Alaska Air Group Reports Second Quarter 2013 Results

             Alaska Air Group Reports Second Quarter 2013 Results

PR Newswire

SEATTLE, July 25, 2013

SEATTLE, July 25, 2013 /PRNewswire/ --

Financial Highlights:

  oReported second quarter net income, excluding special items, of $105
    million, or $1.47 per diluted share, compared to adjusted net income of
    $111 million, or $1.53 per diluted share in the prior year quarter. This
    quarter's results compare to a First Call analyst consensus estimate of
    $1.51 per share.
  oRecorded net income for the second quarter under Generally Accepted
    Accounting Principles (GAAP) of $104 million or $1.47 per diluted share,
    compared to net income of $68 million, or $0.93 per diluted share in 2012.
  oAchieved trailing twelve-month return on invested capital of 13.0 percent
    compared to 12.3 percent in the twelve months ended June30, 2012.
  oDeclared a $.20 quarterly cash dividend to be paid on August 22.
  oAnnounced changes to bag and change fee policies effective October 30,
    estimated to increase revenues by approximately $50 million annually.
  oExtended affinity card agreement with Bank of America through 2017,
    estimated to generate $55 million in additional cash flows on an annual
    basis.
  oLowered adjusted debt-to-total-capitalization ratio by 2.0 percentage
    points, to 52.0 percent, since Dec. 31, 2012.
  oRepurchased 544,597 shares of common stock for $32 million in the second
    quarter. For the year the company has repurchased 917,782 shares for $51
    million.
  oHeld $1.4 billion in unrestricted cash and marketable securities as of
    June30, 2013.

Operational Highlights:

  oRanked "Highest in Customer Satisfaction Among Traditional Network
    Carriers" in 2013 by J.D. Power and Associates for the sixth year in a
    row.
  oReceived the FAA's "Diamond Certificate of Excellence" award for the 12th
    consecutive year.
  oHeld the No. 1 spot in U.S. Department of Transportation on-time
    performance among the 10 largest U.S. airlines for the twelve months ended
    May 2013.
  oImproved employee productivity by 5.5 percent.
  oSigned five-year collective bargaining agreements with Alaska pilots and
    Horizon flight attendants.

New routes:

  oNew routes launched and announced in the second quarter are as follows:

New Non-Stop Routes launched in Q2 New Non-Stop Routes (Launch Date)
Portland to Fairbanks              Anchorage to Fairbanks (3/3/14) - Horizon
San Diego to Lihue                 Anchorage to Kodiak (3/3/14) - Horizon
Seattle to Salt Lake City          Anchorage to Las Vegas (12/19)
                                   Anchorage to Phoenix (12/18)
                                   Portland to Boise (11/1) - SkyWest
                                   Portland to Reno (11/8)
                                   Portland to Tucson (11/1)
                                   San Diego to Boise (11/1)
                                   San Diego to Mammoth Lakes (12/19)
                                   Seattle to Colorado Springs (11/1)
                                   Seattle to Omaha (11/7)
                                   Seattle to Steamboat Springs (12/18)

Alaska Air Group, Inc., (NYSE: ALK) today reported second quarter 2013 GAAP
net income of $104 million, or $1.47 per diluted share, compared to $68
million, or $0.93 per diluted share in the second quarter of 2012. Excluding
the impact of mark-to-market fuel hedge adjustments of $1 million, the company
reported adjusted net income of $105 million, or $1.47 per diluted share,
compared to adjusted net income of $111 million, or $1.53 per diluted share,
in 2012.

"These results represent our 17th consecutive quarter of profitability and the
second-best June quarter in our history. I want to thank our employees at
Alaska and Horizon who are continuing to work hard to keep us safe and
reliable, provide a great experience for our customers, and produce results
that make Alaska a great place to invest," CEO Brad Tilden said. "Although our
quarterly results were down slightly, our financial performance continues to
be very strong. This is why we were very pleased to recently announce the
initiation of a quarterly dividend which, combined with our share repurchases,
will be a key component of our capital deployment program."

The following table reconciles the company's reported GAAP net income and
earnings per diluted share (EPS) during the second quarters of 2013 and 2012
to adjusted amounts:

                                    Three Months Ended June 30,
                                    2013                  2012
(in millions, except per-share      Dollars  Diluted EPS  Dollars  Diluted EPS
amounts)
Reported GAAP net income            $  104   $   1.47     $  68    $   0.93
Mark-to-market fuel hedge           1        —            43       0.60
adjustments, net of tax
Non-GAAP adjusted income and        $  105   $   1.47     $  111   $   1.53
per-share amounts

Statistical data, as well as a reconciliation of the reported non-GAAP
financial measures, can be found in the accompanying tables. A glossary of
financial terms can be found on the last page of this release.

A conference call regarding the second quarter results will be simulcast via
the Internet at 8:30 a.m. Pacific time on July 25, 2013. It can be accessed
through the company's website at alaskaair.com/investors. For those unable to
listen to the live broadcast, a replay will be available after the conclusion
of the call.

