  $187M
  vs. $351M prior year
• Key pressures: $120M in increased non-fuel expenses, $77M in reduced revenue [3]

• Q3 Pretax Loss (Ex-Special Items):
  $42M
  vs. $56M loss (Pro Forma prior year)
• Improvement trajectory: $14M sequential improvement
• Key drivers: Strong Hawaii demand, synergy realization [3]

• Q3 Pretax Profit (Ex-Special Items):
  $11M
  vs. $56M prior year
• Pressure points: $46M in increased non-fuel operating expenses [3]

The Hawaiian Airlines turnaround is a critical test case for the integration thesis. The $129M YTD loss (excluding special items) shows improvement from prior periods, but continued progress is essential [3].

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Metric	Q3 FY2025	YoY Change (Pro Forma)
CASMex	11.23¢	+8.6%
Non-Fuel Expenses	$2.793B	+9%

UBS expects “CASM-ex inflation moderating by 200–400 bps YoY” across the airline sector in 2026 [2]. Alaska Air’s Q4 guidance indicates low single-digit CASMex increases, reflecting “significant cost synergies” [0]. Key cost drivers to monitor:

1. Wages and Benefits
   : +12% YoY on pro forma basis due to headcount growth and higher wage rates [3]
2. Aircraft Maintenance
   : +12% YoY due to increased utilization and engine events [3]
3. Landing Fees and Rentals
   : +27% YoY due to terminal rent increases [3]
4. Depreciation
   : +9% YoY from 16 additional owned aircraft [3]

Metric	Q3 FY2025	YoY Change
Economic Fuel Cost/Gallon	$2.51	-3.5%
Fuel Gallons	303 million	+0.3%
Fuel Expense	$761M	-3%

Management has noted that due to ongoing volatility [0]. The fuel hedge program has been fully settled, leaving the company fully exposed to spot fuel prices [3].

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UBS’s thesis heavily emphasizes

as a structural growth driver [1][2]. Investors should scrutinize:

• Premium cabin yield trends
• Premium seat penetration rates
• Corporate travel recovery indicators

The Atmos Rewards program launch in August 2025 is still in early stages [0][3]. Key metrics to monitor:

• Credit card partnership revenue trends
• Bank of America co-branded card amendments impact (effective September 2025)
• Member engagement and redemption behavior
• Summit Visa Infinite premium card uptake [0]

Metric	Q3 FY2025	YoY Change
Cargo Revenue	$142M	+20%

The Amazon Air Transportation Services Agreement (ATSA) has added to Hawaiian’s cargo fleet, driving significant revenue growth [0][3]. Continued cargo momentum validates this strategic diversification.

Pacific routes faced headwinds in Q3, with the Pacific region showing:

• Passenger Revenue: -22% YoY
• Yield: -27% YoY
• PRASM: -30% YoY [3]

The Seattle-Seoul route launch and broader international network build-out will be a key test of Alaska Air’s global expansion capabilities.

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The

obtained on October 29, 2025 represents the most significant integration milestone to date [0][3]. This facilitates transition to a single passenger service system planned for Spring 2026.

Management continues to assert synergies are

, though specific quarterly synergy targets have not been disclosed. Key integration metrics:

• Joint collective bargaining agreement (JCBA) negotiations
• Commercial network optimization
• Technology systems integration
• Procurement savings

Recent labor updates include:

• McGee Air Services
  (IAM): Ratified five-year agreement in Q3 [3]
• Horizon Pilots
  (IBT): Under negotiation
• Horizon Flight Attendants
  (AFA): Mediator participating
• Horizon Dispatchers
  (TWU): Mediator participating [3]

Labor cost trajectory is a critical input to CASMex outlook. The company has experienced significant wage inflation across multiple labor groups [3].

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Metric	September 30, 2025	Change YoY
Cash & Marketable Securities	$2.3B	-6%
Liquidity as % of TTM Revenue	22%	-6 pts
Unused Credit Facility	$850M	—
Unencumbered Aircraft	112	—

With $3.1B in total liquidity (including unused lines), Alaska Air maintains a strong balance sheet position [0][3]. The company’s target is 15-25% of TTM revenue in liquidity, and current levels remain within this range.

