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ALASKA AIR GROUP, INC.

ALASKA AIR GROUP, INC.ALKEarnings & Financial Report

NYSE · transport

Alaska Air Group, Inc. is an American airline holding company based in SeaTac, Washington, United States. The group owns two mainline carriers, Alaska Airlines and Hawaiian Airlines, along with a regional airline, Horizon Air. Alaska Airlines in turn wholly owns an aircraft ground handling company, McGee Air Services.

What changed in ALASKA AIR GROUP, INC.'s 10-K — 2023 vs 2024

Top changes in ALASKA AIR GROUP, INC.'s 2024 10-K

374 paragraphs added · 399 removed · 232 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

117 edited+49 added−47 removed26 unchanged
COLLECTIVE BARGAINING Most major airlines, including Alaska and Horizon, have employee groups that are covered by collective bargaining agreements (CBA). Airlines with unionized workforces generally have higher labor costs than carriers without unionized workforces. Those with unionized workforces may not have the ability to adjust labor costs downward quickly in response to new competition or slowing demand.
COLLECTIVE BARGAINING Most major airlines, including Alaska, Hawaiian, and Horizon, have employee groups that are covered by collective bargaining agreements (CBA). Airlines with unionized workforces generally have higher labor costs than carriers without unionized workforces. Those with unionized workforces may not have the ability to adjust labor costs downward quickly in response to new competition or slowing demand.
The program is regulated by the FAA who then affirms compliance to the International Civil Aviation Organization. The FAA has approved both Alaska and Horizon's monitoring, verification, and reporting plans. As a result of the COVID-19 pandemic, the CORSIA growth baseline year was modified and set to 85% of 2019 carbon dioxide emissions.
The program is regulated by the FAA who then affirms compliance to the International Civil Aviation Organization. The FAA has approved both Alaska, Hawaiian, and Horizon's monitoring, verification, and reporting plans. As a result of the COVID-19 pandemic, the CORSIA growth baseline year was modified and set to 85% of 2019 carbon dioxide emissions.
We believe that the following competitive factors matter to guests when making an air travel purchase decision: • Fares and ancillary services Ticket and other fee pricing is a significant competitive factor in the airline industry. Travelers are able to easily compare fares and identify competitor promotions and discounts.
We believe that the following competitive factors matter to guests when making an air travel purchase decision: 11 • Fares and ancillary services Ticket and other fee pricing is a significant competitive factor in the airline industry. Travelers are able to easily compare fares and identify competitor promotions and discounts.
In addition, we currently carry a cyber insurance policy in the event of security breaches from malicious parties. We believe that our emphasis on safety and our state-of-the-art flight deck safety technology help to control the cost of our insurance.
In addition, we currently carry a cyber insurance policy in the event of security breaches from malicious parties. We believe that our emphasis on safety and our state-of-the-art flight deck technology help control the cost of our insurance.
Alliances are an important part of our strategy and enhance our revenue by: • offering our guests more travel destinations and better mileage credit and redemption opportunities, including elite qualifying miles on U.S. and international airline partners; • providing a consistent and seamless guest experience whether flying on Alaska or one of our partners; • giving us access to more connecting traffic from other airlines; and • providing members of our partners’ frequent flyer programs an opportunity to travel on Alaska and our regional partners while earning mileage credit in our partners’ programs.
Alliances are an important part of our strategy and enhance our revenue by: • offering our guests more travel destinations and better mileage credit and redemption opportunities, including elite qualifying miles on U.S. and international airline partners; • providing a consistent and seamless guest experience whether flying on Alaska or one of our partners; • giving us access to more connecting traffic from other airlines; and • providing members of our partners’ loyalty programs an opportunity to travel on Alaska and our regional partners while earning mileage credit in our partners’ programs.
The demand for SAF within the aviation industry significantly exceeds the current available supply. We are evaluating options for obtaining the volume of SAF that we expect will be necessary to move us toward our long-term sustainability goals. These options include partnerships with alternative fuel companies and industry groups focused on ways to accelerate innovation in this area.
The demand for SAF within the aviation industry significantly exceeds the current available supply. We are evaluating options for obtaining the volume of SAF that we expect will be necessary to move us toward our long-term carbon-emission goals. These options include partnerships with alternative fuel companies and industry groups focused on ways to accelerate innovation in this area.
Through one world, guests can travel to more than 900 destinations in 170 territories. • Frequent flyer programs We compete with other airlines for customer loyalty in order to build long-term relationships with our guests.
Through one world, guests can travel to more than 900 destinations in 170 territories. • Loyalty programs We compete with other airlines for customer loyalty in order to build long-term relationships with our guests.
The Department of Transportation (DOT), the Transportation Security Administration (TSA), and the FAA exercise significant regulatory authority over air carriers. 17 • DOT: A domestic airline is required to hold a certificate of public convenience and necessity issued by the DOT in order to provide passenger and cargo air transportation in the U.S.
The Department of Transportation (DOT), the Transportation Security Administration (TSA), and the FAA exercise significant regulatory authority over air carriers. • DOT: A U.S. airline is required to hold a certificate of public convenience and necessity issued by the DOT in order to provide passenger and cargo air transportation in the country.
Domestic airlines are required to hold a valid air carrier operating certificate issued by the FAA. Pursuant to these regulations, we have established, and the FAA has approved, our operations specifications and a maintenance program for each type of aircraft we operate.
U.S. airlines are required to hold a valid air carrier operating certificate issued by the FAA. Pursuant to these regulations, we have established, and the FAA has approved, our operations specifications and a maintenance program for each type of aircraft we operate.
The state of California has enacted rules, effective in 2025, that will expand required disclosures discussing the impact of environmental change; agencies within the federal government have proposed similar rules that are not yet finalized. Costs associated with compliance could be significant.
The state of California has enacted rules that will expand required disclosures discussing the impact of environmental change; agencies within the federal government have proposed similar rules that are not yet finalized. Costs associated with compliance could be significant.
Awarding miles for flights based on distance traveled serves as a competitive advantage when compared to other airlines that award miles based on fares, as customers can accumulate miles faster. The program has multiple tiers of status that offer a variety of benefits including bonus miles, complimentary upgrades, free checked bags, and priority boarding.
Awarding miles for flights based on distance traveled serves as a competitive advantage when compared to other airlines that award miles based on fares, as customers can accumulate miles faster. The programs have multiple tiers of status that offer a variety of benefits including bonus miles, complimentary upgrades, free checked bags, and priority boarding.
In 2023, Air Group companies donated $15 million in cash and in-kind travel to approximately 1,300 charitable organizations, and our employees volunteered more than 40,000 hours of community service related to youth and education, medical research, and transportation. Air Group also encourages its guests to play a role in supporting these communities.
In 2024, Air Group companies donated $15 million in cash and in-kind travel to approximately 1,300 charitable organizations, and our employees volunteered more than 45,000 hours of community service related to youth and education, medical research, and transportation. Air Group also encourages its guests to play a role in supporting these communities.
In a typical year, in addition to passenger loads, factors that could cause our operating results to vary include: • pricing initiatives by us or our competitors; • changes in fuel costs; • increases in competition at our primary airports; • general economic conditions and resulting changes in both leisure and business passenger demand; • increases or decreases in passenger and volume-driven variable costs; and • air space and Air Traffic Control delays, particularly in Seattle and San Francisco.
In a typical year, in addition to passenger loads, factors that could cause our operating results to vary include: • pricing initiatives by us or our competitors; • changes in fuel costs; • increases in competition at our primary airports; • general economic conditions, in both the U.S. and other countries, and resulting changes in both leisure and business passenger demand; • increases or decreases in passenger and volume-driven variable costs; and • air space and Air Traffic Control delays, particularly in Seattle and San Francisco.
An interline itinerary offered by one airline may not necessarily be offered by the other, and the fares collected from passengers are prorated and distributed to interline partners according to preexisting agreements between the carriers. Frequent flyer, codeshare, and interline agreements help increase our traffic and revenue by providing a more diverse network and schedule options to our guests.
An interline itinerary offered by one airline may not necessarily be offered by the other, and the fares collected from passengers are prorated and distributed to interline partners according to preexisting agreements between the carriers. These agreements help increase our traffic and revenue by providing a more diverse network and schedule options to our guests.
Due to their design, up-gauged capacity, and engines, the new B737 aircraft are between 15% to 25% more efficient on a seat-by-seat basis than the aircraft they replace. 12 • Using SAF - Among available technologies, SAF has the greatest potential for enabling near-term progress towards our net-zero emissions goal, as it can be used alongside traditional jet fuel as a drop-in fuel while producing up to 80% lower carbon emissions on a lifecycle basis.
Due to their designs, up-gauged capacity, and engines, the new aircraft are between 20% to 25% more efficient on a seat-by-seat basis than the aircraft they replace. • Using SAF: Among available technologies, SAF has the greatest potential for enabling near-term progress towards our net zero emissions goal, as it can be used alongside traditional jet fuel as a drop-in fuel while producing up to 80% lower carbon emissions on a lifecycle basis.
Authorities in several cities have established aircraft noise reduction programs, including the imposition of nighttime curfews. We believe we have sufficient scheduling flexibility to accommodate local noise restrictions. The domestic US airline industry committed to carbon neutral growth starting in 2020 for both domestic and international growth.
Authorities in several cities have established aircraft noise reduction programs, including the imposition of nighttime curfews. We believe we have sufficient scheduling flexibility to accommodate local noise restrictions. 20 The domestic U.S. airline industry committed to carbon neutral growth starting in 2020 for both domestic and international growth.
Air Group acquired Virgin America in 2016, then legally merged the entity with Alaska in 2018, at which time the airlines' operating certificates were also combined. The Company also includes McGee Air Services, an aviation services provider that was established as a wholly-owned subsidiary of Alaska in 2016, and other subsidiaries.
Air Group acquired Virgin America in 2016, then legally merged the entity with Alaska in 2018, at which time the airlines' operating certificates were also combined. The Company also includes McGee Air Services, an aviation services provider that was established as a wholly-owned subsidiary of Alaska in 2016, and other subsidiaries. Alaska, Hawaiian, and Horizon operate as separate airlines.
The program also gives guests the ability to enjoy privileges on other one world airlines by granting reciprocal status and benefits, which include upgrades, lounge access, and priority boarding. • Product and customer service We compete with other airlines in areas of customer service such as on-time performance and guest amenities - including first class and other premium seating, quality of on-board products, aircraft type and comfort.
Additionally, Alaska's Mileage Plan gives guests the ability to enjoy privileges on other one world airlines by granting reciprocal status and benefits, which include upgrades, lounge access, and priority boarding. • Product and customer service We compete with other airlines in areas of customer service such as on-time performance and guest amenities - including first class and other premium seating, quality of on-board products, aircraft type and comfort.
We have partnered with industry experts to develop criteria for assessing credible, high-quality carbon offsets and carbon removal technologies. The Company does not currently purchase or invest in any carbon offsets or carbon removal technology. We will continue to evaluate various strategies, including these technologies, as we refine our plans to achieving net-zero.
We have partnered with industry experts to develop criteria for assessing credible, high-quality carbon offsets and carbon removal technologies. The Company does not have material investments in any carbon offsets or carbon removal technology. We will continue to evaluate various strategies, including these technologies, as we refine our plans to achieving net zero.
Tackett Executive Vice President/Finance and Chief Financial Officer of Alaska Air Group, Inc. and Alaska Airlines, Inc. 45 2011 Kyle B. Levine Senior Vice President Legal, General Counsel and Corporate Secretary of Alaska Air Group, Inc., Alaska Airlines, Inc. and Horizon Air Industries, Inc., and Chief Ethics and Compliance Officer of Alaska Air Group, Inc. 52 2016 Jason M.
Tackett Executive Vice President Finance and Chief Financial Officer of Alaska Air Group, Inc. and Alaska Airlines, Inc. 46 2011 Kyle B. Levine Senior Vice President Legal, General Counsel and Corporate Secretary of Alaska Air Group, Inc., Alaska Airlines, Inc. and Horizon Air Industries, Inc., and Chief Ethics and Compliance Officer of Alaska Air Group, Inc. 53 2016 Jason M.
As a one world member, Alaska's elite Mileage Plan members now receive tier status matching across member airlines. Depending on tier status, guests can enjoy a variety of privileges, including access to more than 600 international first and business class lounges, fast track through security, priority baggage benefits, priority check-in desks, upgrades, and priority boarding.
Alaska is a member of the one world alliance. Alaska's elite Mileage Plan members receive tier status matching across other member airlines. Depending on tier status, guests can enjoy a variety of privileges, including access to more than 600 international first and business class lounges, fast track through security, priority baggage benefits, priority check-in desks, upgrades, and priority boarding.
Alaska is working with others in the aviation community, companies in the private sector, and governments at the federal and state levels towards advancing the scalability of SAF production and reducing its cost. Alaska currently offtakes SAF from Neste at San Francisco International Airport and from Shell Aviation at Los Angeles International Airport.
We are working with others in the aviation community, companies in the private sector, and governments at the federal and state levels towards advancing the scalability of SAF production and reducing its cost. We currently offtake SAF from Neste at San Francisco International Airport and from Shell Aviation at Los Angeles International Airport.
Many of the markets we serve experience inclement weather conditions in the winter, causing increased costs associated with deicing aircraft, canceling flights, and accommodating displaced passengers.
Many of the markets we serve experience inclement weather conditions in the winter, causing increased costs associated with deicing aircraft, flight cancellations, and accommodating displaced passengers.
In addition to Delta, United Airlines and Southwest Airlines are significant competitors on the West Coast and in the states of Hawaii and Alaska. Our California and transcontinental routes have a higher concentration of competitors when compared to our routes within the Pacific Northwest.
In addition to Delta, Southwest Airlines and United Airlines are significant competitors in the state of Hawai'i and on the West Coast. Our Hawai'i, California, transcontinental, and international routes have a higher concentration of competitors when compared to our routes within the Pacific Northwest.
Alaska has an agreement with Bank of America N.A which offers Mileage Plan members in the United States the Alaska Airlines Visa Signature card (co-branded credit card).
Alaska has an agreement with Bank of America N.A which offers Mileage Plan members in the U.S. the Alaska Airlines Visa Signature card (Alaska's co-branded credit card).
The Board has a dedicated Climate Working Group to oversee management’s climate strategy and path to net-zero. This working group is comprised of four members from the board who bring deep expertise in energy, aviation, finance, and governance.
The Board has a dedicated Climate Working Group to oversee management’s climate strategy and path to net zero. This working group comprises three members from the board who bring deep expertise in energy, aviation, finance, and governance.
This does not have a direct impact on domestic flights, however the EPA finalized a rule in 2020 on aircraft emission standards which aligns with the international agreements. Additional emissions reporting requirements and potential requirements to decarbonize could have a significant impact on our industry.
This does not have a direct impact on domestic flights, however the U.S. Environmental Protection Agency (EPA) finalized a rule in 2020 on aircraft emission standards which aligns with the international agreements. Additional emissions reporting requirements and potential requirements to decarbonize both aircraft and ground equipment could have a significant impact on our industry.
However, Alaska's Mileage Plan members can earn and redeem miles on these airlines' route systems. (b) These airline partnerships are limited to earning miles. Alaska's Mileage Plan members can earn miles when purchasing these airlines' flights on alaskaair.com.
However, Alaska's Mileage Plan members can earn and redeem miles on these airlines' route systems. (b) These airline partnerships are limited to earning miles.
Our Mileage Plan program offers some of the most valuable benefits in the industry, giving our members the ability to earn and redeem miles when flying with us or our 30 partner carriers.
Our Mileage Plan and HawaiianMiles programs offer some of the most valuable benefits in the industry, giving our members the ability to earn and redeem miles when flying with us or our partner carriers.
Currently, there are supply constraints in the SAF market, including scope, scale, and cost, which we are dependent on in order to expand our use of SAF at the quantities necessary to reach our sustainability goals.
Currently, there are supply constraints in the SAF market, including scope, scale, and cost, which we are dependent on in order to expand our use of SAF at the quantities necessary to reach our net zero carbon emissions ambition.
Many state and local governments have adopted employee safety and health laws and regulations. We maintain our safety and health programs in order to meet or exceed these requirements. ENVIRONMENTAL We are also subject to various laws and government regulations concerning environmental matters, both domestically and internationally.
We maintain our safety and health programs in order to meet or exceed these requirements. ENVIRONMENTAL We are also subject to various laws and government regulations concerning environmental matters, both domestically and internationally.
Our Leader Academy, which launched in 2022, helps Alaska and Horizon supervisors and managers further develop their leadership and communication skills. Providing meaningful advancement opportunities to employees throughout Air Group is important, and we continue to evaluate new programs which support our people and advance our long-term strategic goals.
Our Leader Academy, which launched in 2022, helps supervisors and managers further develop their leadership and communication skills. Providing meaningful advancement opportunities to employees throughout Air Group is important, and we continue to evaluate new programs which support our people and advance our long-term strategic goals. COMMUNITY INVOLVEMENT We are dedicated to actively supporting the communities we serve.
The percentage of Mainline passenger capacity by region and average stage length is presented below: 2023 2022 2021 West Coast (a) 21 % 22 % 24 % Transcon/midcon 47 % 46 % 40 % Hawaii 14 % 14 % 18 % Alaska 11 % 11 % 12 % Latin America 7 % 7 % 6 % Total 100 % 100 % 100 % Average Stage Length (miles) 1,387 1,347 1,324 (a) Category represents flying within the West Coast.
