Alaska Air Group reported earnings of 43 cents per share for the fourth quarter of 2025, exceeding the Zacks Consensus Estimate of 11 cents. However, this reflects a significant drop of 55.7% compared to the previous year, mainly due to rising operating costs. Operating revenues were $3.63 billion, which fell short of the estimated $3.65 billion, though it still represented a 2.8% increase from the previous year. Passenger revenues made up 89.4% of the total, rising by 2% to $3.25 billion, but were below the projected $3.35 billion. Cargo and other revenues grew by 11% to $146 million, surpassing expectations. Loyalty program revenues increased by 6% to $238 million. Corporate travel and premium revenues went up by 9% and 7%, respectively. The company recorded a slight increase in revenue per available seat mile, rising by 0.6% to 15.63 cents. Despite these increases, Alaska Air’s consolidated traffic saw a 0.7% decline. However, capacity increased by 2.2%, leading to a reduced load factor of 81.5%. Operating expenses rose by 3% to $3.56 billion. By the end of 2025, the company had $627 million in cash and had repurchased 11.3 million shares for $570 million. For the first quarter of 2026, Alaska Air estimates a loss per share of between 50 cents and $1.50. They expect an increase in capacity and capital expenditures, with adjusted earnings per share projected at $3.5-$6.5 for the year. Delta Air Lines reported a fourth-quarter earnings figure of $1.55 per share, exceeding estimates but down 16.22% from the previous year due to labor costs. Their revenues increased to $16 billion. J.B. Hunt Transport saw a 24.2% growth in earnings, but total revenues fell. Both companies faced challenges and areas of growth in their financial results. Alaska Air’s fourth-quarter report presents a mixed but insightful view. Although the earnings exceeded expectations, a weak forecast for the first quarter of 2026 creates some uncertainty. The broad guidance for the full year indicates that management is unsure about how cost pressures and demand will play out, which often results in increased volatility for the stock. With the expectation of a loss in the upcoming quarter, we foresee downward pressure on the stock price. Traders might want to adopt protective measures such as buying puts or employing bear call spreads to take advantage of potential declines in the following weeks. The expected loss of between 50 cents and $1.50 per share is notably worse than what was previously anticipated, acting as a strong negative catalyst. However, it’s essential to consider broader industry trends. Recent observations show that while jet fuel prices remain high, they’ve started to stabilize and even slightly decrease, according to the U.S. Energy Information Administration. If this trend continues, it might lessen the impact of high operating costs as reported later in the year. Moreover, overall travel demand is strong. TSA checkpoint data from early January 2026 indicates that passenger traffic is modestly surpassing levels from January 2025, showing that consumers are still valuing travel. This demand could serve as a safety net for the stock, preventing a more significant decline and making short positions risky. In this environment, selling cash-secured puts at a lower strike price could be a good strategy to collect premiums from the high volatility, while establishing an attractive entry point if the stock declines. Alternatively, for investors expecting a rebound later in the year based on positive full-year guidance, taking advantage of the current weakness to enter longer-dated bull call spreads could be wise. The loyalty program and corporate travel sectors continue to perform well, indicating solid growth in fundamental business areas.

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