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Alaska Air Group has quickly transformed from a primarily domestic West Coast carrier into an ambitious would‑be global player. With Hawaiian Airlines now under its roof, a record Boeing order in hand, and long‑haul routes to Europe and Asia rolling out, the story on the surface looks like classic “under-earning compounder”: big growth, big synergies, temporarily depressed margins.

But when we dig into the numbers and filings, we see a more uncomfortable picture for equity investors at today’s price.

According to the latest 8-K (2026), p.2, Alaska generated $14.239 billion of revenue in 2025, yet only 2.8% adjusted pretax margin and $2.44 in adjusted EPS. At a share price of $48.86, that translates to about 39x trailing earnings and an EV/EBITDA close to 8x, levels that would be aggressive even for a high‑quality compounder, let alone a capital‑intensive airline digesting a complex merger and fighting through IT outages.

In this piece, we walk through why our DeepValue team currently rates Alaska Air Group as a potential sell, where we see the line between upside and downside, and what investors should watch closely across 2026–2027.

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Where Alaska Air Group Stands Today

Alaska Air Group sits at a strategic crossroads.

Through subsidiaries Alaska Airlines, Hawaiian Airlines, Horizon Air and McGee Air Services, the group now touches more than 140 destinations across North America, Latin America, Asia and the Pacific, with Europe entering the mix in spring 2026, per the 8-K (2026), p.5. Revenue is diversified across:

Passenger transportation (main cabin and premium)
Loyalty partnerships (co‑brand cards and partners)
Cargo and other services, including Hawaiian’s Air Transportation Services Agreement with Amazon, which pays fixed monthly, per‑hour and per‑cycle fees plus expense reimbursement, as outlined in the 10-K (2025), p.39.

On paper, management’s ambition is clear. The “Alaska Accelerate” plan, unveiled at Investor Day 2024, targets:

≥ $1 billion incremental profit
≥ $10 EPS
11–13% pretax margins by 2027
At least $500 million of synergies from merging Hawaiian into the broader system

You can see that roadmap laid out in the Alaska Accelerate summary, Dec 2024.

That’s a big leap from where Alaska stands today. According to the 8-K (2026), p.2, 2025 delivered:

$14.239 billion in operating revenue
$100 million GAAP net income and $293 million adjusted net income
2.8% adjusted pretax margin
$2.44 adjusted EPS

The investment debate boils down to this question: are investors being paid enough to underwrite a multi‑year ramp from sub‑3% pretax margins to double‑digits while Alaska tackles integration, IT and capex risk all at once?

Valuation: Where Is the Margin of Safety?

The blunt answer from our work: we don’t see much margin of safety at current prices.

At $48.86, Alaska screens as follows, based on the snapshot in our report and FMP data:

P/E: 38.78x trailing EPS
EV/EBITDA: 7.95x
Net debt/EBITDA: 3.64x
Interest coverage: 1.37x

For context, airlines are generally cyclical, capital‑intensive businesses with modest long‑term returns on capital. Paying nearly 8x EBITDA and nearly 40x earnings after a year of outages, rising unit costs and a big integration is only reasonable if you’re highly confident that:

1. Hawaiian synergies arrive largely on time and in full

2. CASM ex‑fuel flattens or declines

3. New long‑haul and Hawaii demand support materially higher EPS within 2–3 years

The problem is that recent filings tell a more stubborn story on costs.

According to the 10-Q (2025), p.29, pro forma Q3 2025 CASM ex‑fuel was 11.23¢ versus 10.34¢ a year earlier, a roughly 8.6% jump. Even Q4 2025, which management framed as a step in the right direction, saw CASM ex‑fuel up 1.3% year‑over‑year, per the Q4/FY25 release, Jan 22 2026.

On top of that, management is committing to:

$1.4–1.5 billion of capex in 2026 (primarily fleet and related investments)
$600 million+ over five years for the Kahu‘ewai plan to upgrade Hawaiian’s product and infrastructure, as described in the Kahu‘ewai plan release, Jan 5 2026

Those are large cash outlays for a company with mid‑single‑digit pretax margins and modest interest coverage.

Our conclusion: downside protection today relies heavily on management delivering the full Alaska Accelerate bridge, not on current earnings power or balance‑sheet strength. That’s not the kind of setup we typically like to pay a premium multiple for.