The percentage of Alaska passenger capacity by region and average stage length is presented below: 2024 2023 2022 West Coast (a) 21 % 21 % 22 % Transcon/midcon 46 % 47 % 46 % Hawaii 14 % 14 % 14 % Alaska 11 % 11 % 11 % Latin America 8 % 7 % 7 % Total 100 % 100 % 100 % Average Stage Length (miles) 1,395 1,387 1,347 (a) Category represents flying within West Coast markets.
FUEL Our business and financial results are highly impacted by the price and the availability of aircraft fuel. Aircraft fuel expense includes raw fuel expense, or the price that we generally pay at the airport, including taxes and fees, plus the effect of mark-to-market adjustments to our fuel hedge portfolio as the value of that portfolio increases and decreases.
Aircraft fuel expense includes raw fuel expense, or the price that we generally pay at the airport, including taxes and fees, plus the impact of our fuel hedge program, including the effect of mark-to-market adjustments to our portfolio as the value of that portfolio increases and decreases.
Schneider Senior Vice President People of Alaska Airlines, Inc. 58 2003 Diana Birkett-Rakow Senior Vice President Public Affairs and Sustainability of Alaska Airlines, Inc. 46 2017 Mr. Minicucci was elected President and Chief Executive Officer (CEO) of Alaska Air Group effective March 31, 2021, and has been President of Alaska Airlines since May 2016.
Schneider Senior Vice President People of Alaska Airlines, Inc. 59 2003 Diana Birkett Rakow Senior Vice President Public Affairs and Sustainability of Alaska Airlines, Inc. 47 2017 Mr. Minicucci was elected President and Chief Executive Officer (CEO) of Alaska Air Group, Inc. in March 2021 and President of Alaska Airlines, Inc. in May 2016.
AGREEMENTS WITH OTHER AIRLINES Our marketing agreements with other airlines fall into three categories: frequent flyer, codeshare, and interline. 6 • Frequent flyer agreements enable our Mileage Plan members to accrue miles and/or redeem them for flights on partner airlines. • Codeshare agreements allow one or more marketing carriers to sell seats on a single operating carrier that services passengers under multiple flight numbers.
These agreements fall into three categories: loyalty program, codeshare, and interline. 7 • Loyalty program agreements enable our members to accrue miles and/or redeem them for flights on partner airlines. • Codeshare agreements allow one or more marketing carriers to sell seats on a single operating carrier that serves passengers under multiple flight numbers.
Our codeshare and interline agreements generated 5%, 5%, and 2% of our total marketed flight revenue for the years ended December 31, 2023, 2022, and 2021. 7 A comprehensive summary of Alaska's alliances with other airlines is as follows: Codeshare Airline Frequent Flyer Agreement Alaska Flight # on Flights Operated by Other Airline Other Airline Flight # on Flights Operated by Alaska or CPA Partners Aer Lingus Yes No No Air Tahiti Nui Yes Yes Yes American Airlines Yes Yes Yes Bahamasair (b) Yes No No British Airways Yes No Yes Cape Air (b) Yes No No Cathay Pacific Airways Yes No Yes Condor Airlines (a) Yes Yes Yes EL AL Israel Airlines (c) Yes No Yes Fiji Airways (a) Yes No Yes Finnair Yes Yes Yes Hainan Airlines Yes No No Iberia Yes Yes Yes Icelandair Yes Yes Yes Japan Airlines Yes Yes Yes Kenmore Air (b) Yes No No Korean Air Yes No Yes LATAM Yes No Yes Malaysia Airlines Yes No No Mokulele Airlines (b) Yes No No Porter Airlines Yes No No Qantas Airways Yes Yes Yes Qatar Airways Yes Yes Yes Ravn Alaska Yes No No Royal Air Maroc Yes No No Royal Jordanian Yes No No Singapore Airlines Yes No Yes Southern Airways Express (b) Yes No No SriLankan Airlines Yes No No STARLUX Airlines Yes No No (a) These airlines do not have their own frequent flyer program.
Our codeshare and interline agreements generated 5% of our total operating revenue for each of the years ended December 31, 2024, 2023, and 2022. 8 Alaska's marketing agreements with other airlines are as follows: Codeshare Airline Mileage Plan Loyalty Program Agreement Alaska Flight # on Flights Operated by Other Airline Other Airline Flight # on Flights Operated by Alaska or CPA Partners Aer Lingus Yes No No Air Tahiti Nui Yes Yes Yes Aleutian Airways (b) Yes No No American Airlines Yes Yes Yes Bahamasair (b) Yes No No British Airways Yes Yes Yes Cape Air (b) Yes No No Cathay Pacific Airways Yes No Yes Condor Airlines (a) Yes Yes Yes Contour Airlines (b) Yes No No Fiji Airways (a) Yes No Yes Finnair Yes Yes Yes Hainan Airlines Yes No No Iberia Yes Yes Yes Icelandair Yes Yes Yes Japan Airlines Yes Yes Yes Kenmore Air (b) Yes No No Korean Air Yes No Yes LATAM Yes No Yes Malaysia Airlines Yes No No Mokulele Airlines (b) Yes No No Oman Air Yes No No Porter Airlines Yes No No Qantas Airways Yes Yes Yes Qatar Airways Yes Yes Yes Royal Air Maroc Yes No No Royal Jordanian Yes No No Singapore Airlines Yes No Yes Southern Airways Express (b) Yes No No SriLankan Airlines Yes No No STARLUX Airlines Yes No No (a) These airlines do not have their own loyalty program.
Currently, not all airports have the necessary infrastructure in place to support charging and use of these units to enable their full operational reliability, and we are actively working with our airport partners to make these important improvements. • Renewing our fleet with more efficient airplanes - Alaska received 29 B737 aircraft in 2023 and has firm commitments to take 80 additional B737 aircraft.
Currently, not all airports have the necessary infrastructure in place to support charging and use of these units to enable their full operational reliability, and we are actively working with our airport partners to make these improvements. • Renewing our fleet with more efficient airplanes: Alaska and Hawaiian have purchase commitments for B737 and B787-9 aircraft.
The DOT has been active in implementing a variety of consumer protection regulations and directives, covering subjects such as advertising, passenger communications, denied boarding compensation, tarmac delay response, ticket refunds, family seating requirements, and fee disclosures for ancillary services. Following operational difficulties across the industry, the DOT has increased its review of airline operational performance.
The DOT has been active in reviewing airlines' operational performance and in implementing a variety of consumer protection regulations and directives, covering subjects such as advertising, passenger communications, denied boarding compensation, tarmac delay response, ticket refunds, family seating requirements, fee disclosures for ancillary services, and accommodations for passengers with disabilities.
Miles can also be earned by flying with one of our partner airlines, by using the co-branded credit card, or through other non-airline partners. Miles awarded do not expire and can accumulate until such time a member chooses to redeem.
Miles are also earned by flying with one of Hawaiian's partner airlines, by using Hawaiian's co-branded credit card, or through other non-airline partners. Miles awarded do not expire and can accumulate until such time a member chooses to redeem. Members can redeem miles earned for flights on Hawaiian or partner airlines, hotel stays, or for other non-airline partner benefits.
We compete with other domestic airlines and a limited number of international airlines on nearly all of our scheduled routes. Our largest competitor is Delta Air Lines Inc. (Delta). Approximately 75% of our capacity to and from Seattle competes with Delta.
Our airlines compete with other U.S. and foreign airlines on nearly all of our domestic and international routes. Our largest competitor is Delta Air Lines Inc. (Delta). Approximately 79% of our capacity to and from Seattle competes with Delta.
Mr. Berry served as President of Alaska Airlines' wholly owned subsidiary McGee Air Services from January 2019 – December 2020. Prior to this Mr. Berry served in several roles at Alaska Airlines including, Managing Director, Cargo from September 2015 – June 2019 and Director, Cargo Operations & Compliance from June 2013 – September 2015. Mr.
He joined Alaska Airlines, Inc. in June 2013 and has served in several roles including Director Cargo Operations and Compliance from June 2013 to September 2015, Managing Director Cargo from September 2015 to June 2019, and President of Alaska Airlines, Inc.'s wholly owned subsidiary McGee Air Services from January 2019 to December 2020.
He was elected Senior Vice President of Planning and Revenue Management in 2014 and Executive Vice President and Chief Revenue Officer in February 2015. Ms. von Muehlen was elected Executive Vice President and Chief Operating Officer of Alaska Airlines effective April 3, 2021 and is a member of Air Group’s Management Executive Committee.
Ms. von Muehlen was elected Executive Vice President and Chief Operating Officer of Alaska Airlines, Inc. in April 2021 and is a member of Air Group’s Management Executive Committee.
While airlines are permitted to establish their own fares without government regulation, the DOT has jurisdiction over the approval of international codeshare agreements, marketing alliance agreements between major domestic carriers, international and some domestic route authorities, Essential Air Service market subsidies, carrier liability for personal or property damage, and certain airport rates and charges disputes.
Certificates do not expire, but may be revoked for failure to comply with federal aviation statutes, regulations, orders or the terms of the certificates. 19 While airlines are permitted to establish their own fares without government regulation, the DOT has jurisdiction over the approval of international codeshare agreements, marketing alliance agreements between major U.S. carriers, international and some domestic route authorities, Essential Air Service market subsidies, carrier liability for personal or property damage, and certain airport rates and charges disputes.
ITEM 1. BUSINESS Alaska Air Group (the "Company" or "Air Group") is a Delaware corporation incorporated in 1985 that operates two airlines, Alaska and Horizon. Alaska was organized in 1932 and incorporated in 1937 in the state of Alaska. Horizon is a Washington corporation that was incorporated and began service in 1981, and was acquired by Air Group in 1986.
ITEM 1. BUSINESS Alaska Air Group is a Delaware corporation incorporated in 1985 that operates three airlines, Alaska Airlines, Hawaiian Airlines, and Horizon Air. Alaska Airlines was organized in 1932 and incorporated in 1937 in the state of Alaska.
In a typical year, some of the impacts of seasonality are offset by travel from the West Coast to leisure destinations and expansion to leisure and business destinations in the mid-continental and eastern U.S.
Profitability typically increases in the second and third quarters as a result of vacation travel. Some of the negative impacts of seasonality are offset by travel from the West Coast to leisure destinations and expansion to leisure and business destinations in the mid-continental and eastern U.S.
Levine was elected Senior Vice President Legal and General Counsel of Alaska Air Group and Alaska Airlines in January 2020 and is a member of Air Group’s Management Executive Committee. Mr. Levine was previously Vice President Legal and General Counsel of Alaska Air Group and Alaska Airlines (January 2016 - January 2020).
Mr. Levine was elected Senior Vice President Legal in January 2020, General Counsel and Corporate Secretary of Alaska Air Group, Inc. and Alaska Airlines, Inc. in August 2017 and Horizon Air Industries, Inc. in January 2020, and Chief Ethics and Compliance Officer in January 2016. He is a member of Air Group’s Management Executive Committee.
To identify and enable these and other technologies needed to accelerate our path to net-zero carbon emissions, among other business needs, we established an investment arm in 2021, called Alaska Star Ventures (ASV). Through ASV, we have partnered with ZeroAvia, a company developing hydrogen-electric powertrain technology for regional aircraft.
To enable these technologies and accelerate our path to net zero carbon emissions, among other business needs, we established an investment arm in 2021, called Alaska Star Ventures (ASV). Through ASV, we have partnered with companies focused on new aircraft technologies.
We are also subject to the oversight of the Occupational Safety and Health Administration (OSHA) concerning employee safety and health matters. The OSHA and other federal agencies have been authorized to create and enforce regulations that have an impact on our operations. In addition to these federal activities, various states have been delegated certain authorities under these federal statutes.
The OSHA and other federal agencies have been authorized to create and enforce regulations that have an impact on our operations. In addition to these federal activities, various states have been delegated certain authorities under these federal statutes. Many state and local governments have adopted employee safety and health laws and regulations.
All Bombardier Q400 aircraft were retired from our fleet by January 2023. 5 The percentage of Regional passenger capacity by region and average stage length is presented below: 2023 2022 2021 West Coast 76 % 75 % 74 % Pacific Northwest 10 % 8 % 7 % Canada 2 % 2 % — % Alaska 5 % 3 % 3 % Transcon/midcon 7 % 12 % 16 % Total 100 % 100 % 100 % Average Stage Length (miles) 470 488 521 CARGO AND OTHER REVENUE The Company provides freight and mail services (cargo).
The percentage of Regional passenger capacity by region and average stage length is presented below: 2024 2023 2022 West Coast 78 % 76 % 75 % Pacific Northwest 8 % 10 % 8 % Canada 2 % 2 % 2 % Alaska 6 % 5 % 3 % Transcon/midcon 5 % 7 % 12 % Mexico 1 % — % — % Total 100 % 100 % 100 % Average Stage Length (miles) 475 470 488 CARGO AND OTHER REVENUE The Company provides freight and mail services (cargo) using both freighter aircraft and the bellies of its passenger aircraft.
We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate. The Department of Justice (DOJ) and DOT have jurisdiction over airline competition matters. The DOJ has authority to review Alaska's proposed acquisition of Hawaiian Airlines under the U.S. antitrust laws. The U.S.
We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate. The Department of Justice (DOJ) and DOT have jurisdiction over airline competition matters. The U.S. Postal Service has jurisdiction over certain aspects of mail transportation services. Labor relations are regulated under the RLA.
As a member of the one world® alliance, Alaska provides our guests with global access to more than 900 destinations in 170 territories. We have operated in a highly competitive and often challenging industry for more than 90 years. Our top priority is ensuring the safety of our guests and employees, an area we continually invest in.
We have operated in a highly competitive and often challenging industry for more than 90 years. Our airlines' top priority is ensuring the safety of our guests and employees, an area we continually invest in.
Alaska also has agreements to purchase approximately 200 million gallons of neat SAF to be delivered through 2030. Alaska's Fueled Up for the Future program enables collaboration with business travel customers to address their business travel emissions while supporting the development of the SAF market.
Alaska and Hawaiian have additional agreements to purchase SAF to be delivered in the coming years. Alaska's Fueled Up for the Future program enables collaboration with business travel customers to address their business travel emissions while supporting the development of the SAF market.
Tackett joined Alaska Airlines in 2000 and has served in a number of roles including Managing Director Financial Planning and Analysis (2008-2010), Vice President Labor Relations (2010-2015), Vice President Revenue Management (2016), Senior Vice President Revenue and E-commerce (2017-2018), and Executive Vice President Planning and Strategy (2018-2020). Mr.
He joined Alaska Airlines, Inc. in December 2000 and has served in several roles including Managing Director Financial Planning and Analysis from December 2008 to August 2011, Vice President Labor Relations from August 2011 to February 2015, Vice President Revenue Management from February 2015 to August 2017, Senior Vice President Revenue and E-commerce from August 2017 to September 2018, and Executive Vice President Planning and Strategy from September 2018 to March 2020.
She was previously elected Vice President of Public Affairs and Sustainability in February 2021 and also served as Vice President of External Relations at Alaska Airlines from September 2017 to February 2021. Ms. Birkett-Rakow is a member of Air Group's Management Executive Committee. REGULATION GENERAL The airline industry is highly regulated, most notably by the federal government.
She joined Alaska Airlines, Inc. in September 2017 and has served as Vice President External Relations from September 2017 to February 2021 and Vice President Public Affairs and Sustainability from February 2021 to November 2021. REGULATION GENERAL The airline industry is highly regulated, most notably by the federal government.
Sprague was elected Regional President Hawai’i / Pacific of Alaska Airlines, Inc. in December 2023 and is a member of Air Group’s Management Executive Committee. Prior to this, he was Sr. Advisor to the CEO of Alaska Airlines from November 2023 to December 2023, and served as President of Horizon Air from November 2019 – October 2023. Mr.
Advisor to the CEO of Alaska Airlines, Inc. from November 2023 to December 2023, and Regional President Hawai'i and Pacific of Alaska Airlines, Inc. from December 2023 to December 2024. Mr. Harrison was elected Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc. in August 2015 and is a member of Air Group's Management Executive Committee.
If either party wishes to modify the terms of any such agreement, it must notify the other party in the manner prescribed by the RLA and/or described in the agreement.
Under the RLA, collective bargaining agreements do not expire, but instead become amendable as of a stated date. If either party wishes to modify the terms of any such agreement, it must notify the other party in the manner prescribed by the RLA and/or described in the agreement.
SAFETY The safety and well-being of our employees and guests is the foundation of our work at Alaska Air Group. The Company's primary safety objective is to identify, monitor, and mitigate safety risks using our Safety Management System. Safety goals and objectives are regularly reviewed and communicated to employees, and are continually measured to evaluate our progress.
SAFETY The safety and well-being of our employees and guests is the foundation of our work at Alaska Air Group. The Company's primary safety objective is to identify, monitor, and mitigate safety risks, which we do using our airlines’ Safety Management Systems (SMS).
For those achieving MVP tier status, the program offers benefits, including bonus miles on flown segments, complimentary upgrades, free checked bags, and priority boarding. Members qualifying for higher tiers are offered incremental benefits. As a member of one world, Mileage Plan members with tier status are provided reciprocal status and benefits when flying on other one world members.
Members qualifying for higher tiers are offered incremental benefits. As a member of one world, Mileage Plan members with tier status are provided reciprocal status and benefits when flying on other one world members.
