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Alaska Air (ALK) is trading sharply lower today after resetting Q1 guidance lower this morning. The company now expects adjusted EPS of $(2.00)-$(1.50), down from prior guidance of $(1.50)-$(0.50), as sharply higher fuel costs and softer demand in Puerto Vallarta and Hawaii more than offset otherwise solid underlying revenue trends.

• The company said the demand strength that began in Q4 2025 and accelerated into early 2026 has recently been disrupted by unrest in Puerto Vallarta and severe rainstorms and historic flooding in Hawaii. Those markets together account for about 30% of capacity.
• Fuel is adding another sizable hit. Alaska now expects economic fuel price of $2.90-3.00 per gallon, which is projected to create an incremental EPS headwind of at least $(0.70).
• Even so, broader network performance does not appear to be deteriorating materially. Unit revenue remains in line with prior expectations, while capacity is still tracking toward the high end of the prior outlook, up about 2%.
• Looking ahead, management was more constructive on Q2, citing standout managed corporate demand, forward bookings over the next 90 days up more than 25% yr/yr, and yields and load factors that are also running above last year.

Briefing.com Analyst Insight

While ALK provided encouraging commentary and some solid underlying metrics, particularly with unit revenue remaining in line with prior expectations despite softer demand in a few key leisure markets, the market is focused squarely on the weaker-than-expected earnings outlook. Management made clear that the pressure is being driven more by sharply higher fuel costs and localized demand weakness in Puerto Vallarta and Hawaii than by a broader deterioration in network demand, but the size of the downside Q1 reset is still difficult for investors to ignore. Although broader trends across the rest of the network, including corporate demand, appear to be holding up relatively well and early Q2 commentary was encouraging, fuel volatility and macro uncertainty still seem to be keeping investors from giving the company much credit for those healthier underlying trends.