Base, Bull, and Bear: How the Risk‑Reward Stacks Up

Our team framed Alaska’s fair value under three scenarios:

Base case (45% probability)

Pretax margin trends toward 6–7% by 2027
Hawaiian reaches modest profitability; CASM ex‑fuel flattens
Synergies materialize, but not to the point of fully hitting the Accelerate plan
Implied value: about $55 per share

Bull case (25% probability)

Flawless Hawaiian integration, no major IT disruptions, strong Hawaii and international demand
Synergies exceed $500 million, pretax margin approaches 10%, EPS trajectory toward $8 by 2027
Implied value: about $75 per share

Bear case (30% probability)

Structural costs (wages, airports, IT) stay high; CASM ex‑fuel refuses to normalize
Recurring disruptions and/or prolonged Hawaii softness; pretax margin stuck below 5%
Implied value: about $32 per share

Weighting those scenarios, we see expected value clustering in the mid‑$50s, not dramatically above today’s price, but with sizeable tail risk to the low $30s if things go wrong.

For us, that’s not enough upside to justify underwriting a complex integration and capex cycle in a cyclical industry, especially with consensus still relatively bullish.

Sentiment: The Market Still Sees an “Under-Earner” to Buy

Market sentiment around Alaska Air Group is nuanced but still tilted positive.

Over the last few months, analyst coverage and media commentary have continued to describe Alaska as a structurally attractive growth and synergy story. Pieces highlighted in our report from AInvest, Defense World and Smartkarma show that most analysts maintain Buy or Moderate Buy ratings with price targets in the high‑$60s to low‑$70s.

At the same time, the tone on execution has clearly deteriorated:

The July 20, 2025 IT outage, which led to ~200 canceled flights and a ~$20 million hit to Q3, is detailed in the 10-Q (2025), p.28.
An October 2025 data‑center/Microsoft Azure event that impacted ~500 flights and ~50,000 guests pressured Q4 results.
According to AInvest, Dec 2025, the stock suffered a notable 9‑day slide after revised guidance and outage fallout.

Recent commentary increasingly frames Alaska’s margin pressure as a function of outages, weather and even government shutdown impacts, rather than a simple cost blip, with the Wall Street Journal, Dec 2025 tying its results to macro shocks.

In other words:

The narrative is still bullish on the long‑term story (Hawaiian, Boeing order, international growth)
Yet investors are clearly less forgiving of execution errors and cost surprises

For value‑oriented investors, crowded optimism plus rising skepticism is exactly the mix that can lead to sideways or negative stock performance while a company tries to grow into its multiple.

Business Economics: High Operating Leverage Cuts Both Ways

Alaska’s business model is standard for a network airline but with a few important nuances.

According to the 8-K (2026), p.5:

2025 operating revenue of $14.239 billion consisted of:
$12.835 billion passenger
$855 million loyalty
$549 million cargo and other

The group’s cost structure features:

Fixed and semi‑fixed elements: aircraft ownership, maintenance, airport facilities, much of labor
Variable: fuel and some labor/handling

As the 10-K (2025), p.12 explains, this creates high operating leverage: small movements in load factor, yield or CASM ex‑fuel can translate into outsized swings in margins.

This leverage can be a powerful tailwind when:

Demand is strong
Fuel is manageable
CASM ex‑fuel is under control

But the last few quarters have shown the other side of that blade:

Q3 2025 GAAP pretax income was $111 million versus $328 million in Q3 2024 (pro forma $255 million), per the 10-Q (2025), p.28.
On a pro forma basis, revenue was up just 1%, while CASM ex‑fuel jumped from 10.34¢ to 11.23¢.
IT outages alone reduced Q3 by about $20 million and contributed to Q4 volatility.

When your core cost metric is drifting higher and your network is more complex, leverage works against you.

From our perspective, the recent pattern of “record revenue but squeezed margins,” highlighted in multiple pieces like AInvest, Nov 2025 and the Wall Street Journal, Oct 23 2025, is a risk signal investors should take seriously.

Integration and IT: The Spine of the Thesis

Hawaiian: From Deal Rationale to Execution Reality

The Hawaiian acquisition is the centerpiece of Alaska’s growth story.