Prior to that she served as Senior Vice President of Maintenance and Engineering of Alaska Airlines from January 2019 to April 2021. Ms. von Muehlen served as Chief Operating Officer at Horizon Air from January 2018 to January 2019, and Managing Director of Airframe, Engine, Components MRO at Alaska Airlines from December 2012 to January 2018. Ms.
She joined Alaska Airlines, Inc. in July 2011 and has served in several roles including Managing Director Airframe, Engine, Components Maintenance Repair and Overhaul of Alaska Airlines, Inc. from December 2012 to January 2018, Chief Operating Officer of Horizon Air Industries, Inc. from January 2018 to January 2019, and Senior Vice President Maintenance and Engineering of Alaska Airlines, Inc. from January 2019 to April 2021.
Schneider was elected Senior Vice President of People at Alaska Airlines in June 2019 and is a member of Air Group’s Management Executive Committee. Ms. Schneider was previously Vice President of People at Alaska (August 2017-May 2019), Vice President of Inflight Services at Alaska (2011-2017), and later also took responsibility for Call Centers at Alaska (February 2017).
Ms. Schneider was elected Senior Vice President People at Alaska Airlines, Inc. in June 2019 and is a member of Air Group’s Management Executive Committee.
EMPLOYEE TRAINING The Alaska Air Group companies invest in employee programs and training that aid advancement throughout the enterprise. Our Pathways Program provides a clear and direct path for Horizon pilots, flight attendants, technicians, and dispatchers to progress to Mainline. Since inception in 2018, nearly 400 pilots have advanced through the program.
We will continue to foster a workplace where our employees feel safe, cared for, and trust that they belong. 16 EMPLOYEE TRAINING The Alaska Air Group companies invest in employee programs and training that aid advancement throughout the enterprise. Our Pathways Program provides a clear and direct path for Horizon pilots, flight attendants, technicians, and dispatchers to progress to Alaska.
Aligning our employees' goals with the Company's goals is critical in achieving success. To that end, Alaska and Horizon employees participate in our PBP and OPR programs, which reward employees across all work groups based on metrics related to profitability, safety, sustainability, guest satisfaction, and completion rate. Employees earned $200 million under these incentive programs during the year.
During the year, Alaska and Horizon employees participated in the PBP and OPR programs, which reward employees across all work groups based on metrics related to profitability, safety, sustainability, guest satisfaction, completion rate, and on-time rate.
The call options lessen the financial impact from spikes in crude oil prices, and when prices are below our call option strike prices, we only forfeit cash previously paid for hedge premiums. In the fourth quarter of 2023, we suspended purchases of crude oil call options as we reevaluate our fuel and hedge program strategies.
Alaska and Hawaiian each have a fuel hedge program, both of which use crude oil call options to limit exposure to material increases in fuel prices. The call options lessen the financial impact from spikes in crude oil prices, and when prices are below the call option strike prices, we only forfeit cash previously paid for hedge premiums.
GLOSSARY OF TERMS Adjusted Net Debt - long-term debt, including current portion, plus capitalized operating and finance leases, less cash and marketable securities Adjusted Net Debt to EBITDAR - represents adjusted net debt divided by EBITDAR (trailing twelve months earnings before interest, taxes, depreciation, amortization, special items and rent) Aircraft Utilization - block hours per day; this represents the average number of hours per day our aircraft are in transit Aircraft Stage Length - represents the average miles flown per aircraft departure ASMs - available seat miles, or “capacity”; represents total seats available across the fleet multiplied by the number of miles flown CASM - operating costs per ASM; represents all operating expenses including fuel and special items 19 CASMex - operating costs excluding fuel and special items per ASM, or "unit cost"; this metric is used to help track progress toward reduction of non-fuel operating costs since fuel is largely out of our control Debt-to-Capitalization Ratio - represents adjusted debt (long-term debt plus capitalized operating lease liabilities) divided by total equity plus adjusted debt Diluted Earnings per Share - represents earnings per share (EPS) using fully diluted shares outstanding Diluted Shares - represents the total number of shares that would be outstanding if all possible sources of conversion, such as stock options, were exercised Economic Fuel - best estimate of the cash cost of fuel, net of the impact of our fuel-hedging program Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with paying passengers Mainline - represents flying Boeing 737, Airbus A320, and Airbus A321neo jets and all associated revenue and costs Productivity - number of revenue passengers per full-time equivalent employee RASM - operating revenue per ASMs, or "unit revenue"; operating revenue includes all passenger revenue, freight & mail, Mileage Plan and other ancillary revenue; represents the average total revenue for flying one seat one mile Regional - represents capacity purchased by Alaska from Horizon and SkyWest.
GLOSSARY OF TERMS Aircraft Utilization - block hours per day; this represents the average number of hours per day our aircraft are in transit Aircraft Stage Length - represents the average miles flown per aircraft departure ASMs - available seat miles, or “capacity”; represents total seats available across the fleet multiplied by the number of miles flown CASM - operating costs per ASM; represents all operating expenses including fuel, freighter costs, and special items CASMex - operating costs excluding fuel, freighter costs, and special items per ASM, or “unit cost” Debt-to-capitalization ratio - represents adjusted debt (long-term debt plus capitalized operating and finance lease liabilities) divided by total equity plus adjusted debt Diluted Earnings per Share - represents earnings per share (EPS) using fully diluted shares outstanding Diluted Shares - represents the total number of shares that would be outstanding if all possible sources of conversion, such as stock options, were exercised Economic Fuel - best estimate of the cash cost of fuel, net of the impact of our fuel-hedging program and excluding operations under the Air Transportation Service Agreement (ATSA) with Amazon 21 Freighter Costs - operating expenses directly attributable to the operation of Alaska's B737 freighter aircraft and Hawaiian's A330-300 freighter aircraft exclusively performing cargo missions Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with revenue passengers PRASM - passenger revenue per ASM, or “passenger unit revenue” RASM - operating revenue per ASMs, or “unit revenue”; operating revenue includes all passenger revenue, freight & mail, loyalty program revenue, and other ancillary revenue; represents the average total revenue for flying one seat one mile RPMs - revenue passenger miles, or “traffic”; represents the number of seats that were filled with revenue passengers; one passenger traveling one mile is one RPM Yield - passenger revenue per RPM; represents the average passenger revenue for flying one passenger one mile
Alaska's membership in the one world alliance provides our guests increased global network utility, and positions us to capture an incremental share of global travelers and corporate accounts.
The agreements also make it more convenient for guests to purchase flights to their final destinations through our airlines' distribution channels. Alaska's membership in the one world alliance provides its guests increased global network utility, and positions the airline to capture an incremental share of global travelers and corporate accounts.
Alaska’s union contracts at December 31, 2023 were as follows: Union Employee Group Number of Employees Contract Status Air Line Pilots Association, International (ALPA) Pilots 3,473 Amendable 10/17/2025 Association of Flight Attendants (AFA) (a) Flight attendants 6,813 Amendable 12/17/2022 International Association of Machinists and Aerospace Workers (IAM) Ramp service and stock clerks 828 Amendable 9/27/2026 IAM Clerical, office and passenger service 4,754 Amendable 9/27/2026 Aircraft Mechanics Fraternal Association (AMFA) Mechanics, inspectors and cleaners 981 Amendable 10/17/2023 Transport Workers Union of America (TWU) Dispatchers 105 Amendable 3/24/2027 (a) Negotiations with AFA for an updated collective bargaining agreement are ongoing as of the date of this filing. 15 Horizon’s union contracts at December 31, 2023 were as follows: Union Employee Group Number of Employees Contract Status International Brotherhood of Teamsters (IBT) (a) Pilots 565 Amendable 12/31/2024 AFA (a) Flight attendants 510 Amendable 4/30/2024 AMFA (a) Mechanics and related classifications 181 Amendable 5/10/2024 TWU Dispatchers 24 Amendable 1/29/2026 (a) Negotiations with IBT, AFA, and AMFA for updated collective bargaining agreements have begun of the date of this filing.
Certain employees located outside the U.S. are also represented by unions or local representative groups. 15 Alaska’s union contracts at December 31, 2024 were as follows: Union Employee Group Number of Employees Contract Status Air Line Pilots Association, International (ALPA) Pilots 3,401 Amendable 3/2/2027 Association of Flight Attendants (AFA) (a) Flight attendants 6,927 Amendable 12/17/2022 International Association of Machinists and Aerospace Workers (IAM) Ramp service and stock clerks 854 Amendable 9/27/2026 IAM Clerical, office and passenger service 4,691 Amendable 9/27/2026 Aircraft Mechanics Fraternal Association (AMFA) Technicians and related 1,060 Amendable 10/17/2028 Transport Workers Union of America (TWU) Dispatchers 113 Amendable 3/24/2027 (a) In January 2025, Alaska reached a tentative agreement with its flight attendants, represented by the AFA, for an updated collective bargaining agreement.
In 2023, direct sales composed approximately 73% of our total sales. 11 SEASONALITY AND OTHER FACTORS Our results of operations for any interim period are not necessarily indicative of those for the entire year because our business is subject to seasonal fluctuations.
SEASONALITY AND OTHER FACTORS Our results of operations for any interim period are not necessarily indicative of those for the entire year because our business is subject to seasonal fluctuations. In typical years, our profitability is generally lowest during the first and fourth quarters due principally to fewer departures and passengers.
We expect there to be continued incremental legislation aimed at further reduction of greenhouse gas emissions, hazardous substances, and additional focus on environmental justice. 18 The Airport Noise and Capacity Act recognizes the rights of airport operators with noise problems to implement local noise abatement programs so long as they do not interfere unreasonably with interstate or foreign commerce or the national air transportation system.
Many state and local environmental regulations exceed these federal regulations. The Airport Noise and Capacity Act recognizes the rights of airport operators with noise problems to implement local noise abatement programs so long as they do not interfere unreasonably with interstate or foreign commerce or the national air transportation system.
Subject to certain individual airport capacity, noise and other restrictions, this certificate permits an air carrier to operate between any two points in the U.S. Certificates do not expire, but may be revoked for failure to comply with federal aviation statutes, regulations, orders or the terms of the certificates.
Subject to certain individual airport capacity, noise and other restrictions, this certificate permits an air carrier to operate between any two points in the U.S.
Berry President of Horizon Air Industries, Inc. 46 2023 Joseph A. Sprague Regional President of Hawai'i/Pacific of Alaska Airlines, Inc. 55 2019 Andrew R. Harrison Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc. 54 2008 Constance E. von Muehlen Executive Vice President and Chief Operating Officer of Alaska Airlines, Inc. 56 2018 Andrea L.
Harrison Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc. 55 2008 Constance E. von Muehlen Executive Vice President and Chief Operating Officer of Alaska Airlines, Inc. 57 2018 Andrea L.
He leads Air Group’s Management Executive Committee, and was elected to the Alaska Air Group Board of Directors in May 2020. Mr. Tackett was elected Chief Financial Officer in March 2020 and is a member of Air Group’s Management Executive Committee. Mr.
He was Chief Executive Officer of Virgin America, Inc. from December 2016 to July 2018, when Virgin America, Inc. was merged into Alaska Airlines, Inc. Mr. Tackett was elected Executive Vice President Finance and Chief Financial Officer of Alaska Air Group, Inc. and Alaska Airlines, Inc. in March 2020, and is a member of Air Group’s Management Executive Committee.
Historically, markets that faced competition from low-cost and ultra-low-cost carriers were subject to disruptive ticket and fee pricing as the carriers' low cost per available seat mile allowed them to serve markets at very low fares. Post-COVID industry competitive dynamics are evolving.
Historically, markets that faced competition from low-cost and ultra-low-cost carriers were subject to disruptive ticket and fee pricing as the carriers' low cost per available seat mile allowed them to serve markets at very low fares. Legacy carriers with expansive networks and diversified product offerings have experienced greater success attracting more price-conscious customers with their basic economy offerings.
In 2023, Alaska used limited quantities of SAF on flights departing from San Francisco International Airport and Los Angeles International Airport. SAF prices are generally higher than jet fuel prices as the SAF market is still developing. As of December 31, 2023, Alaska has agreements to purchase approximately 200 million gallons of neat SAF to be delivered through 2030.
Sustainable aviation fuel (SAF) is an important part of our long-term strategy to reduce emissions. In 2024, Alaska used limited quantities of SAF on flights departing from San Francisco International Airport and Los Angeles International Airport. SAF prices are generally higher than jet fuel prices as the SAF market is still developing.
He also served as Associate General Counsel and Managing Director Commercial Law and General Litigation from July 2009 to February 2011 and, subsequently, as Deputy General Counsel and Managing Director of Legal at Alaska Airlines from February 2011 to January 2016. Mr.
He joined Alaska Airlines, Inc. in February 2006 and has served in several roles including Senior Attorney from February 2006 to July 2009, Associate General Counsel and Managing Director Commercial Law and General Litigation from July 2009 to February 2011, 18 Deputy General Counsel and Managing Director Legal from February 2011 to January 2016, Vice President Legal from January 2016 to January 2020 .
Our strong financial position and low cost advantage have historically enabled us to offer competitive fares while still earning returns for our shareholders. • Routes served, flight schedules, codesharing and interline relationships, and alliances We compete with other airlines based on markets served and the frequency of service to those markets.
Our cost discipline and high productivity have historically enabled us to maintain competitive fares. • Routes served, flight schedules, codesharing and interline agreements, and alliances We compete with other airlines based on markets served and the frequency of service to those markets. Some airlines have more extensive route structures than we do, and they offer significantly more international routes.
Our principles of "Ready, Safe, Go" are critical to empowering employees to stop the operation any time something appears to be unsafe. Our employees are also rewarded for reporting safety concerns and meeting measurable safety targets as both our Performance Based Pay (PBP) and Operational Performance Rewards (OPR) programs include payouts for achievement to stated goals.
Alaska and Horizon employees are also rewarded for reporting safety concerns and meeting measurable safety targets as both our Performance Based Pay (PBP) and Operational Performance Rewards (OPR) programs include payouts for achievement to stated goals. As of December 31, 2024, Alaska and Horizon operate under one SMS and Hawaiian operates under its own SMS.
Sprague previously served as Senior Vice President External Relations of Alaska Airlines from May 2014 until his resignation in September 2017. Mr. Sprague also served Alaska Airlines as Vice President of Marketing from March 2010 to April 2014 and Vice President of Alaska Air Cargo from April 2008 to March 2010. Mr.
He has served in several roles, including Vice President of Alaska Air Cargo from April 2008 to March 2010, Vice President Marketing of Alaska Airlines, Inc. from March 2010 to April 2014, Senior Vice President External Relations of Alaska Airlines, Inc. from May 2014 to September 2017, President of Horizon Air Industries, Inc. from November 2019 to October 2023, Sr.
The Company also earns other revenue for lounge memberships, hotel and car commissions, travel insurance, and certain other immaterial items not intrinsically tied to providing air travel to passengers. Revenue is recognized when these services are rendered and recorded as Cargo and other revenue.
The ATSA provides for Hawaiian to operate up to ten A330-300F aircraft. As of December 31, 2024, Hawaiian has taken delivery of and is operating six A330-300F aircraft. The Company also earns other revenue for lounge memberships, hotel and car commissions, travel insurance, and certain other immaterial items not intrinsically tied to providing air travel to passengers.
Our roadmap for achieving this goal includes the following focus areas: • Increasing operational efficiency - Alaska and Horizon take pride in consistently delivering top-of-industry operational performance. By having a consistent, top-of-industry operational performance, we are also able to optimize our fuel efficiency.
ENVIRONMENTAL INITIATIVES We have both short and long-term goals to reduce fuel consumption, with the long-term aim to reach net zero carbon emissions by 2040. Our roadmap for achieving this goal includes the following focus areas: • Increasing operational efficiency: We take pride in consistently delivering top-of-industry operational performance.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+23 added−24 removed69 unchanged
Terrorist attacks, the fear of such attacks or other hostilities involving the U.S. could have a significant negative effect on the airline industry, including us, and could: • significantly reduce passenger traffic and yields as a result of a dramatic drop in demand for air travel; • significantly increase security and insurance costs; • make war risk or other insurance unavailable or extremely expensive; • increase fuel costs and the volatility of fuel prices; • increase costs from airport shutdowns, flight cancellations, and delays resulting from security breaches and perceived safety threats; and • result in a grounding of commercial air traffic by the FAA.
Terrorist attacks, the fear of such attacks or other hostilities involving the U.S. could have a significant negative effect on the airline industry, including us, and could: 23 • significantly reduce passenger traffic and yields as a result of a dramatic drop in demand for air travel; • significantly increase security and insurance costs; • make war risk or other insurance unavailable or extremely expensive; • increase fuel costs and the volatility of fuel prices; • increase costs from airport shutdowns, flight cancellations, and delays resulting from security breaches and perceived safety threats; and • result in a grounding of commercial air traffic by the FAA.
If we are unable to maintain our cost advantage over the long-term and achieve sustained targeted returns on invested capital, we will likely not be able to grow our business in the future or weather industry downturns. Therefore, our financial results may suffer. 22 The airline industry may undergo further consolidation or restructuring.
If we are unable to maintain our cost advantage over the long-term and achieve sustained targeted returns on invested capital, we will likely not be able to grow our business in the future or weather industry downturns. Therefore, our financial results may suffer. The airline industry may undergo further consolidation or restructuring.
Although we have a long track record of fostering good communications, negotiating approaches, and developing other strategies to enhance workforce engagement in our long-term vision, unsuccessful attempts to strengthen relationships with union employees could divert management’s attention from other projects and issues and negatively impact the business.
