Alaska Air Group says Hawaii market remained a drag in 2026, but sees conditions improving in 2027
Hawaii has been a drag on Alaska Air Group's performance so far this year, but executives told investors Wednesday they are increasingly optimistic about the market in 2027 as industry capacity growth slows and temporary headwinds begin to ease.
The Hawaii market has been one of the weakest-performing parts of Alaska's network, creating about two points of unit revenue pressure across the system, according to Andrew Harrison, Alaska's executive vice president and chief commercial officer.
"It's been a challenging year for Hawaii," Harrison said during a Wednesday earnings call. "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 is headed in the right direction."
Harrison pointed to several signs that conditions are improving. He said storm disruptions are expected to ease, while integration milestones have eliminated operational friction between the two
airlines.
"We transitioned to a
(single passenger service system) PSS in April, and that got rid of all sorts of friction, connectivity challenges, and Hawaiian joined the Oneworld (alliance)," Harrison said.
He added that mainland-Hawaii capacity growth also is expected to moderate.
"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 is up about 1.9%, and second quarter is actually down over 4%," he said. "The setup for Hawaii next year … we feel optimistic."
This more optimistic outlook for Hawaii came as Alaska Air Group, parent of Alaska Airlines, Hawaiian Airlines and Horizon Air, reported a third-quarter net loss of $147 million, or $1.32 per share, compared with net income of $73 million, or 62 cents per share, a year earlier. Executives blamed higher jet fuel costs for much of the decline but said Hawaii also continued to weigh on results.
Higher fuel costs weighed on the third-quarter results, but merger synergies and
investments under Alaska Accelerate, the company's three-year growth plan, remain on track. The carrier expects to generate $1 billion in revenue and cost improvements from the merger by 2027, including about $800 million in revenue initiatives and $200 million in cost savings.
Executives said the merger, which closed Sept. 18, 2024, has expanded travel options for Hawaii residents through Alaska's growing international network and strengthened the combined carrier's financial performance despite ongoing industry challenges. The company is expanding its international presence from its Seattle hub with new nonstop service to Osaka, Japan, and Papeete, Tahiti, as it targets 15 international routes by 2030.
Ben Minicucci, president and CEO of Alaska Air Group and CEO of Alaska Airlines, said, "We know we can do better than the results we are producing today. That is precisely why we are 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 will see the investments we have made over the last
several years translate into tangible results across the business."
Hawaii came up repeatedly during the earnings call as a market where Alaska sees long-term value despite recent challenges.
"One of the reasons we remain confident in Hawaii over the long term is that no one is more invested in the market," Harrison said. "The big four have less than 4% of their network invested."
Executives also emphasized Alaska's long-term commitment to Hawaii, pointing to planned cargo expansion and fleet investments. The company has said that it plans to nearly double cargo aircraft capacity by 2027 and replace Hawaiian Airlines' aging interisland fleet beginning in 2028 by redeploying Boeing 737-800 aircraft from
Alaska's existing fleet.
Minicucci said, "We are optimistic about growing this business to a more meaningful level as we deploy our new 37 freighters in Alaska and Hawaii next year and work toward renewing our partnership with Amazon with better economics and expanded service."
Jason Berry, Alaska's executive vice president and chief operating officer, added, "That is going to double our capacity on the
narrow-body freighter fleet, which we're excited to do in Hawaii and Alaska."
The merger also continues to reshape Hawaiian Airlines' workforce.
On Oct. 2, Hawaiian issued a notice that 13 additional nonunion employees are expected to separate from the airline in December or January. Alex Da Silva, Alaska's regional communications director for Hawaii, said about 383 nonunion Hawaiian Airlines employees have separated since Alaska completed its acquisition of the carrier.
"Over this same period, between September 2024 and today, the company has hired more than 1,500 new employees, primarily in unionized roles based in Hawaii, maintaining a workforce of more than 6,000 employees across the islands and more than 7,100 systemwide," Da Silva said.
Da Silva added that joint collective-bargaining agreements, which remain under negotiation, are the final major merger-integration milestone.