The deal, roughly $1.9 billion including assumed debt, brought:

Inter‑island flying
A Pacific network (Japan, Oceania, etc.)
A brand deeply tied to Hawai‘i tourism

Strategically, it positions Alaska as a potential “fourth U.S. global airline,” as discussed in Alaska Air Group Wikipedia, accessed Jan 2026 and the Alaska Accelerate summary, Dec 2024.

But investors need to separate strategic logic from execution reality:

Hawaiian only achieved its first positive adjusted pretax margin since 2019 in 2025, according to the Q2 2025 release, Jul 23 2025.
Even then, Hawaiian remained a pretax loss maker year‑to‑date 2025 at the time of the 10-Q (2025).
The Kahu‘ewai program will pour more than $600 million into Hawaiian’s product and airport investments over five years, per the Kahu‘ewai plan release, Jan 5 2026.

That capex will hit cash well before we know whether Hawaiian can sustainably earn its cost of capital in a market where visitor arrivals remain below 2019 levels, as shown in the Hawaii DBEDT July 2025 tourism release, Sep 2025.

IT and PSS Migration: A Quiet but Critical Risk

If we had to single out one under‑appreciated operational risk, it would be IT.

Beyond the 2025 outages already mentioned, Alaska is preparing for:

A Hawaiian passenger service system (PSS) migration
Oneworld integration for Hawaiian
Complex systems integration to unify customer and back‑end platforms

The 10-Q (2025), p.28 and 10-K (2025), p.25 both flag increasing cyber and IT risk, and recent outages show this is not a theoretical issue.

Our thesis “downgrade trigger” is explicit here:

If the April 2026 PSS migration triggers another major outage (hundreds of cancellations, multi‑day disruption), we would shift from “potential sell” to strong sell given the structural hit to reliability, costs and customer perception.

For anyone holding or considering ALK, we think the PSS cutover and subsequent operational performance through Q3 2026 will be one of the most important catalysts to watch.

For complex, moving pieces like IT and integration, having a tool that keeps every development tied back to filings and earnings commentary is invaluable.

Use DeepValue’s citation-backed reports to monitor each new 10-Q and outage disclosure so you can quickly see how integration and IT risks are evolving before the market fully reacts.

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Is ALK Stock a Buy in 2026?

From our DeepValue team’s perspective, ALK is not a buy at current levels. We rate it “potential sell” with the following risk‑reward profile:

Trim Above: $60

At that level, the stock implies that investors are paying a full (or even aggressive) price for 2027 earnings that remain speculative.

Attractive Entry: Around $40

If shares drift toward $40 without negative guidance revisions, we would likely move from “potential sell” toward “wait” and reassess the setup. At that price, you’re paying less for the upside optionality on Hawaiian and Accelerate.

Reassessment Window: 6–12 months

Over the next year, the evidence on CASM ex‑fuel, Hawaiian profitability, and long‑haul route performance should meaningfully clarify whether the Alaska Accelerate bridge is realistic.

So what would make us more constructive?

Evidence that CASM ex‑fuel is flattening or declining on a consolidated basis, not just explained away as “temporary investments” in each quarter
Hawaiian sustaining positive pretax margins into 2026, with management confirming that at least $500 million in synergies by 2027 remains on track, as originally laid out in the Alaska Accelerate summary, Dec 2024
A clean PSS migration and IT track record through late 2026—no repeat of the disruptive events detailed by Investopedia, Oct 2025

Without these data points, we think the equity story still leans too heavily on promise over proof.

Will Alaska Air Deliver Long-Term Growth?

Long term, we do think Alaska has credible ingredients for value creation:

A powerful West Coast franchise with strong O&D traffic and a respected loyalty program, as described in the 10-K (2025), p.39
Alliance membership in oneworld and growing long‑haul connectivity, which broaden revenue pools and loyalty relevance, supported by announcements like the “Ready, set, Italia!” release, Nov 2025
A modernizing fleet with 105 737‑10s and 5 787s on order, plus options for 35 more 737‑10s, as confirmed in the Boeing press release, Jan 7 2026

Historically, Alaska has been a disciplined operator. The DEF 14A (2025), p.46 shows 2024 ROIC at 10.5%, above the maximum target of 8.5%, driving a 200% payout on performance stock units. Management has shown they can earn well above the cost of capital in stable conditions.