Although we have a long track record of fostering good communications, negotiating approaches, and developing other strategies to enhance workforce engagement in our long-term vision, unsuccessful attempts to strengthen relationships with union employees could 27 divert management’s attention from other projects and issues and negatively impact the business.
Application of these laws may result in operational disruption, increased litigation risk and expense, and undermining of negotiated labor agreements. In recent years, the state of California and the federal government have enacted and proposed, respectively, rules that significantly expand required disclosures discussing the impact of environmental change.
Application of these laws may result in operational disruption, increased litigation risk and expense, and undermining of negotiated labor agreements. 29 In recent years, the state of California and the federal government have enacted and proposed, respectively, rules that significantly expand required disclosures discussing the impact of environmental change.
If other airlines participate in consolidation or reorganization, those airlines may significantly improve their cost structures or revenue generation capabilities, thereby potentially making them stronger competitors of ours and potentially impairing our ability to realize expected benefits from our own strategic relationships.
If other airlines participate in consolidation or reorganization, those airlines may significantly improve their cost 25 structures or revenue generation capabilities, thereby potentially making them stronger competitors of ours and potentially impairing our ability to realize expected benefits from our own strategic relationships.
Additionally, increases in interest rates may mean that future borrowings are more costly for the Company, which could harm our future financial results. We carry, and will continue to carry for the foreseeable future, a substantial amount of debt and aircraft operating lease commitments.
Additionally, increases in interest rates may mean that future borrowings are more costly for the Company, which could harm our future financial results. We carry, and will continue to carry for the foreseeable future, a substantial amount of debt and aircraft lease commitments.
These events could result in disruptions in our operations or increases in our cost structure. 21 Impacts of climate change, including physical and transition risks, as well as market responses, may have a material adverse result on our operations and financial position.
These events could result in disruptions in our operations or increases in our cost structure. Impacts of climate change, including physical and transition risks, as well as market responses, may have a material adverse result on our operations and financial position.
The exclusive forum provision in our certificate of incorporation will not relieve us of our duties to comply with the federal 28 securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
The exclusive forum provision in our certificate of incorporation will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
Factors that might impact our operations include: • congestion, construction, space constraints at airports, and/or air traffic control problems, all of which many restrict flow; • lack of adequate staffing or other resources within critical third parties; • adverse weather conditions; • lack of operational approval (e.g. new routes, aircraft deliveries, etc.); • contagious illness and fear of contagion; • increased security measures or breaches in security; • changes in international treaties concerning air rights; • international or domestic conflicts or terrorist activity; • random acts of violence on our aircraft or at airports; • interference by modernized telecommunications equipment with aircraft navigation technology; • disruption, failure, or inadequacy of systems or infrastructure under the control of third parties, including government entities; and • other changes in business conditions.
Factors that might impact our operations include: • congestion, construction, space constraints at airports, and/or air traffic control problems, all of which many restrict flow; • lack of adequate staffing or other resources within critical third parties; • adverse weather conditions and natural disasters; • lack of operational approval (e.g. new routes, aircraft deliveries, etc.); 22 • contagious illness and fear of contagion; • increased security measures or breaches in security; • changes in international treaties concerning air rights; • international or domestic conflicts or terrorist activity; • random acts of violence on our aircraft or at airports; • interference by modernized telecommunications equipment with aircraft navigation technology; • disruption, failure, or inadequacy of systems or infrastructure under the control of third parties, including government entities; and • other changes in business conditions.
In addition, regulatory, policy, and legal developments could impact the extent to which airlines can merge, or form and maintain marketing alliances and joint ventures with other airlines, particularly U.S. carriers. These factors could have a material adverse effect on our business, financial conditions, and results of operations. We continue to face strong competition, mainly from other U.S. carriers.
In addition, regulatory, policy, and legal developments could impact the extent to which airlines can merge, or form and maintain marketing alliances and joint ventures with other airlines, particularly U.S. carriers. These factors could have a material adverse effect on our business, financial condition, and results of operations. We continue to face strong competition, mainly from other U.S. carriers.
Our airlines are parties to marketing agreements with a number of domestic and international air carriers, or “partners," including an expanded relationship with American and other one world carriers. These agreements provide that certain flight segments operated by us are held out as partner “codeshare” flights and that certain partner flights are held out for sale as Alaska codeshare flights.
Our airlines are parties to marketing agreements with a number of domestic and international air carriers, or “partners,” including an expanded relationship with American and other one world carriers. These agreements provide that certain flight segments operated by us are held out as partner “codeshare” flights and that certain partner flights are held out for sale as codeshare flights.
The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder would otherwise choose to bring the action, and such judgments or results may be more favorable to our company than to our stockholders. PENDING ACQUISITION OF HAWAIIAN HOLDINGS INC.
The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder would otherwise choose to bring the action, and such judgments or results may be more favorable to our company than to our stockholders. ACQUISITION AND INTEGRATION OF HAWAIIAN HOLDINGS, INC.
These efforts could include significant enhancements to our in-airport and on-board environments, increasing our direct customer relationships through improvements to our purchasing portals (digital and mobile), and management of our customer loyalty programs. In pursuit of these efforts we may negatively affect our reputation with some of our existing customer base.
These efforts could include significant enhancements to our in-airport and on-board environments, increasing our direct customer relationships through improvements to our purchasing portals (digital and mobile), and management of our customer loyalty program. In pursuit of these efforts, we may negatively affect our reputation with some of our existing customer base.
We have significant capacity overlap with competitors, particularly in our key West Coast markets. This dynamic may be exacerbated by competition among airlines to attract passengers during periods of economic recovery.
We have significant capacity overlap with competitors, particularly in our key West Coast and Hawaiian markets. This dynamic may be exacerbated by competition among airlines to attract passengers during periods of economic recovery.
Our success is also dependent on cultivating and maintaining a unified culture with cohesive values and goals. Much of our continued success is tied to our guest loyalty. Failure to maintain and grow the Alaska culture could strain our ability to maintain relationships with guests, suppliers, employees and other constituencies.
Our success is also dependent on cultivating and maintaining a unified culture with cohesive values and goals. Much of our continued success is tied to our guest loyalty. Failure to maintain and grow the Air Group culture could strain our ability to maintain relationships with guests, suppliers, employees and other constituencies.
Due to the concentration of our flights in the Pacific Northwest and Alaska, we believe a large portion of our operation is more susceptible to adverse weather conditions than other carriers with networks that cover a larger geographic area.
Due to the concentration of our flights in the Pacific Northwest, Alaska, and Hawai'i, we believe a large portion of our operation is more susceptible to adverse weather conditions and natural disasters than other carriers with networks that cover a larger geographic area.
This would harm our business. 20 Our operations are often affected by factors beyond our control, including delays, cancellations, and other conditions, which could harm our business, financial condition, and results of operations. As is the case for all airlines, our operations often are affected by delays, cancellations and other conditions caused by factors largely beyond our control.
Our operations are often affected by factors beyond our control, including delays, cancellations, and other conditions, which could harm our business, financial condition, and results of operations. As is the case for all airlines, our operations often are affected by delays, cancellations and other conditions caused by factors largely beyond our control.
In many instances, our competitors have been able to grow and increase their competitive influence by merging with other airlines, as Alaska did with Virgin America in 2016. Some competitors have also benefited from the ability to reduce their cost structures through the U.S. bankruptcy process and restructuring laws.
In many instances, our competitors have been able to grow and increase their competitive influence by merging with other airlines, as Alaska did with Virgin America in 2016 and Hawaiian Holdings, Inc. in 2024. Some competitors have also benefited from the ability to reduce their cost structures through the U.S. bankruptcy process and restructuring laws.
Moreover, any aircraft accident or incident, even if it is fully insured or does not involve one of our aircraft, could cause a public perception that our airlines or the aircraft we or our partners fly are less safe or reliable than other transportation alternatives.
Moreover, any aircraft accident or incident, even if it is fully insured or does not involve one of our aircraft, could cause a public perception that our airlines or the aircraft we or our partners fly are less safe or reliable than other transportation alternatives. This would harm our business.
Negative publicity, including as a result of misconduct by our guests or employees, failures by our suppliers and other vendors, failure to address our environmental, social, and governance goals, or other circumstances, can spread rapidly through such channels. Should the Company not respond in a timely and appropriate manner to address negative publicity, the Company's reputation may be significantly harmed.
Negative publicity, including as a result of misconduct by our guests or employees, failures by our suppliers and other vendors, failure to achieve our stated goals, or other circumstances, can spread rapidly through such channels. Should the Company not respond in a timely and appropriate manner to address negative publicity, the Company's reputation may be significantly harmed.
Economic uncertainty, including a recession, would likely impact demand for our product and could harm our financial condition and results of operations. The airline industry, which is subject to relatively high fixed costs and highly variable and unpredictable demand, is particularly sensitive to changes in economic conditions.
Any of these factors could adversely impact our operations and financial results. 26 Economic uncertainty, including a recession, would likely impact demand for our product and could harm our financial condition and results of operations. The airline industry, which is subject to relatively high fixed costs and highly variable and unpredictable demand, is particularly sensitive to changes in economic conditions.
This could result in production instability in the locations in which the aircraft and its parts are manufactured or an inability to operate our aircraft. 23 We rely on partner airlines for codeshare and frequent flyer marketing arrangements.
This could result in production instability in the locations in which the aircraft and its parts are manufactured or an inability to operate our aircraft. We rely on partner airlines for codeshare and loyalty program marketing arrangements.
This includes our airline reservation system, website, telecommunication systems, maintenance systems, airline operations control systems, flight deck/route optimization systems, planning and scheduling, mobile applications and devices, and many other systems. These systems require significant investment of employee time and cost for maintenance and upgrades.
We heavily depend on automated systems to operate our business. This includes our airline reservation system, website, telecommunication systems, maintenance systems, airline operations control systems, flight deck/route optimization systems, planning and scheduling, mobile applications and devices, and many other systems. These systems require significant investment of employee time and cost for maintenance and upgrades.
The challenges involved in this integration, which will be complex and time-consuming, include the following: • successfully managing relationships with our combined customer base and retaining Hawaiian’s customers; • the ability to successfully integrate Hawaiian's business with ours in a manner that permits us to achieve the synergies and other benefits anticipated to result from the acquisition; • integrating complex systems, operating procedures, regulatory compliance programs, technology, aircraft fleets, networks, and other assets of the two companies in a manner that minimizes any adverse impact on customers, suppliers, employees, and other constituencies; • managing Alaska Airlines and Hawaiian Airlines as two distinct brands under one operating certificate, a strategy that has not been implemented in the U.S. commercial airline industry; • diversion of the attention of our and Hawaiian's management and other key employees; • integrating the workforces of the two companies while maintaining focus on providing consistent, high quality customer service and running a safe and efficient operation; • disruption of, or the loss of momentum in, our ongoing business; • liabilities that are significantly larger than we currently anticipate and unforeseen increased expenses or delays associated with the acquisition, including transition costs to integrate the two businesses that may exceed the costs that we currently anticipate; • maintaining productive and effective employee relationships and, in particular, successfully and promptly integrating seniority lists and achieving cost-competitive collective bargaining agreements that cover the combined union-represented work groups; • limitations prior to the completion of the acquisition on the ability of management of our company and of Hawaiian to conduct planning regarding the integration of the two companies; • the increased scale of our operations resulting from the acquisition; • retaining key employees of our company and Hawaiian; and • obligations that we will have to counterparties of Hawaiian that arise as a result of the change in control of Hawaiian.
Potential difficulties we may encounter as part of the integration process include the following: • the inability to successfully combine the Hawaiian Airlines business with that of Alaska's in a manner that permits us to achieve anticipated net synergies and other anticipated benefits of the acquisition; • successfully managing relationships with our combined customer base and retaining Hawaiian’s customers; • integrating complex systems, operating procedures, regulatory compliance programs, technology, aircraft fleets, networks, and other assets of the two companies in a manner that minimizes any adverse impact on customers, suppliers, employees, and other constituencies; • managing Alaska Airlines and Hawaiian Airlines as two distinct brands, a strategy that has not been implemented in the U.S. commercial airline industry; • managing Hawaiian's international network successfully, which comprises multiple countries in which Air Group did not have prior experience; • diversion of the attention of our and Hawaiian's management and other key employees; • integrating the workforces of the two companies while maintaining focus on providing consistent, high quality customer service and running a safe and efficient operation; 30 • disruption of, or the loss of momentum in, our ongoing business; • liabilities that are significantly larger than we currently anticipate and unforeseen increased expenses or delays associated with the acquisition, including transition costs to integrate the two businesses that may exceed the costs that we currently anticipate; • maintaining productive and effective employee relationships and, in particular, successfully and promptly integrating seniority lists and achieving cost-competitive collective bargaining agreements that cover the combined union-represented work groups; • the increased scale of our operations resulting from the acquisition; • retaining key employees of our company and Hawaiian; and • obligations that we will have to counterparties of Hawaiian that arise as a result of the change in control of Hawaiian.
If we fail to do so, our business could be harmed. Our business, financial condition, and results of operations are substantially exposed to the volatility of jet fuel prices. Significant increases in jet fuel costs or significant disruptions in the supply of jet fuel would harm our business. Fuel costs constitute a significant portion of our total operating expenses.
Our business, financial condition, and results of operations are substantially exposed to the volatility of jet fuel prices. Significant increases in jet fuel costs or significant disruptions in the supply of jet fuel would harm our business. Fuel costs constitute a significant portion of our total operating expenses.
Should these suppliers be unable to manufacture, obtain certification for, and deliver new aircraft, we may not be able to grow our fleet at intended rates, which could impact our financial position. Boeing has significant production constraints and regulatory delays for the B737 family of aircraft, which may impact the timing of deliveries.
Should these suppliers be unable to manufacture, obtain certification for, and deliver new aircraft, we may not be able to grow our airlines' fleet at intended rates, which could impact our financial position. Boeing has significant production constraints for the B737 and B787-9 aircraft, as well as regulatory delays for certain B737 aircraft.
We are unable to predict the future supply of jet fuel, which may be impacted by various factors, included but not limited to geopolitical conflict, economic sanctions against oil-producing countries, natural disasters, or staffing and equipment shortages in the oil industry. Any of these factors could adversely impact our operations and financial results.
We are unable to predict the future supply of jet fuel, which may be impacted by various factors, including but not limited to geopolitical conflict, economic sanctions against oil-producing countries, natural disasters, or staffing and equipment shortages in the oil industry.
As part of our core business, we are required to collect, process, store and share personal and financial information from our guests and employees. Under current or future privacy legislation, we are subject to significant legal risk should we not appropriately protect that data. Our membership in the one world alliance exposes us to incremental global regulation and therefore risk.
As part of our core business, we are required to collect, process, store and share personal and financial information from our guests and employees. Under current or future privacy legislation, we are subject to significant legal risk should we not appropriately protect that data.
As part of this process, we may continue to incur substantial costs for employee programs. TECHNOLOGY We rely heavily on automated systems to operate our business, including expanded reliance on systems managed or hosted by third parties.
As part of this process, we may continue to incur substantial costs for employee programs. TECHNOLOGY We rely heavily on automated systems to operate our business, including expanded reliance on systems managed or hosted by third parties. Failure to invest in new technology or a disruption of our current systems or their operators could harm our business.
If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business the size of Hawaiian, then we may not achieve the anticipated benefits of the acquisition of Hawaiian and our revenue, expenses, operating results and financial condition could be materially adversely affected. 30 Each of our and Hawaiian’s indebtedness and other obligations are, and our indebtedness and other obligations following the completion of the acquisition will continue to be, substantial and could adversely affect our business and liquidity.
If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business the size of Hawaiian, then we may not achieve the anticipated benefits of the acquisition of Hawaiian and our revenue, expenses, operating results and financial condition could be materially adversely affected.
Alaska is dependent on Boeing as its sole supplier for mainline aircraft and many aircraft parts. Horizon is similarly dependent on Embraer. Additionally, each carrier is dependent on sole suppliers for aircraft engines for each aircraft type.
We are dependent on a limited number of suppliers for aircraft and parts. Alaska is dependent on Boeing as its sole supplier for mainline aircraft and many aircraft parts. Horizon is dependent on Embraer. Each carrier is dependent on sole suppliers for aircraft engines for each aircraft type.
Further, as regulation of the collection and storage of personal and financial information continues to evolve and increase, we may incur significant costs to bring our systems and processes into compliance. Cybersecurity threats have and will continue to impact our business.
Further, as regulation of the collection and storage of personal and financial information continues to evolve and increase, we may incur significant costs to bring our systems and processes into compliance. Cybersecurity threats have and will continue to impact our business. Failure to appropriately mitigate these risks could negatively impact our operations, onboard safety, reputation and financial condition.
Unauthorized parties have attempted and continue to attempt to gain access to our systems and information, including through fraudulent misrepresentation and other means of deception. Methods used by unauthorized parties are continually evolving and may be difficult to identify.
Our sensitive information is securely transmitted over public and private networks. Our systems are subject to increasing and evolving cybersecurity risks. Unauthorized parties have attempted and continue to attempt to gain access to our systems and information, including through fraudulent misrepresentation and other means of deception. Methods used by unauthorized parties are continually evolving and may be difficult to identify.
We may be unable to integrate Hawaiian’s business with ours successfully and realize the anticipated benefits of the acquisition, which could negatively impact our stock price and our future business and financial results.
