The Seattle company expects elevated fuel prices will tack $600 million onto its second-quarter expenses alone.
Alaska Air Group will borrow $1 billion to help it better manage the spike in global fuel prices.
The debt is split into two separate transactions. The company’s subsidiary Alaska Airlines will borrow $500 million in senior unsecured notes with a 6.5% interest rate and due in 2031. And wholly-owned group subsidiary AS Mileage Plan, a holding company for Alaska’s Atmos loyalty plan assets, will borrow an incremental $500 million under a 2024 senior secured loan facility.
Proceeds for both transactions will be used for general corporate purposes — in other words, anything Alaska needs the funds for. Close is scheduled for 12 May.
The new debt comes as Alaska works to ease the impact of elevated fuel prices. In April, CEO Ben Minicucci estimated that higher prices would add roughly $600 million to the group’s fuel bill in the second quarter. That’s nearly double its $700 million in total fuel expenses a year earlier.
Average North American jet fuel prices stood at $3.75 a gallon on 7 May, the latest data from Platt’s Jet Fuel Price Assessment shows. That’s down from a peak of $4.77 a gallon on 2 April but up 51% from where they stood on 27 February, the day before the start of the US-Israel war against Iran that prompted closure of the Strait of Hormuz.
An additional headwind for Alaska is the fact that jet fuel typically costs 10-15% more on the US West Coast. The region is known as a fuel island as it is isolated from the rest of the country’s oil infrastructure.
American Airlines and JetBlue Airways have separately tapped financial markets to raise additional funds since the beginning of the Iran war.
Shane Tackett, Alaska’s finance chief, described the airline’s financial position as “strong” on 21 April. The group had $2.9 billion in available liquidity at the end of March.
Alaska estimates it will spend $1.4-1.5 billion on capital expenditures in 2026. Total aircraft deliveries expected this year include one Airbus A330-300F, six Boeing 737 Max 8s and one Boeing 787-9, plus four Embraer E175s at its regional affiliates.
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