Our concern is less about the strategic direction and more about the stacking of execution risks into a narrow window:

Integrating Hawaiian and capturing $500M+ of synergies
Rolling out a new PSS and oneworld integration for Hawaiian
Managing record capex and Boeing delivery risk, highlighted in the 10-K (2025), p.22
Competing head‑to‑head with Delta on long‑haul routes from Seattle, as covered by the Wall Street Journal, Aug 2025

All of that is being asked of a company that just reported 2.8% adjusted pretax margin and saw expenses rise faster than revenue in 2025, per the Q3 2025 release, Oct 23 2025.

In our view, the odds that everything goes right, on time, and on budget are low enough that we’d want more valuation support than we see today.

Key Things for ALK Investors to Watch in 2026–2027

If you own or track Alaska Air Group, we’d focus on a handful of leading indicators over the next 18 months.

1. CASM ex-fuel vs. Guidance

Each quarter, compare reported CASM ex‑fuel vs. guidance and year‑over‑year trends.

Bullish signal: Flat or declining CASM ex‑fuel without heavy reliance on one‑time explanations.
Red flag: Repeated upside surprises in CASM ex‑fuel attributed to “investments,” “integration,” or “operational challenges,” particularly after the 2026 PSS migration, as flagged by the 10-Q (2025), p.28.

2. Hawaiian Segment Profitability and Kahu‘ewai ROI

We’d watch:

Hawaiian’s segment pretax margin quarter by quarter
Management’s commentary on how Kahu‘ewai investments are affecting unit revenue and profitability, as the plan unfolds per the Kahu‘ewai plan release, Jan 5 2026

If, by late 2026, Hawaiian isn’t sustainably profitable and synergy commentary becomes more cautious, the 2027 EPS bridge will look increasingly strained.

3. Long-Haul Route Performance and Competitive Response

Alaska is ramping new routes such as Seattle–Rome, London and Reykjavik, as detailed in the “Ready, set, Italia!” release, Nov 2025 and Business Insider, Aug 2025.

We’d focus on:

Load factors and yield commentary for these routes
Any signs of heavy discounting or schedule cuts
Comparisons of RASM versus system averages

Persistent underperformance here would suggest the international growth leg of the thesis is diluting, not enhancing, returns.

4. Balance Sheet and Interest Coverage

With net debt/EBITDA at 3.64 and interest coverage at 1.37, based on FMP and the 8-K (2026), p.1, Alaska has less room for error than in past cycles.

As capex ramps in 2026–2027, we’d monitor:

Net debt/EBITDA trends
Interest coverage
Management commentary on leverage targets and capital returns (buybacks vs. debt paydown)

If leverage rises further while margins stay in the low‑ to mid‑single digits, the equity increasingly becomes a levered bet on a successful 2027 outcome.

For tracking multiple names through this kind of multi‑year cycle, it can be powerful to systematize how you watch these signals. Read our AI-powered value investing guide if you want a framework for combining deep fundamental work with automation so you don’t miss early warning signs across a 10‑stock or 20‑stock portfolio.

How We’d Act on ALK Today

Putting it all together, our DeepValue stance on Alaska Air Group is:

Rating: Potential Sell
Conviction: 4.0 / 5 (we feel strongly that the current risk‑reward is unfavorable)
Bias:
Existing holders: Consider trimming, especially on rallies above $55–60 where the market is pricing in a cleaner path to 2027.
New capital: We would wait for either a better price (~$40) or better evidence on cost control and Hawaiian profitability.

We would downgrade to strong sell if:

The Hawaiian PSS migration and oneworld integration in April 2026 cause another major outage on the scale of 2025’s events, a risk referenced in the 10-Q (2025), p.28 and Investopedia, Oct 2025.

We would become more constructive if:

Shares sold off toward $40+ without negative guidance revisions
CASM ex‑fuel clearly stabilized or improved across 2026
Hawaiian’s pretax profitability and synergy contributions became more tangible and repeatable

Until then, we see more downside than upside skew for patient, fundamentals‑driven investors.

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Alaska Air Group (ALK) Deep Research Report: Overvalued vs. Execution Risk in a High-Stakes 2027 Earnings Ramp