We may be unable to integrate Hawaiian’s business with ours successfully and realize the anticipated benefits of the acquisition, which could negatively impact our stock price and our future business and financial results. We must devote significant management attention and resources to integrating the business practices and operations of Hawaiian Airlines.
We continue to monitor emerging technologies, including technologies which may have disruptive impacts which are out of our control. We will continue to work with regulatory agencies and other air carriers to mitigate potential impacts of these technologies on the safety and security of air travel.
We will continue to work with regulatory agencies and other air carriers to mitigate potential impacts of these technologies on the safety and security of air travel.
Our concentration in certain markets could cause us to be disproportionately impacted by adverse changes in circumstances in those locations. Our strategy involves a high concentration of our business in key West Coast markets. A significant portion of our flights occur to and from our stations in Seattle, Portland, and the Bay Area.
Our strategy involves a high concentration of our business in key West Coast markets. A significant portion of our flights occur to and from our stations in Seattle, Portland, and the Bay Area.
Refer to Item 1 above for details regarding these codeshare agreements. In addition, the agreements generally provide that members of Alaska’s Mileage Plan program can earn credit on or redeem credit for partner flights and vice versa. We receive revenue from flights sold under codeshare and from interline arrangements.
In addition, the agreements generally provide that members of our airlines' loyalty programs can earn credit on or redeem credit for partner flights and vice versa. We receive revenue from flights sold under codeshare and from interline arrangements.
We routinely engage in analysis and discussions regarding our own strategic position, including alliances, codeshare arrangements, interline arrangements, and frequent flyer program enhancements, and will continue to pursue these commercial activities.
Failure to appropriately manage these partnerships and alliances could negatively impact future growth plans and our financial position. We routinely engage in analysis and discussions regarding our own strategic position, including alliances, codeshare arrangements, interline arrangements, and loyalty program enhancements, and will continue to pursue these commercial activities.
In 2023, passengers to and from these locations accounted for 82% of our total guests. We believe that concentrating our service offerings in this way allows us to maximize our investment in personnel, aircraft and ground facilities, as well as to gain greater advantage from sales and marketing efforts in those regions.
We believe that concentrating our service offerings in this way allows us to maximize our investment in personnel, aircraft and ground facilities, as well as to gain greater advantage from sales and marketing efforts in those regions. As a result, we remain highly dependent on our key markets.
An increase in competition in our key markets could also cause us to reduce fares or take other competitive measures that, if sustained, could harm our business, financial condition, and results of operations. We are dependent on a limited number of suppliers for aircraft and parts.
Our business could be harmed by any circumstances causing a reduction in demand for air transportation in our key markets. An increase in competition in our key markets could also cause us to reduce fares or take other competitive measures that, if sustained, could harm our business, financial condition, and results of operations.
If we are unable to receive these aircraft or future aircraft in a timely manner, our growth plans could be negatively impacted. Given Alaska's size relative to its competitors, these challenges may have a disproportionate impact on Alaska. Additionally, further consolidation among aircraft and aircraft parts manufacturers could further limit the number of suppliers.
Given Alaska's and Hawaiian's size relative to its competitors, these challenges may have a disproportionate impact on Alaska and Hawaiian. Additionally, further consolidation among aircraft and aircraft parts manufacturers could further limit the number of suppliers.
Goodwill is not amortized, but is tested for impairment at least annually.
Goodwill and indefinite-lived intangible assets are not amortized, but are tested for impairment at least annually.
Additionally, reduced consumer spending would adversely impact revenue and cash flows from our co-branded credit card agreements. Unfavorable or even uncertain economic conditions could negatively affect our financial condition and results of operations. Our maintenance costs will increase as our fleet ages, and we will periodically incur substantial maintenance costs due to the timing of maintenance events of our aircraft.
Additionally, reduced consumer spending would adversely impact revenue and cash flows from our co-branded credit card agreements. Unfavorable or even uncertain economic conditions could negatively affect our financial condition and results of operations. Our financial condition or results of operations may be negatively affected by increases in expenses related to the airports in which we operate.
In addition, we continue to expand our reliance on third-party software providers and data processors, including cloud providers. Unauthorized access of personal and financial data via fraud or other means of deception could result in data loss, theft, modification, or unauthorized disclosure.
Unauthorized access of personal and financial data via fraud or other means of deception could result in data loss, theft, modification, or unauthorized disclosure.
The application of the acquisition method of accounting resulted in us recording goodwill, which could result in significant future impairment charges and negatively affect our financial results. 25 In accordance with acquisition accounting rules, we recorded goodwill on our consolidated balance sheet to the extent the Virgin America acquisition purchase price exceeded the net fair value of Virgin America’s tangible and identifiable intangible assets and liabilities as of the acquisition date.
In accordance with acquisition accounting rules, we recorded goodwill and identifiable intangible assets associated with the acquisitions of Virgin America and Hawaiian Holdings, Inc. on our consolidated balance sheet. Goodwill was recorded to the extent the acquisition purchase prices exceeded the net fair value of tangible and identifiable intangible assets and liabilities as of the acquisition date.
We are dependent on U.S. consumer confidence and the health of the U.S. economy. Unfavorable U.S. economic conditions have historically resulted in reduced consumer spending and led to decreases in both leisure and business travel. For some consumers, leisure travel is a discretionary expense, and shorter distance travelers, in particular, have the option to replace air travel with surface travel.
We are dependent on consumer confidence, as well as the health of the U.S. economy and economies of other countries in which we operate. Unfavorable economic conditions have historically resulted in reduced consumer spending and led to decreases in both leisure and business travel.
Further, should we incur incremental obligations, issuers may require future debt agreements to contain more restrictive covenants or require additional collateral beyond historical market terms which may further restrict our ability to successfully access capital. 24 Although we have historically been able to generate sufficient cash flow from our operations to pay our debt and other fixed obligations when they become due, we cannot ensure we will be able to do so in the future.
Further, should we incur incremental obligations, issuers may require future debt agreements to contain more restrictive covenants or require additional collateral beyond historical market terms which may further restrict our ability to successfully access capital.
Additionally, we rely on the FAA and its systems for critical aspects of flight operations. The failure of these systems could lead to increased delays and inefficiencies in flight operations, resulting in an adverse impact to our financial condition and results of operations.
The failure of these systems could lead to increased delays and inefficiencies in flight operations, resulting in an adverse impact to our financial condition and results of operations. 28 We continue to monitor emerging technologies, including technologies which may have disruptive impacts which are out of our control.
Our membership in the one world global alliance may limit options to bring non- one world carrier partners into our Mileage Plan program. Further, maintaining an alliance with another U.S. airline may expose us to additional regulatory scrutiny. Failure to appropriately manage these partnerships and alliances could negatively impact future growth plans and our financial position.
Should partners not make available enough inventory within their cabins for our members, the attractiveness of our program may be decreased. Alaska's membership in the one world global alliance may limit options to bring non- one world carrier partners into Alaska's Mileage Plan program. Further, maintaining an alliance with another U.S. airline may expose us to additional regulatory scrutiny.
In addition, we believe that the frequent flyer arrangements are an important part of our loyalty program. The loss of a significant partner through bankruptcy, consolidation, or otherwise, could have a negative effect on our revenue or the attractiveness of our Mileage Plan program, which we believe is a source of competitive advantage.
The loss of a significant partner through bankruptcy, consolidation, or otherwise, could have a negative effect on our revenue or the attractiveness of our loyalty programs, which we believe is a source of competitive advantage. Additionally, we rely on partners to provide available space for credit redemption on their aircraft.
In recent years, the U.S. antitrust authorities have been increasingly reluctant to approve airline mergers, cooperative marketing arrangements, and joint ventures. The continuation of merger-adverse antitrust policy and/or the finality of legal rulings limiting airline mergers, joint marketing activities, and joint ventures could have a material adverse effect on our business, financial condition, and results of operations.
In recent years, the U.S. antitrust authorities have been increasingly reluctant to approve airline mergers, cooperative marketing arrangements, and joint ventures.
Delays and cost overruns associated with these projects could have a negative impact on our financial condition or results of operations.
Delays and cost overruns associated with these projects could have a negative impact on our financial condition or results of operations. The application of the acquisition method of accounting resulted in us recording goodwill and identifiable intangible assets, which could result in significant future impairment charges and negatively affect our financial results.
Removed
As a result, we remain highly dependent on our key markets. Our business could be harmed by any circumstances causing a reduction in demand for air transportation in our key markets.
Added
The emergence of merger-friendly antitrust policy at the federal level, and the possibility that this policy may be short-lived, might prompt other entities to act on opportunities that could have a material adverse effect on our business, financial condition, and results of operations. 24 Our concentration in certain markets could cause us to be disproportionately impacted by adverse changes in circumstances in those locations.
Removed
As of December 31, 2023, the average age of our Boeing Next Gen passenger aircraft (B737-700, -800, -900, -900ER) was approximately 12.8 years, the average age of our Boeing MAX aircraft (B737-8, -9) was approximately 1.2 years, and the average age of our owned E175 aircraft was approximately 4.3 years.
Added
In addition to these markets, the acquisition of Hawaiian Holdings, Inc. in 2024 significantly increases the concentration of our operation in Hawai'i, with Honolulu now representing Air Group's second largest hub.
Removed
Typically, our newer aircraft require less maintenance than they will in the future. Any significant increase in maintenance expenses could have a material adverse effect on our results of operations. Our financial condition or results of operations may be negatively affected by increases in expenses related to the airports in which we operate.
Added
Hawaiian is similarly dependent on a limited number of suppliers for its aircraft, aircraft engines, and many aircraft parts.
Removed
Failure to invest in new technology or a disruption of our current systems or their operators could harm our business. 26 We heavily depend on automated systems to operate our business.
Added
Recently, Boeing was impacted by an employee strike which temporarily halted production of B737 aircraft. These challenges have impacted and will continue to impact the timing of deliveries. If we are unable to receive aircraft in a timely manner, our growth plans could be negatively impacted.
Removed
Failure to appropriately mitigate these risks could negatively impact our operations, onboard safety, reputation and financial condition. 27 Our sensitive information is securely transmitted over public and private networks. Our systems are subject to increasing and evolving cybersecurity risks.
Added
Although we have historically been able to generate sufficient cash flow from our operations to pay our debt and other fixed obligations when they become due, we cannot ensure we will be able to do so in the future. If we fail to do so, our business could be harmed.
Removed
The acquisition is subject to a number of conditions to our and Hawaiian's obligations, which, if not fulfilled, may result in termination of the acquisition agreement.
Added
For some consumers, leisure travel is a discretionary expense, and shorter distance travelers, in particular, have the option to replace air travel with surface travel.
Removed
The acquisition agreement contains a number of customary conditions to complete the acquisition, including that certain representations and warranties be accurate, that certain covenants be fulfilled, that certain regulatory approvals have been obtained, that there are no legal prohibitions against completion of the acquisition, and that Hawaiian stockholders have adopted the agreement.
Added
Additionally, we rely on the FAA and its systems for critical aspects of flight operations.
Removed
Many of the conditions to complete the acquisition are not within either Hawaiian’s or our control and neither of us can predict when or if these conditions will be satisfied.
Added
Our presence in international locations and our membership in the one world alliance exposes us to incremental global regulation and therefore risk. In addition, we continue to expand our reliance on third-party software providers and data processors, including cloud providers.
Removed
If any of these conditions are not satisfied or waived prior to June 2, 2025, which may be extended to December 2, 2025 in certain circumstances, it is possible that the acquisition will not be completed in the expected time frame or that the agreement may be terminated.
Added
The need to integrate Hawaiian’s workforce into joint collective bargaining agreements with Alaska's workforce presents the potential for delay in achieving expected synergies and other benefits or labor disputes that could adversely affect our operations and costs.
Removed
The regulatory approvals required in connection with our pending acquisition of Hawaiian may not be obtained or may contain materially burdensome conditions. The pending acquisition may also be subject to litigation that could negatively impact our ability to complete the acquisition.
Added
The successful integration of Hawaiian Airlines and achievement of the anticipated benefits of the acquisition depend significantly on integrating Hawaiian Airlines’ employees into Alaska and on maintaining productive employee relations. Failure to do so presents the potential for delays in achieving expected synergies and other benefits of integration or labor disputes that could adversely affect our operations and costs.
Removed
Our ability to close the pending acquisition of Hawaiian is conditioned upon the receipt of certain regulatory approvals, and we cannot provide assurance that these approvals will be obtained.
Added
The process for integrating labor groups in an airline merger is governed by a combination of the Railway Labor Act, the McCaskill-Bond Act, and where applicable, the existing provisions of our collective bargaining agreements (“CBAs”) and internal union policies. Under the Railway Labor Act, the National Mediation Board has exclusive authority to resolve representation disputes arising out of airline mergers.
Removed
If any conditions or changes to the proposed structure of the acquisition are required to obtain these regulatory approvals, they may have the effect of jeopardizing or delaying completion of the pending acquisition or reducing the anticipated benefits of the pending acquisition.
Added
The disputes that the National Mediation Board has authority to resolve include (i) whether the carriers, through the merger, have integrated operations to the point of creating a “single transportation system” for representation purposes; (ii) determination of the appropriate “craft or class” for representational purposes, including a determination of which positions are to be included within a particular craft or class; and (iii) certification of the system-wide representative organization, if any, for each of our craft or class following the merger.
Removed
If we agree to any material conditions in order to obtain any approvals required to complete the pending acquisition, the business and results of operations of our company following the closing may be adversely affected. Our ability to secure regulatory approval may be subject to litigation, the results of which we cannot guarantee.
Added
Failure to resolve these disputes could result in delays in achieving expected synergies and other benefits of integration as well as adversely impact our operations and costs. Pending operational integration of Hawaiian Airlines with Alaska, it will be necessary to maintain a “fence” between Alaska and Hawaiian Airlines employee groups that are represented by unions.
Removed
The pending acquisition may also be subject to litigation from state attorneys generals or other private challengers, which could jeopardize or delay completion of the pending acquisition. As a result, we may not be able to fully achieve the anticipated benefits of the pending acquisition, and our results of operations and financial position may be negatively impacted.
Added
During this time, we will keep the employee groups separate, each applying the terms of its own existing employment agreements unless other terms have been negotiated. Achievement of expected synergies and other benefits will be delayed until the time that operational integration is obtained.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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In the event the CyberSIRT declares an incident, the CISO provides overall direction for the response and mitigation of the threat. This response includes actions 31 taken to protect our data and networks, evaluation of the potential materiality of the incident, and the communication of the incident to critical parties, including senior leadership and the Board of Directors.
In the event the CyberSIRT declares an incident, the CISO provides overall direction for the response and mitigation of the threat. This response includes actions taken to protect our data and networks, evaluation of the potential materiality of the incident, and the communication of the incident to critical parties, including senior leadership and the Board of Directors.
The CISO leads a team dedicated to the prevention, mitigation, detection, and remediation of any cybersecurity incidents. If a potential incident is identified, the CISO is notified and engages the cybersecurity incident response team (CyberSIRT). This team is responsible for declaring a cybersecurity incident and is comprised of individuals from multiple relevant departments.
The CISO leads a team dedicated to the prevention, mitigation, detection, and remediation of any cybersecurity incidents. If a potential incident is identified, the CISO is notified and engages the cybersecurity incident response team (CyberSIRT). This team is responsible for declaring a cybersecurity incident and comprises individuals from multiple relevant departments.
As part of our annual review of our cybersecurity risk management, we engage third-parties for a variety of processes including external audits, vulnerability assessments, and penetration tests. These processes help ensure our overarching strategy remains effective over time. The Board of Directors is responsible for overseeing management’s processes to identify and mitigate risks, including cybersecurity risks.
As part of our annual review of our cybersecurity risk management, we engage third-parties for a variety of processes including external audits, vulnerability assessments, and penetration tests. These processes help ensure our overarching strategy remains effective over time. The Board of Directors of Alaska Air Group is responsible for overseeing management’s processes to identify and mitigate risks, including cybersecurity risks.
Because of the industry in which we operate, we are subject to extensive regulatory requirements connected to cybersecurity, including but not limited to those overseen by the FAA, TSA, and DOT. As a result, it is imperative our cybersecurity risk management is well-planned and sufficiently robust to maintain compliance with these regulations.
Because of the industry in which we operate, we are subject to extensive cybersecurity regulation, including but not limited to those regulations overseen by the FAA, TSA, and DOT. As a result, it is imperative our cybersecurity risk management is well-planned and sufficiently robust to maintain compliance with these regulations.
In 2023, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our organization. For additional discussion related to the Company’s consideration of cybersecurity risks and their potential impact on our business strategy, results of operations, or financial condition, please refer to Part I, Item 1A. “Risk Factors” in this document.
For additional discussion related to the Company’s consideration of cybersecurity risks and their potential impact on our business strategy, results of operations, or financial condition, please refer to Part I, Item 1A. “Risk Factors” in this document.
The Board’s Audit Committee leads the review and discussion of cybersecurity threats with management and receives updates from the CISO each quarter. Senior management, including the CISO, are available to address questions or concerns from the Audit Committee related to our risk management plan.
The Board’s Audit Committee leads the review and discussion of cybersecurity threats with management and receives updates from the CISO each quarter.
Added
Senior management, including the CISO, are available to address questions or concerns from the Audit Committee related to our risk management plan. 32 In 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our organization.

Item 2. Properties

Properties — owned and leased real estate

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We also lease operations, training, administrative, and data center facilities in Burlingame, CA; Long Beach, CA; Portland, OR; Puyallup, WA; Quincy, WA; Renton, WA; Seattle, WA; and Spokane, WA, call center facilities in Seattle, WA; Phoenix, AZ; and Boise, ID, and hangars in Portland, OR, Everett, WA, and Spokane, WA.