Metric	YTD 2025	Prior Year
Share Repurchases	$540M	$63M
Capital Expenditures	$963M	—
Debt Payments	$389M	$279M

The aggressive share repurchase program ($540M YTD) reflects management’s confidence in intrinsic value, though it raises questions about capital priorities during integration [3].

Metric	September 30, 2025
Debt-to-Capital (Including Leases)	60%
Long-Term Debt	$4.49B
Current Ratio	0.52

The 60% debt-to-capital ratio indicates a moderately leveraged balance sheet [0]. Interest expense has increased significantly (+53% YoY) due to higher debt levels and rates [3].

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• July 20, 2025 IT outage
  : ~$20M negative impact on Q3 [3]
• October 23, 2025 data center failure
  : ~500 canceled flights, 50,000 guests impacted [3]
• October 29, 2025 Microsoft Azure outage
  : Flight delays, no cancellations [3]

Management has stated these disruptions’ [0][3]. Any significant one-time charges or guidance adjustments related to these events will be important.

The company faces

that could impact capacity plans:

• B737-8 deliveries shifted to later 2025 or into 2026
• B737-10 deliveries delayed to 2027-2029 pending certification
• B787 deliveries for Hawaiian delayed [3]

Capital expenditure guidance and fleet modernization timeline updates.

The June 2025 cybersecurity incident at Hawaiian Airlines has been contained, with no material impact on operations expected [3]. However, ongoing investigation results could reveal additional considerations.

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Firm	Rating	Price Target	Date
UBS	Buy	$77.00	Jan 2026
BofA Securities	Buy	$70.00	Jan 6, 2026
Barclays	Overweight	$70.00	Jan 12, 2026
TD Cowen	Buy	$65.00	Nov 3, 2025
Citi	Buy	$69.00	Jan 6, 2026
Susquehanna	Positive	$70.00	Jan 7, 2026
Raymond James	Buy	$71.00	Dec 19, 2025

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1. EPS beat
   of $0.11 consensus estimate
2. RASM growth
   of low single digits YoY
3. CASMex increase
   below 3% (within guidance)
4. Hawaiian segment
   continued improvement trajectory
5. Positive guidance
   for 2026 RASM and margins
6. Synergy update
   indicating on-track or ahead of plan
7. Premium revenue
   showing sequential improvement

1. EPS miss
   significantly below $0.11
2. RASM decline
   indicating demand weakness
3. CASMex increase
   above 5% (cost overruns)
4. Hawaiian segment
   regression or increased losses
5. Integration delays
   or synergy target cuts
6. Fuel price headwinds
   greater than anticipated
7. Additional IT disruption
   charges or guidance cuts

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Alaska Air’s Q4 FY2025 earnings report represents a critical test of UBS’s Buy rating thesis. The key validation metrics cluster around three pillars:

1. Revenue Momentum
   : RASM trends, premium revenue performance, and cargo growth
2. Cost Discipline
   : CASMex trajectory and synergy realization
3. Integration Progress
   : Hawaiian Airlines turnaround and operational combination benefits

With UBS seeing the airline sector favorably positioned for 2026, citing easy comparisons, supply discipline, and moderating cost pressures, Alaska Air’s ability to execute on its strategic initiatives will determine whether the stock can realize the 42-57% upside embedded in analyst price targets [2].

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[0] Alaska Air Group Company Overview & Real-Time Quote Data (金灵API)
[1] UBS Reiterates Buy Rating on Alaska Air (ALK) - StreetInsider (https://www.streetinsider.com/Analyst+Comments/UBS+Reiterates+Buy+Rating+on+Alaska+Air+(ALK)%2C+Says+Positive+News+From+Earnings+Could+Spark+Rally/25866213.html)
[2] UBS Upbeat on Airlines for 2026, Lifts American to Buy - Yahoo Finance (https://finance.yahoo.com/news/ubs-upbeat-airlines-2026-lifts-122314168.html)
[3] Alaska Air Group Q3 FY2025 10-Q Filing - SEC.gov (https://www.sec.gov/Archives/edgar/data/766421/000076642125000060/alk-20250930.htm)
[4] ALK to Report Q4 Earnings: What’s in the Offing for the Stock? - Nasdaq (https://www.nasdaq.com/articles/alk-report-q4-earnings-whats-offing-stock)