We also lease operations, training, administrative, and data center facilities in Burlingame, CA; Long Beach, CA; Honolulu, HI; Portland, OR; Puyallup, WA; Quincy, WA; Renton, WA; Seattle, WA; and Spokane, WA, call center facilities in Phoenix, AZ and Boise, ID, and hangars in Portland, OR, Everett, WA, and Spokane, WA.
“Liquidity and Capital Resources" provides more information about aircraft that are used to secure long-term debt arrangements or collateralize credit facilities. Note 7 to the consolidated financial statements provides more information regarding leased aircraft as capitalized on our consolidated balance sheets. The lease for the B737-800F expires in 2033. The leases for the B737-800 aircraft expire between 2026 and 2028.
“Liquidity and Capital Resources” provides more information about aircraft that are used to secure long-term debt arrangements or collateralize credit facilities. Note 7 to the consolidated financial statements provides more information regarding leased aircraft as capitalized on our consolidated balance sheets. Aircraft leases Alaska leases B737-800F, B737-800, B737-9, and E175 aircraft types. The leases for the B737-800F expire in 2034.
The leases for the B737-9 aircraft expire between 2031 and 2035. The leased E175 aircraft support Alaska's capacity purchase agreement with SkyWest, and are under agreement t hrough 2034. Alaska has the option to extend some of the leases for additional periods. GROUND FACILITIES AND SERVICES In various cities in the state of Alaska, we own terminal buildings and hangars.
The leases for the B737-800 aircraft expire between 2026 and 2028. The leases for the B737-9 aircraft expire between 2031 and 2035. The leased E175 aircraft support Alaska's capacity purchase agreement with SkyWest, and are under agreement t hrough 2034. Alaska has the option to extend some of the leases for additional periods.
Airport leases contain provisions for periodic adjustments of lease rates. We are typically responsible for maintenance, insurance and other facility-related expenses and services under these agreements.
At the majority of the airports we serve, we lease ticket counters, gates, cargo and baggage space, ground equipment, office space, and other support areas. Airport leases contain provisions for periodic adjustments of lease rates. We are typically responsible for maintenance, insurance and other facility-related expenses and services under these agreements.
PROPERTIES AIRCRAFT The following table describes the aircraft we operate and their average age at December 31, 2023: Aircraft Type Seats Owned Leased Total Average Age in Years B737-700F — 3 — 3 22.9 B737-800F — — 1 1 16.3 B737-700 124 11 — 11 23.7 B737-800 159 49 10 59 15.7 B737-900 178 12 — 12 21.4 B737-900ER 178 79 — 79 7.9 B737-8 159 1 — 1 — B737-9 178 51 14 65 1.2 Total Mainline Fleet 206 25 231 9.7 E175 76 41 42 83 5.0 Total Regional Fleet 41 42 83 5.0 Total 247 67 314 8.4 “Management’s Discussion and Analysis of Financial Condition and Results of Operations" discusses future orders and options for additional aircraft.
PROPERTIES AIRCRAFT The following table describes the aircraft we operate and their average age at December 31, 2024: Aircraft Seats Owned Leased Total Average Age in Years Alaska Airlines B737-700 Freighters — 3 — 3 23.9 B737-800 Freighters — — 2 2 17.4 B737-700 124 11 — 11 24.7 B737-800 159 49 10 59 16.7 B737-900 178 6 — 6 22.6 B737-900ER 178 79 — 79 8.9 B737-8 159 5 — 5 0.6 B737-9 178 58 14 72 2.1 Total Alaska Airlines Fleet 211 26 237 9.9 Hawaiian Airlines A330-300 Freighters — — 6 6 6.6 A330-200 278 12 12 24 11.5 A321neo 189 14 4 18 6.0 B717-200 128 19 — 19 22.7 B787-9 300 2 — 2 0.8 Total Hawaiian Airlines Fleet 47 22 69 12.4 Regional E175 76 44 42 86 5.8 Total Regional Fleet 44 42 86 5.8 Total Air Group Fleet 302 90 392 9.4 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses future orders and options for additional aircraft.
These include a multi-bay hangar and shops complex (used primarily for line maintenance), a flight operations and training center, an air cargo facility, a data center, and various other commercial office buildings. 32 At the majority of the airports we serve, we lease ticket counters, gates, cargo and baggage space, ground equipment, office space, and other support areas.
We also own or lease several buildings located at or near Seattle-Tacoma International Airport. These include a multi-bay hangar and shops complex (used primarily for line maintenance), a flight operations and training center, an air cargo facility, a data center, and various other commercial office buildings. In various cities in Hawai'i, we own or lease various properties.
Removed
We also own or lease several buildings located at or near Seattle-Tacoma International Airport (Sea-Tac).
Added
Hawaiian leases A330-300F, A330-200, and A321neo aircraft types. The leases for the A330-300F expire in 2030. The leases for the A330-200 aircraft expire between 2025 and 2029. The leases for the A321neo aircraft expire between 2030 and 2032. 33 OTHER PROPERTIES In various cities in Alaska, we own terminal buildings and hangars.
Added
In Honolulu, our principal terminal facilities, cargo facilities and hangar and maintenance facilities are located at Daniel K. Inouye International Airport (HNL). The majority of the facilities at HNL are leased on a month-to-month basis. We are also charged for the use of terminal facilities at other Neighbor Island airports owned by the State of Hawai'i.
Added
Some terminal facilities, including gates and holding rooms, are considered by the State of Hawai'i to be common areas and thus are not exclusively controlled by us. We also utilize other State of Hawai'i facilities, including station manager offices, Premier Club lounges, and operations support space.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The following graph compares our cumulative total stockholder return since December 31, 2018 with the S&P 500 Index and the NYSE ARCA Airline Index. The graph assumes that the value of the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2018. ITEM 6. [RESERVED] None.
The following graph compares our cumulative total stockholder return since December 31, 2019 with the S&P 500 Index and the NYSE ARCA Airline Index. The graph assumes that the value of the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2019. 35 ITEM 6. [RESERVED] None.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs Maximum remaining dollar value of shares that can be purchased under the plan (in millions) October 1, 2023 - October 31, 2023 — — — November 1, 2023 - November 30, 2023 — — — December 1, 2023 - December 31, 2023 1,986,004 $ 37.76 1,986,004 Total 1,986,004 $ 37.76 1,986,004 $ 312 (a) Purchased pursuant to the $1 billion repurchase plan authorized by the Board of Directors in August 2015. 33 PERFORMANCE GRAPH The following Performance Graph and related information shall not be deemed "soliciting material" or "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table summarizes our share repurchase activity for the fourth quarter of 2024: 34 Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs Maximum remaining dollar value of shares that can be purchased under the plan (in millions) October 1, 2024 - October 31, 2024 — — — November 1, 2024 - November 30, 2024 — — — December 1, 2024 - December 31, 2024 3,867,530 $ 64.23 3,867,530 Total 3,867,530 $ 64.23 3,867,530 $ — Shares were purchased pursuant to the $1 billion repurchase plan authorized by the Board of Directors in August 2015, which was completed in 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of December 31, 2023, there were 138,960,830 shares of common stock of Alaska Air Group, Inc. issued, 126,090,353 shares outstanding, and 2,349 shareholders of record. In March 2020, the Company suspended the payment of dividends indefinitely.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange (symbol: ALK). As of December 31, 2024, there were 2,265 holders of record of our common stock. There were no cash dividend payments during the year ended December 31, 2024.
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Our common stock is listed on the New York Stock Exchange (symbol: ALK). SALES OF NON-REGISTERED SECURITIES None.
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Future decisions to pay cash dividends continue to be at the discretion of our Board of Directors and will be dependent on our market and economic conditions, applicable legal requirements, and other relevant factors. SALES OF NON-REGISTERED SECURITIES None.
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In the fourth quarter of 2024, the Board of Directors authorized a new $1 billion repurchase plan. Purchases under this plan started in 2025.
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PERFORMANCE GRAPH The following Performance Graph and related information shall not be deemed "soliciting material" or "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

44 edited+57 added−84 removed10 unchanged
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our company, our operations and our present business environment.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our company and the present business environment.
Critical accounting estimates are defined as those that reflect significant management judgment and uncertainties and that potentially may lead to materially different results under varying assumptions and conditions. Management has identified the following critical accounting estimate and has discussed the development, selection and disclosure of these policies with our audit committee.
Critical accounting estimates are defined as those that reflect significant management judgment and uncertainties and that potentially may lead to materially different results under varying assumptions and conditions. Management has identified the following critical accounting estimates and has discussed the development, selection and disclosure of these policies with our audit committee.
Our aircraft fuel expense can be volatile because it includes these gains or losses in the value of the underlying instrument as crude oil prices and refining margins increase or decrease. Raw fuel expense is defined as the price that we generally pay at the airport, or the “into-plane” price, including taxes and fees.
Our aircraft fuel expense can be volatile because it includes these gains or losses in the value of the underlying instrument as crude oil prices increase or decrease. Raw fuel expense is defined as the price that we generally pay at the airport, or the “into-plane” price, including taxes and fees.
We estimate the selling prices and volumes over the terms of the agreements in order to determine the allocation of proceeds to each of the multiple deliverables. 2.
We estimate the selling prices and volumes over the terms of the agreements in order to determine the allocation of proceeds to each of the multiple deliverables. 47 2.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.
For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.
We believe this is the best measure of the effect that fuel prices are currently having on our business as it most closely approximates the net cash outflow associated with purchasing fuel for our 40 operations. Accordingly, many industry analysts evaluate our results using this measure, and it is the basis for most internal management reporting and incentive pay plans.
We believe this is the best measure of the effect that fuel prices are currently having on our business as it most closely approximates the net cash outflow associated with purchasing fuel for our operations. Accordingly, many industry analysts evaluate our results using this measure, and it is the basis for most internal management reporting and our incentive pay plan.
FREQUENT FLYER PROGRAMS Alaska's Mileage Plan loyalty program awards mileage credits, referred to as miles, to members who fly on our airlines and our airline partners. We also sell services, including miles for transportation, Companion Fare™ certificates, priority boarding, bag fee waivers, and access to our brand and customer lists to major banks that offer Alaska co-branded credit cards.
Alaska Mileage Plan Alaska's Mileage Plan program awards mileage credits, referred to as miles, to members who fly on our airlines and our airline partners. We also sell services, including miles for transportation, Companion Fare™ certificates, priority boarding, bag fee waivers, and access to our brand and customer lists to major banks that offer Alaska co-branded credit cards.
Mileage credits and the various other services we sell under our loyalty program represent performance obligations that are part of a multiple deliverable revenue arrangement. Accounting guidance requires that we use a relative standalone selling price model to allocate consideration received to the material performance obligations in these contracts.
Mileage credits and the various other services we sell under Mileage Plan represent performance obligations that are part of a multiple deliverable revenue arrangement. Accounting guidance requires that we use a relative standalone selling price model to allocate consideration received to the material performance obligations in these contracts.
Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to a significant improvement in operating results.
Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can result in a significant improvement in operating results.
Although we believe it is useful to evaluate non-fuel unit costs for the reasons noted above, we would caution readers of these financial statements not to place undue reliance on unit costs excluding fuel as a measure or predictor of future profitability because of the significant impact of fuel costs on our business.
Although we believe it is useful to evaluate non-fuel unit costs for the reasons noted above, we would caution readers of these financial statements not to place undue reliance on unit costs excluding fuel as a measure or predictor of future profitability because of the significant impact of fuel costs on our business. 36 We are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis.
We review significant Mileage Plan assumptions on an annual basis, or more frequently should circumstances indicate a need, and change our assumptions if facts and circumstances indicate that a change is necessary. The Company regularly updates breakage estimates for the portion of loyalty mileage credits not expected to be redeemed. These estimates are based upon statistical analyses of historical data.
We review significant Mileage Plan assumptions on an annual basis, or more frequently should circumstances indicate a need, and change our assumptions if facts and circumstances indicate that a change is necessary. We regularly update our breakage estimates for the portion of Mileage Plan mileage credits not expected to be redeemed.
The measure is also the subject of frequent questions from investors. 36 • Adjusted income before income tax (and other items as specified in our plan documents) is an important metric for the employee annual incentive plan, which covers the majority of employees within the Alaska Air Group organization. • Disclosure of the individual impact of certain noted items provides investors the ability to measure and monitor performance both with and without these special items.
The measure is also the subject of frequent questions from investors. • Adjusted pretax income is an important metric for the employee incentive plan, which covers the majority of Air Group employees. • Disclosure of the individual impact of certain noted items provides investors the ability to measure and monitor performance both with and without these special items.
We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management: Twelve Months Ended December 31, (in millions) 2023 2022 % Change Aircraft fuel, including hedging gains and losses $ 2,641 $ 2,668 (1) % Non-fuel operating expenses, excluding special items 6,948 6,328 10 % Special items - fleet transition and other 392 496 (21) % Special items - labor and related 51 84 (39) % Total Operating Expenses $ 10,032 $ 9,576 5 % Aircraft fuel Aircraft fuel expense includes raw fuel expense (as defined below) plus the effect of mark-to-market adjustments to our fuel hedge portfolio as the value of that portfolio increases and decreases.
We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management: Twelve Months Ended December 31, (in millions) 2024 2023 % Change Aircraft fuel, including hedging gains and losses $ 2,506 $ 2,641 (5) % Non-fuel operating expenses, excluding special items 8,314 6,948 20 % Special items - operating 345 443 (22) % Total Operating Expenses $ 11,165 $ 10,032 11 % Fuel expense Aircraft fuel expense includes raw fuel expense plus the effect of mark-to-market adjustments to our fuel hedge portfolio as the value of that portfolio increases and decreases.
A hypothetical 1% change in the amount of outstanding miles estimated to be redeemed would result in an approximately $10 million impact on annual revenue recognized.
These estimates are based upon statistical analyses of historical data. A hypothetical 1% change in the amount of outstanding miles estimated to be redeemed would result in an approximately $12 million impact on annual revenue recognized.
We also evaluate economic fuel expense, which we define as raw fuel expense adjusted for the cash we receive from hedge counterparties for hedges that settle during the period and for the premium expense that we paid for those contracts.
Raw fuel expense approximates cash paid to suppliers and does not reflect the effect of our fuel hedges. 40 We evaluate economic fuel expense, which we define as raw fuel expense adjusted for the cash we receive from counterparties for hedges that settle during the period and for the premium expense that we paid for those contracts.
Losses recognized for hedges that settled during the year were $64 million in 2023, compared to gains of $169 million in 2022. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement. In the fourth quarter of 2023, we suspended our crude oil hedge program.
Losses recognized for hedges that settled during the year were $38 million in 2024, compared to losses of $64 million in 2023. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement. Alaska's fuel hedge program was suspended in 2023. Hawaiian's program was temporarily paused as of September 30, 2024.
Our primary use of operating cash flow is for operating expenses, including payments for employee wages and benefits, payments to suppliers for goods and services, and payments to lessors and airport authorities for rents and landing fees. Operating cash flow also includes payments to, or refunds from, federal, state and local taxing authorities.
Our primary use of operating cash flow is for operating expenses, including payments for employee wages and benefits, aircraft fuel, payments to suppliers for goods and services, payments to lessors and airport authorities for leased aircraft, rents, and landing fees, and interest expense for our debt obligations.
The primary components of wages and benefits are shown in the following table: Twelve Months Ended December 31, (in millions) 2023 2022 % Change Wages $ 2,333 $ 2,024 15 % Payroll taxes 162 148 9 % Medical and other benefits 314 263 19 % Defined contribution plans 203 160 27 % Pension - Defined benefit plans 29 45 (36) % Total Wages and benefits $ 3,041 $ 2,640 15 % Wages increased $309 million, or 15%, on 3% growth in FTEs.
The primary components of wages and benefits are shown in the following table: Twelve Months Ended December 31, (in millions) 2024 2023 % Change Wages $ 2,701 $ 2,333 16 % Payroll taxes 186 162 15 % Medical and other benefits 417 314 33 % Defined contribution plans 256 203 26 % Pension - Defined benefit plans 28 29 (3) % Total Wages and benefits $ 3,588 $ 3,041 18 % Wages increased $368 million, or 16%, of which $229 million was attributable to Hawaiian.
The elements of the change are illustrated in the following table: Twelve Months Ended December 31, 2023 2022 (in millions, except for per gallon amounts) Dollars Cost/Gal Dollars Cost/Gal Raw or "into-plane" fuel cost $ 2,579 $ 3.13 $ 2,761 $ 3.64 (Gain)/loss on settled hedges 64 0.08 (169) (0.22) Consolidated economic fuel expense $ 2,643 $ 3.21 $ 2,592 $ 3.42 Mark-to-market fuel hedge adjustments (2) — 76 0.10 GAAP fuel expense $ 2,641 $ 3.21 $ 2,668 $ 3.52 Fuel gallons 824 758 Raw fuel expense decreased 7% in 2023 compared to 2022, due to lower per gallon costs, partially offset by increased fuel consumption.
The elements of the change are illustrated in the following table: Twelve Months Ended December 31, 2024 2023 (in millions, except for per gallon amounts) Dollars Cost/Gal Dollars Cost/Gal Raw or "into-plane" fuel cost $ 2,496 $ 2.70 $ 2,579 $ 3.13 Losses on settled hedges 38 0.04 64 0.08 Economic fuel expense $ 2,534 $ 2.74 $ 2,643 $ 3.21 Mark-to-market fuel hedge adjustments (28) (0.03) (2) — Aircraft fuel, including hedging gains and losses $ 2,506 $ 2.71 $ 2,641 $ 3.21 Fuel gallons 925 824 Raw fuel expense decreased 3% compared to 2023.
Therefore, different assumptions could affect the amount and/or timing of revenue recognition or expenses. The most significant assumptions are described below. 1.
The deferred revenue resulting from our relative selling price allocations requires significant management judgment. There are uncertainties inherent in these estimates. Therefore, different assumptions could affect the amount and/or timing of revenue recognition or expenses. The most significant assumptions are described below. 1.
ANALYSIS OF OUR CASH FLOWS Cash Provided by Operating Activities Cash provided by operating activities was $1.1 billion in 2023 compared to $1.4 billion in 2022. Cash provided by ticket sales and from our co-branded credit card agreement are the primary sources of our operating cash flow.
We discuss our sources and uses of cash in more detail below. Operating cash flows Cash provided by ticket sales and from our co-branded credit card agreements are the primary sources of our operating cash flow.
Twelve Months Ended December 31, 2023 2022 Change Consolidated Operating Statistics: (a) Revenue passengers (000) 44,557 41,468 7% RPMs (000,000) "traffic" 57,362 51,330 12% ASMs (000,000) "capacity" 68,524 60,773 13% Load factor 83.7% 84.5% (0.8) pts Yield 16.61¢ 17.16¢ (3)% RASM 15.21¢ 15.87¢ (4)% CASMex (b) 10.14¢ 10.41¢ (3)% Economic fuel cost per gallon (b) $3.21 $3.42 (6)% Fuel gallons (000,000) 824 758 9% ASMs per gallon 83.2 80.2 4% Departures (000) 414 404 2% Average full-time equivalent employees (FTEs) 23,319 22,564 3% Mainline Operating Statistics: Revenue passengers (000) 35,307 31,795 11% RPMs (000,000) "traffic" 52,975 46,812 13% ASMs (000,000) "capacity" 63,292 55,224 15% Load factor 83.7% 84.8% (1.1) pts Yield 15.28¢ 15.92¢ (4)% RASM 14.12¢ 14.91¢ (5)% CASMex (b) 9.23¢ 9.45¢ (2)% Economic fuel cost per gallon (b) $3.18 $3.40 (6)% Fuel gallons (000,000) 713 646 10% ASMs per gallon 88.8 85.5 4% Departures (000) 268 244 10% Average full-time equivalent employees (FTEs) 18,129 17,224 5% Aircraft utilization 11.4 9.9 15% Average aircraft stage length 1,387 1,347 3% Operating fleet (d) 231 225 6 a/c Regional Operating Statistics: (c) Revenue passengers (000) 9,250 9,673 (4)% RPMs (000,000) "traffic" 4,387 4,518 (3)% ASMs (000,000) "capacity" 5,232 5,549 (6)% Load factor 83.8% 81.4% 2.4 pts Yield 32.57¢ 29.97¢ 9% RASM 28.26¢ 25.34¢ 12% Departures (000) 146 160 (9)% Operating fleet (d) 83 86 (3) a/c (a) Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.
Twelve Months Ended December 31, 2024 2023 Change Consolidated Operating Statistics: (a) Revenue passengers (000) 49,238 44,557 11% RPMs (000,000) "traffic" 63,871 57,362 11% ASMs (000,000) "capacity" 76,167 68,524 11% Load factor 83.9% 83.7% 0.2 pts Yield 16.68¢ 16.61¢ —% PRASM 13.99¢ 13.90¢ 1% RASM 15.41¢ 15.21¢ 1% CASMex (b) 10.80¢ 10.06¢ 7% Economic fuel cost per gallon (b)(c) $2.74 $3.21 (15)% Fuel gallons (000,000) (c) 925 824 12% ASMs per gallon 82.3 83.2 (1)% Departures (000) 461 414 11% Average full-time equivalent employees (FTEs) 25,751 23,319 10% Operating fleet (d) 392 314 78 a/c Alaska Airlines Operating Statistics: RPMs (000,000) "traffic" 53,680 52,975 1% ASMs (000,000) "capacity" 63,873 63,292 1% Economic fuel cost per gallon $2.74 $3.18 (14)% Hawaiian Airlines Operating Statistics: RPMs (000,000) "traffic" 5,143 — n/a ASMs (000,000) "capacity" 6,245 — n/a Economic fuel cost per gallon (c) $2.43 — n/a Regional Operating Statistics: (e) RPMs (000,000) "traffic" 5,048 4,387 15% ASMs (000,000) "capacity" 6,049 5,232 16% Economic fuel cost per gallon $2.93 $3.41 (14)% (a) Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.
A mediator from the National Railway Labor Board has been assigned and is involved in the negotiations. Horizon has begun negotiations with certain labor groups for updated CBAs, including its pilots, represented by IBT; its flight attendants, represented by AFA; and its mechanics, represented by AMFA.
Horizon is in negotiations with certain labor groups for updated CBAs, including its pilots, represented by IBT; its flight attendants, represented by AFA; and its technicians, represented by AMFA. Alaska and Hawaiian are working towards JCBAs for workgroups represented by the same unions.
Please consider our forward-looking statements in light of the risks referred to in this report’s introductory cautionary note and the risks mentioned in Part I, “Item 1A.
Please consider our forward-looking statements in light of the risks referred to in this report’s introductory cautionary note and the risks mentioned in Item 1A. "Risk Factors" within this document. This section of the Form 10-K covers discussion of 2024 and 2023 results, and comparisons between those years.
(b) See reconciliation of this non-GAAP measure to the most directly related GAAP measure in the accompanying pages. (c) Data presented includes information related to flights operated by Horizon and third-party carriers.
(b) See reconciliation of this non-GAAP measure to the most directly related GAAP measure in the accompanying pages. (c) Excludes operations under the ATSA with Amazon. (d) Includes aircraft owned and leased by Alaska, Hawaiian, and Horizon as well as aircraft operated by third-party regional carriers under CPAs. Excludes all aircraft removed from operating service.
See “ Results of Operations ” below for further discussion of changes in revenue and operating expenses as compared to 2022, and our reconciliation of non-GAAP measures to the most directly comparable GAAP measure. A glossary of financial terms can be found at the end of Item 1.
See “ Results of Operations ” below for further discussion of changes in revenue and operating expenses as compared to 2023. A glossary of financial terms can be found at the end of Item 1. 38 Labor update In 2024, Alaska technicians, represented by AMFA, ratified a new five-year CBA that includes wage increases and quality of life improvements.
Raw fuel prices are impacted by world oil prices and refining costs, which can vary by region in the U.S. Raw fuel expense approximates cash paid to suppliers and does not reflect the effect of our fuel hedges. Aircraft fuel expense decreased $27 million, or 1%, compared to 2022.
Raw fuel prices are impacted by world oil prices and refining costs, which can vary by region in the U.S.
Non-fuel expenses Twelve Months Ended December 31, (in millions) 2023 2022 % Change Wages and benefits $ 3,041 $ 2,640 15 % Variable incentive pay 200 257 (22) % Aircraft maintenance 488 424 15 % Aircraft rent 208 291 (29) % Landing fees and other rentals 680 581 17 % Contracted services 389 329 18 % Selling expenses 303 295 3 % Depreciation and amortization 451 415 9 % Food and beverage service 241 197 22 % Third-party regional carrier expense 218 182 20 % Other 729 717 2 % Total non-fuel operating expenses, excluding special items $ 6,948 $ 6,328 10 % Wages and benefits Wages and benefits expense increased during 2023 by $401 million, or 15%, compared to 2022.
A summary of Alaska's WTI positions and Hawaiian's Brent crude positions is provided below: Approximate % of Expected Fuel Requirements Weighted-Average Crude Oil Price per Barrel Average Premium Cost per Barrel Alaska: First Quarter of 2025 10 % $92 $5 Hawaiian: First Quarter of 2025 39 % $94 $2 Second Quarter of 2025 22 % $93 $2 Third Quarter of 2025 6 % $91 $2 41 Non-fuel expenses Twelve Months Ended December 31, (in millions) 2024 2023 % Change Wages and benefits $ 3,588 $ 3,041 18 % Variable incentive pay 358 200 79 % Aircraft maintenance 620 488 27 % Aircraft rent 207 208 — % Landing fees and other rentals 781 680 15 % Contracted services 444 389 14 % Selling expenses 349 303 15 % Depreciation and amortization 583 451 29 % Food and beverage service 287 241 19 % Third-party regional carrier expense 243 218 11 % Other 854 729 17 % Total non-fuel operating expenses, excluding special items $ 8,314 $ 6,948 20 % Wages and benefits Wages and benefits expense increased $547 million, or 18%, of which $299 million was attributable to Hawaiian.
Our relative standalone selling price models are refreshed when contracts originate or are materially modified. At December 31, 2023, we had approximately 341 billion miles outstanding, resulting in an aggregate deferred revenue balance of $2.6 billion. The deferred revenue resulting from our relative selling price allocations requires significant management judgment. There are uncertainties inherent in these estimates.
Our relative standalone selling price models are refreshed when contracts originate or are materially modified. At December 31, 2024, Alaska's Mileage Plan program had 360 billion miles outstanding, resulting in a deferred revenue balance of $2.7 billion. For the year ended December 31, 2024, Mileage Plan revenue recognized from deferred revenue and recorded in passenger revenue was $1.1 billion.
In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management (and thus investors) to understand the impact of (and trends in) company-specific cost drivers, such as productivity, airport costs, maintenance costs, etc., which are more controllable by management. • Cost per ASM (CASM) excluding fuel and special items is one of the most important measures used by management and by our Board of Directors in assessing quarterly and annual cost performance. • CASM excluding fuel and special items is a measure commonly used by industry analysts and we believe it is an important metric by which they have historically compared our airline to others in the industry.
We believe that all U.S. carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact of company-specific cost drivers which are more controllable by management.
Third-party regional carrier expense Third-party regional carrier expense, which represents payments made to SkyWest under our CPA, increased $36 million, or 20%, in 2023 compared to 2022. The increase in third-party regional carrier expense is driven by incremental SkyWest-operated departures.
The remaining $18 million increase was driven by growth in revenue passengers, as well as higher costs for food, food service supplies, and transportation. Third-party regional carrier expense Third-party regional carrier expense, which represents payments made to SkyWest under the CPA with Alaska, increased $25 million, or 11% driven by incremental departures and block hours operated by SkyWest.
ADDITIONAL SEGMENT INFORMATION Refer to Note 14 to the consolidated financial statements for a detailed description of each segment. Below is a summary of each segment's profitability. Mainline Mainline operations reported an adjusted pretax income of $820 million in 2023, compared to an adjusted pretax income of $855 million in 2022.
Special items - operating In 2024, we recognized $345 million of special operating expenses, compared to $443 million in 2023. Refer to Note 16 to the consolidated financial statements for details. Additional Segment Information Refer to Note 14 to the consolidated financial statements for a detailed description of each segment.
LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are: • Existing cash and marketable securities of $1.8 billion; • Cash flows from operations of $1.1 billion; • Our Mileage Plan program and 69 unencumbered aircraft which could be financed, if necessary; • Combined bank line-of-credit facilities, with no outstanding borrowings, of $550 million.
LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2024, we had cash and marketable securities of $2.5 billion. We also had 104 unencumbered aircraft, which can be financed if necessary, and an $850 million bank line-of-credit facility with no outstanding borrowings.
The Company expects to fund this acquisition through a combination of existing cash and marketable securities, new debt, as well as other available sources of liquidity. 48 CRITICAL ACCOUNTING ESTIMATES The discussion and analysis of our financial position and results of operations in this MD&A are based upon our consolidated financial statements.
The ATSA provides for the operation of ten aircraft with customer options to expand the fleet. 46 CRITICAL ACCOUNTING ESTIMATES The discussion and analysis of our financial position and results of operations in this MD&A are based upon our consolidated financial statements.
These agreements are dependent on suppliers' ability to obtain all required governmental and regulatory approvals, achieve commercial operation, and produce sufficient quantities of SAF. Financial commitments that have been contractually established and have defined minimum obligations, including those related to Alaska Star Ventures, are included within the CPA and other obligations row in the above table.
We also anticipate we may have material cash outlays to meet our fuel efficiency targets. Currently, Alaska and Hawaiian have agreements to purchase SAF to be delivered in the coming years. These agreements are dependent on suppliers' ability to obtain all required governmental and regulatory approvals, achieve commercial operation, and produce sufficient quantities of SAF.
The changes are summarized in the following table: Twelve Months Ended December 31, (in millions) 2023 2022 % Change Passenger revenue $ 9,526 $ 8,808 8 % Mileage Plan other revenue 648 590 10 % Cargo and other revenue 252 248 2 % Total Operating Revenue $ 10,426 $ 9,646 8 % Passenger revenue On a consolidated basis, Passenger revenue for 2023 increased by $718 million, or 8%, on a 12% increase in passenger traffic, partially offset by a 3% decrease in yield.
The changes are summarized in the following table: Twelve Months Ended December 31, (in millions) 2024 2023 % Change Passenger revenue $ 10,654 $ 9,526 12 % Loyalty program other revenue 733 648 13 % Cargo and other revenue 348 252 38 % Total Operating Revenue $ 11,735 $ 10,426 13 % 39 The table below presents operating revenue details by principal geographic region (as defined by the U.S.
The following table summarizes our anticipated fleet count by year, as of December 31, 2023: Actual Fleet Count Anticipated Fleet Activity Aircraft Dec 31, 2022 Dec 31, 2023 2024 Changes Dec 31, 2024 2025 Changes Dec 31, 2025 2026 Changes Dec 31, 2026 B737-700 Freighters 3 3 — 3 — 3 — 3 B737-800 Freighters — 1 1 2 — 2 — 2 B737-700 11 11 — 11 — 11 — 11 B737-800 61 59 — 59 — 59 — 59 B737-900 12 12 — 12 — 12 — 12 B737-900ER 79 79 — 79 — 79 — 79 B737-8 — 1 7 8 12 20 — 20 B737-9 37 65 16 81 — 81 — 81 B737-10 — — — — 11 11 19 30 A320 12 — — — — — — — A321neo 10 — — — — — — — Total Mainline Fleet 225 231 24 255 23 278 19 297 E175 operated by Horizon 33 41 3 44 3 47 3 50 E175 operated by third party 42 42 — 42 1 43 — 43 Q400 operated by Horizon 11 — — — — — — — Total Regional Fleet 86 83 3 86 4 90 3 93 Total 311 314 27 341 27 368 22 390 We intend to finance future aircraft deliveries and option exercises using cash flow from operations or long-term debt. 46 Fuel Hedge Positions In the fourth quarter of 2023, we suspended our crude oil hedge program.
Actual Fleet Count Anticipated Fleet Activity Aircraft Dec 31, 2023 Dec 31, 2024 2025 Changes Dec 31, 2025 2026 Changes Dec 31, 2026 2027 Changes Dec 31, 2027 Alaska Airlines Fleet: B737-700 Freighters 3 3 — 3 — 3 — 3 B737-800 Freighters 1 2 — 2 — 2 — 2 B737-700 11 11 — 11 — 11 — 11 B737-800 59 59 — 59 — 59 — 59 B737-900 12 6 (6) — — — — — B737-900ER 79 79 — 79 — 79 — 79 B737-8 1 5 9 14 6 20 — 20 B737-9 65 72 8 80 — 80 — 80 B737-10 — — — — 3 3 17 20 Total Alaska Airlines Fleet 231 237 11 248 9 257 17 274 Hawaiian Airlines Fleet: A330-300 Freighters (a) — 6 4 10 — 10 — 10 A330-200 — 24 — 24 — 24 — 24 A321neo — 18 — 18 — 18 — 18 B717-200 — 19 — 19 — 19 — 19 B787-9 — 2 3 5 2 7 4 11 Total Hawaiian Airlines Fleet — 69 7 76 2 78 4 82 Regional Fleet: E175 operated by Horizon 41 44 3 47 3 50 — 50 E175 operated by third party 42 42 1 43 — 43 — 43 Total Regional Fleet 83 86 4 90 3 93 — 93 Total Air Group Fleet 314 392 22 414 14 428 21 449 (a) A330-300 freighter aircraft to be utilized under the ATSA with Amazon.
Contracted services Contracted services expense increased by $60 million, or 18%, compared to 2022, primarily driven by higher rates charged by vendors for services as well as an increase in passengers. We expect contracted services to increase in 2024 as we continue to increase capacity and departures throughout our network.
The remaining $16 million increase was primarily driven by higher rates charged by vendors for services as well as increased passengers throughout our network. Selling expenses Selling expenses increased by $46 million, or 15%, of which $40 million was attributable to Hawaiian. The remaining $6 million increase was driven by incremental credit card commissions and additional marketing costs.
RESULTS OF OPERATIONS ADJUSTED (NON-GAAP) RESULTS AND PER-SHARE AMOUNTS We believe disclosure of earnings excluding the impact of aircraft fuel and special items is useful information to investors because: • By excluding fuel expense and special items from our unit metrics, we believe that we have better visibility into the results of operations as we focus on cost-reduction and productivity initiatives.
We believe that consideration of these non-GAAP financial measures may be important to investors for the following reasons: • By excluding certain costs from our unit metrics, we believe that we have better visibility into the results of operations.
Higher stock-based compensation also contributed to the increase in wages, driven by additional stock award grants within the period. Increased expense for medical and other benefits was primarily driven by an increase in claims compared to the prior year and incremental FTEs.
The change in medical and other benefits was primarily driven by an increase in the cost of medical services compared to the prior year, as well as higher expenses associated with Alaska's long-term disability plan for its pilots. Increased expense for defined contribution plans was driven by higher wages as well as higher matching contributions for Alaska technicians.
We also resumed share repurchases during the year, spending $145 million in 2023, pursuant to the $1 billion repurchase plan authorized by the Board of Directors in August 2015. 43 We believe that our current cash and marketable securities balance, combined with available sources of liquidity, will be sufficient to fund our operations, meet our debt payment obligations, and remain in compliance with the financial debt covenants in existing financing arrangements for the foreseeable future.
We expect our current cash and marketable securities balance, combined with our available sources of liquidity, are sufficient to fund our liquidity needs for the next 12 months. We expect to meet our liquidity needs for the foreseeable future using cash flows from our operations, our available sources of liquidity, and future financing arrangements.
Raw fuel expense per gallon decreased 14% due to lower all-in jet fuel prices. Jet fuel prices are impacted by the price of crude oil and refining margins associated with the conversion of crude oil to jet fuel, both of which have decreased in 2023 compared to 2022. Fuel gallons consumed increased 9%, driven by a 13% increase in capacity.
The decrease was driven primarily by lower refining margins associated with the conversion of crude oil to jet fuel, as well as lower per gallon costs on crude oil. It was partially offset by higher fuel consumption consistent with increased capacity and the inclusion of $193 million of raw fuel expense attributable to Hawaiian.
Mileage Plan other revenue On a consolidated basis, Mileage Plan other revenue increased $58 million, or 10%, compared to 2022, primarily driven by higher commissions from our bank card partners due to increased spend levels, annual membership fees, and credit card acquisitions. OPERATING EXPENSES Total operating expenses increased $456 million, or 5%, compared to 2022.
Loyalty program other revenue On a consolidated basis, Loyalty program other revenue increased $85 million, or 13%, of which $53 million was attributable to Hawaiian. The remaining $32 million increase was primarily driven by higher commissions from bank card and third party partners.
Higher operating revenue was primarily attributable to a 13% increase in traffic consistent with growth in capacity, as well as continued strength in the Mileage Plan program. Regional Regional operations reported an adjusted pretax loss of $22 million in 2023, compared to an adjusted pretax loss of $76 million in 2022.
Regional Regional reported a pretax profit, excluding special items and other adjustments, of $152 million in 2024, compared to a profit of $65 million in 2023. The $87 million improvement was driven by higher passenger revenue consistent with the increase in traffic, partially offset by higher operating expenses driven by increased capacity.
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Risk Factors.” This overview summarizes the MD&A, which includes the following sections: 34 • Year in Review —highlights from 2023 outlining some of the major events that happened during the year and how they affected our financial performance. • Results of Operations —an in-depth analysis of our revenue by segment and our expenses from a consolidated perspective for the most recent two years presented in our consolidated financial statements.
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GAAP TO NON-GAAP RECONCILIATIONS AND OPERATING STATISTICS We are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis.
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To the extent material to the understanding of segment profitability, we more fully describe the segment expenses per financial statement line item. Financial and statistical data is also included here.
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We adjust for expenses related directly to our freighter aircraft operations, including those costs incurred under the ATSA with Amazon, to allow for better comparability to other carriers that do not operate freighter aircraft.
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This section also includes forward-looking statements regarding our view of 2024. • Liquidity and Capital Resources —an overview of our financial position, analysis of cash flows, sources and uses of cash, contractual obligations and commitments, and off-balance sheet arrangements. • Critical Accounting Estimates —a discussion of our accounting estimates that involve significant judgment and uncertainties.
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We also exclude certain special charges as they are unusual or nonrecurring in nature and adjusting for these expenses allows management and investors to better understand our cost performance. • CASMex is one of the most important measures used by management and by the Air Group Board of Directors in assessing cost performance.
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This section of the Form 10-K covers discussion of 2023 and 2022 results, and comparisons between those years.
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CASMex is also a measure commonly used by industry analysts, and we believe it is the basis by which they have historically compared our airline to others in the industry.
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YEAR IN REVIEW 2023 Results In 2023, Air Group recorded operating revenue of $10.4 billion, the highest in company history, and exceeded pre-pandemic capacity for the first time. Our 2023 consolidated pretax income under GAAP was $323 million compared to $79 million in 2022.
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Amounts in the tables below are rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to our actual figures presented in the tables below.
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The improvement is due to $780 million in increased operating revenue, partially offset by $456 million in increased operating expenses and $80 million in increased non-operating expenses. Increased operating revenue and operating expenses were primarily driven by the continued recovery in air travel demand.
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GAAP TO NON-GAAP RECONCILIATIONS (unaudited) Twelve Months Ended December 31, (in millions) 2024 2023 Income before income tax $ 545 $ 323 Adjusted for: Mark-to-market fuel hedge adjustment (28) (2) Unrealized gain on foreign debt (10) — Special items - operating 345 443 Special items - net non-operating (16) 18 Adjusted income before income tax $ 836 $ 782 Pretax margin 4.6 % 3.1 % Adjusted pretax margin 7.1 % 7.5 % Twelve Months Ended December 31, 2024 2023 (in millions, except per share amounts) Dollars Per Share Dollars Per Share Net income $ 395 $ 3.08 $ 235 $ 1.83 Adjusted for: Mark-to-market fuel hedge adjustments (28) (0.22) (2) (0.02) Unrealized gain on foreign debt (10) (0.08) — — Special items - operating 345 2.69 443 3.44 Special items - net non-operating (16) (0.12) 18 0.14 Income tax effect of adjustments above (a) (61) (0.48) (111) (0.86) Adjusted net income $ 625 $ 4.87 $ 583 $ 4.53 (a) Certain integration costs are non deductible for tax purposes, resulting in a smaller income tax effect for current year adjustments.
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Flight 1282 and B737-9 Updates On January 5, 2024, Alaska temporarily grounded its fleet of 65 B737-9 aircraft in response to an accident in which a plug door detached from the fuselage en-route from Portland, Oregon to Ontario, California. On January 24, 2024, the FAA provided detailed instructions to operators to inspect each aircraft before returning them to service.
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Twelve Months Ended December 31, (in millions, except unit metrics) 2024 2023 Total operating expenses $ 11,165 $ 10,032 Less the following components: Aircraft fuel, including hedging gains and losses 2,506 2,641 Freighter costs 84 53 Special items - operating 345 443 Total operating expenses, excluding fuel, freighter costs, and special items $ 8,230 $ 6,895 ASMs 76,167 68,524 CASMex 10.80 ¢ 10.06 ¢ 37 OPERATING STATISTICS SUMMARY (unaudited) Below are operating statistics we use to measure performance.
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These inspections were completed by Alaska maintenance technicians, and all aircraft, excluding the aircraft involved in the accident, were returned to service by early February. We also completed inspections of plug doors on our B737-900ER aircraft in accordance with FAA recommendations and identified one minor issue which was immediately resolved.
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(e) Data presented includes information related to flights operated by Horizon and third-party carriers. YEAR IN REVIEW Overview On September 18, 2024, we completed our acquisition of Hawaiian, combining two highly complementary networks and expanding our international reach. Results for the year include Hawaiian activity beginning September 18, 2024.
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The accident remains under investigation by the National Transportation Safety Board (NTSB) to determine the root cause of the plug door failure. The NTSB has issued a preliminary report indicating that certain critical parts were not installed at the time the aircraft was delivered to Alaska.
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In 2024, Air Group reported consolidated pretax income of $545 million compared to $323 million in 2023. For the period September 18, 2024 through December 31, 2024, Hawaiian produced $869 million of revenue and a loss before income tax and special items of $58 million.
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In response to the accident, Alaska has since announced that it will audit Boeing's production quality and control systems, as well as enhance quality oversight of aircraft destined for Alaska's fleet from the Boeing production line. Alaska believes these steps will help ensure quality and safety of every new aircraft delivered.
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Alaska pilots, represented by ALPA, ratified a two-year extension of its existing CBA. In January 2025, Alaska reached a tentative agreement with its flight attendants, represented by AFA, for an updated CBA. Voting on the tentative agreement will be completed in the first quarter of 2025.
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The FAA has also announced increased oversight of Boeing's production facilities, including capping expanded production lines for the B737 MAX aircraft type.
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At December 31, 2024, Transition and Process Agreements have been negotiated for certain workgroups which define the process for negotiating JCBAs and set forth interim agreements until a JCBA is reached. Outlook Looking ahead to 2025, we are focused on the successful integration of Hawaiian into Air Group.
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We anticipate delivery delays as a result of these actions, however, at this time have not received information regarding updated timelines. 35 Labor Update In 2023, McGee fleet and ramp service employees, represented by IAM, ratified a new contract which is next amendable in 2025.
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We expect capacity growth for the year of 2% to 3% as compared to historical Air Group and Hawaiian combined capacity in the prior year. In addition to growth in revenue and expenses due to the the impact of Hawaiian on Air Group results for the full year, 2025 results will be impacted by other factors throughout the year.
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Also in 2023, Alaska executed certain Letters of Agreement (LOA) with its Mainline pilots, represented by ALPA. One LOA increased payouts of unused sick leave upon retirement. As a result of this change, we recorded a one-time special charge of $51 million. Refer to the 'Results of Operations' section below for additional details.
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We expect revenue improvements to be driven by continued strength in leisure and corporate demand, and by network and loyalty synergies as integration work continues.
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The other LOAs provided increased wage rates to certain Airbus pilots and other quality-of-life enhancements through the end of Alaska's operation of Airbus aircraft, and other enhanced pay policies. Alaska is in negotiations with its flight attendants, represented by AFA, for an updated CBA.
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Wage rate increases stemming from new labor agreements and rising costs at airports in which we operate will drive cost pressures during the year, but we anticipate some benefit from synergy capture in the second half of the year.
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Subsequent to year end, Alaska reached a tentative agreement with its mechanics, represented by AMFA, on a new, 5-year CBA. Voting by Alaska employees on the agreement is expected to be completed in the first quarter of 2024. Outlook Absent the B737-9 impacts described above, the Company anticipated modest capacity growth of 3% to 5% when compared to 2023.
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RESULTS OF OPERATIONS Items affecting comparability Results for 2024 are inclusive of Hawaiian's operations from the acquisition date of September 18, 2024 through December 31, 2024, while the prior period does not include combined results. Consolidated revenue and expenses increased compared to the prior period due to the incorporation of Hawaiian's operations into Air Group.
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With the current lack of insight into delivery delays that may result from the capped production lines at Boeing, we now anticipate our capacity growth could be at or below the lower end of this range. The company also estimates the grounding of the B737-9 fleet through early February negatively impacted results by at least $150 million.
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The below discussion of changes to our revenue and expenses compared to the prior year largely focus on material factors independent of the acquisition. 2024 COMPARED WITH 2023 Operating Revenue Total operating revenue increased $1.3 billion, or 13%, of which $869 million was attributable to Hawaiian.
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Inclusive of this impact, we expect full year 2024 adjusted earnings per share to range between $3.00 and $5.00. Our top priority is to safely return our B737-9 fleet back into service, and to restore our schedule to 100%.
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Department of Transportation), inclusive of Hawaiian Airlines for the period from September 18, 2024 through December 31, 2024. Twelve Months Ended December 31, 2024 Increase (Decrease) vs.
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Additionally, our audits and enhanced quality oversight of Boeing’s production line will mean we take an active role in ensuring every airplane delivered to us meets the highest quality and safety standards. We expect to hold Boeing fully accountable for the impacts of the Flight 1282 accident and the ensuing grounding.
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Prior Year (in millions) Total Operating Revenue Passenger Revenue RPMs ASMs Yield PRASM Domestic $ 10,814 10% 9% 8% 1% 2% Latin America 751 15% 18% 22% (3)% (6)% Pacific 170 n/a n/a n/a n/a n/a Total $ 11,735 12% 11% 11% —% 1% Passenger revenue On a consolidated basis, Passenger revenue increased $1.1 billion, or 12%, of which $757 million was attributable to Hawaiian.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Approximately $253 million of the Company's total variable rate notes payable were effectively fixed via interest rate swaps at December 31, 2023. Our exposure to interest rate variability is further mitigated through our variable rate investment portfolio. We also have investments in marketable securities, which are exposed to market risk associated with changes in interest rates.
Approximately $567 million of our total variable rate notes payable were effectively fixed via interest rate swaps at December 31, 2024. Our exposure to interest rate variability is further mitigated through our variable rate investment portfolio. We also have investments in marketable securities, which are exposed to market risk associated with changes in interest rates.
A hypothetical 10% change in the average interest rates incurred on average variable rate debt held during 2023 would have correspondingly changed our net earnings and cash flows associated with these items by less than $5 million. Our variable rate debt represents approximately 39% and 24% of our total long-term debt as of December 31, 2023 and December 31, 2022.
A hypothetical 10% change in the average interest rates incurred on average variable rate debt held during 2024 would have correspondingly changed our net earnings and cash flows associated with these items by $10 million. Our variable rate debt represents approximately 41% and 39% of our total long-term debt as of December 31, 2024 and December 31, 2023.
Interest Rates We have exposure to market risk associated with changes in interest rates related primarily to our debt obligations, which include variable rate instruments, as well as our short-term investment portfolio.
Said another way, a one-cent change in our fuel price per gallon would have impacted our 2024 raw fuel expense by approximately $9 million. Interest rates We have exposure to market risk associated with changes in interest rates related primarily to our debt obligations, which include variable rate instruments, as well as our short-term investment portfolio.
If short-term interest rates were to average one point more than they did in 2023, interest income would increase by approximately $18 million. Inflationary Risk Inflation in the United States remained elevated throughout 2023.
If short-term interest rates were to average one point more than they did in 2024, interest income would increase by approximately $14 million. Foreign currency We have exposure to market risk associated with changes in foreign currency exchange rates because we generate sales, incur expenses, and have certain debt denominated and paid in foreign currencies.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have interest rate risk on our variable rate debt obligations and our available-for-sale marketable investment portfolio, and commodity-price risk in jet fuel required to operate our aircraft fleet.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are subject to market risk exposure related to commodity (fuel) prices, interest rates, and foreign currency exchange rates. The adverse effects of potential changes in these market risks are discussed below.
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We purchase the majority of our jet fuel at prevailing market prices and have historically sought to manage market risk through execution of our hedging strategy and other means. 49 We have market-sensitive instruments in the form of fixed rate debt instruments and financial derivative instruments used to hedge our exposure to crude oil price increases and interest rate increases.
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In an effort to manage our exposure to these risks, we may enter into derivative contracts from time to time and may revise our derivative portfolio as market conditions change.
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We do not purchase or hold any derivative financial instruments for trading purposes. Aircraft Fuel Currently, our fuel hedging portfolio consists of crude oil call options. Call options are designed to cap our pricing for the crude oil component of jet fuel, limiting our exposure to increasing fuel prices for about half of our planned fuel consumption.
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The sensitivity analyses presented do not consider the effects that such adverse changes may have on overall economic activity nor do they consider additional actions we might undertake to mitigate our exposure to such changes. Actual results may differ.
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With call options, we are hedged against volatile crude oil price increases, and, during a period of decline in crude oil prices, we only forfeit cash paid for hedge premiums.
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Aircraft fuel Aircraft fuel costs constitute a significant portion of our operating expense and changes in fuel prices could materially impact the results of operations. A $1 per barrel change in the price of oil equates to approximately $22 million of raw fuel expense annually based on 2024 consumption levels.
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We estimate that a hypothetical 10% increase or decrease in the forward curve for crude oil prices as of December 31, 2023 would change the fair value of our crude oil hedge portfolio to approximately $26 million or $4 million.
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This exposure is primarily associated with the Japanese Yen, Australian Dollar, Canadian Dollar, and Mexican Peso. To manage exchange rate risk, we transact our international sales and expenditures in the same foreign currency, to the extent practical. Additionally, our Yen denominated debt serves as a natural hedge against the volatility of exchange rates against cash 48 inflows.
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The portfolio value of our fuel hedge contracts was $11 million at December 31, 2023 compared to a portfolio value of $44 million at December 31, 2022. We did not have any collateral held by counterparties on these agreements as of December 31, 2023. In the fourth quarter of 2023, we suspended our fuel hedge program.
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We estimate that a 10% depreciation or appreciation in the U.S. dollar, relative to the Australian Dollar, Canadian Dollar, Japanese Yen, and Mexican Peso would result in a change in annual pretax income (loss) of approximately $35 million.
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Existing positions entered into before the suspension will settle through the first quarter of 2025. We believe refining margins represent a significant source of our fuel expense volatility, particularly given our geographic concentration on the West Coast. We are exploring alternative strategies that will enable fuel cost optimization and mitigate our concentrated reliance on West Coast refineries.
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Although a portion of our operating costs are subject to contractual escalation caps, a portion are not, and are therefore subject to a greater degree of inflationary pressures.
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Examples include fuel costs, goods and services for which we do not have existing contracts, wages for employees, airport costs based on cost recovery models, and certain vendor costs that include wage increase clauses, among others.
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Elevated inflation rates for a prolonged period of time, without a contemporaneous increase our fares at a similar rate, may have a negative impact to our financial results.

Other ALK 10-K year-over-year comparisons