References in this news release to "Air Group," "company," "we," "us" and
"our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise
specified. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred
to as "Alaska" and "Horizon," respectively, and together as our "airlines."

This news release may contain forward-looking statements subject to the safe
harbor protection provided by Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and
the Private Securities Litigation Reform Act of 1995. These statements relate
to future events and involve known and unknown risks and uncertainties that
may cause actual outcomes to be materially different from those indicated by
any forward-looking statements. For a comprehensive discussion of potential
risk factors, see Item 1A of the company's Annual Report on Form 10-K for the
year ended Dec. 31, 2012. Some of these risks include general economic
conditions, increases in operating costs including fuel, competition, labor
costs and relations, our significant indebtedness, inability to meet cost
reduction goals, seasonal fluctuations in our financial results, an aircraft
accident, and changes in laws and regulations. All of the forward-looking
statements are qualified in their entirety by reference to the risk factors
discussed therein. We operate in a continually changing business environment,
and new risk factors emerge from time to time. Management cannot predict such
new risk factors, nor can it assess the impact, if any, of such new risk
factors on our business or events described in any forward-looking statements.
We expressly disclaim any obligation to publicly update or revise any
forward-looking statements after the date of this report to conform them to
actual results. Over time, our actual results, performance or achievements
will likely differ from the anticipated results, performance or achievements
that are expressed or implied by our forward-looking statements, and such
differences might be significant and materially adverse.

Alaska Airlines, a subsidiary of Alaska Air Group (NYSE: ALK), together with
its partner regional airlines, serves 95 cities through an expansive network
in Alaska, the Lower 48, Hawaii, Canada and Mexico. Alaska Airlines has ranked
"Highest in Customer Satisfaction Among Traditional Network Carriers" in the
J.D. Power and Associates North America Airline Satisfaction Study SM for six
consecutive years from 2008 to 2013. For reservations, visit
www.alaskaair.com. For more news and information, visit the Alaska Airlines
Newsroom at www.alaskaair.com/newsroom.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Alaska Air Group, Inc.
                   Three Months Ended June 30,    Six Months Ended June 30,
(in millions,
except per-share   2013         2012      Change  2013         2012     Change
amounts)
Operating
Revenues:
Passenger
 Mainline   $  896       $  863    4    %  1,692        1,586    7   %
 Regional   192          188       2    %  374          361      4   %
 Total          1,088        1,051     4    %  2,066        1,947    6   %
passenger revenue
Freight and mail   30           31        (3)  %  56           55       2   %
Other - net        138          132       5    %  268          251      7   %
Total Operating    1,256        1,214     3    %  2,390        2,253    6   %
Revenues
Operating
Expenses:
Wages and benefits 258          259       —    %  522          515      1   %
Variable incentive 21           22        (5)  %  42           38       11  %
pay
Aircraft fuel,
including hedging  372          433       (14) %  753          751      —   %
gains and losses
Aircraft           67           54        24   %  133          105      27  %
maintenance
Aircraft rent      30           29        3    %  59           57       4   %
Landing fees and   75           60        25   %  136          123      11  %
other rentals
Contracted         54           50        8    %  107          98       9   %
services
Selling expenses   51           44        16   %  89           85       5   %
Depreciation and   68           66        3    %  136          129      5   %
amortization
Food and beverage  21           20        5    %  41           37       11  %
service
Other              65           61        7    %  133          126      6   %
Total Operating    1,082        1,098     (1)  %  2,151        2,064    4   %
Expenses
Operating Income   174          116       50   %  239          188      27  %
Nonoperating
Income (Expense):
Interest income    4            5                 9            10
Interest expense   (14)         (17)              (29)         (34)
Interest           5            3                 9            8
capitalized
Other - net        —            2                 1            3
                   (5)          (7)               (10)         (13)
Income Before      169          109               229          176
Income Tax
Income tax expense 65           41                88           67
Net Income         $  104       $  68             141          109
Basic Earnings Per $  1.49      $  0.95           $  2.00      $ 1.53
Share:
Diluted Earnings   $  1.47      $  0.93           $  1.98      $ 1.50
Per Share:
Shares Used for
Computation:
Basic              70.252       70.996            70.342       71.069
Diluted            71.159       72.200            71.297       72.325



CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
Alaska Air Group, Inc.
(in millions)                                 June30, 2013  December 31, 2012
Cash and marketable securities                $   1,429      $    1,252
Total current assets                          1,986          1,737
Property and equipment-net                    3,725          3,609
Other assets                                  141            159
Total assets                                  5,852          5,505
Air traffic liability                         724            534
Current portion of long-term debt             110            161
Other current liabilities                     922            806
Current liabilities                           1,756          1,501
Long-term debt                                814            871
Other liabilities and credits                 1,739          1,712
Shareholders' equity                          1,543          1,421
Total liabilities and shareholders' equity    $   5,852      $    5,505
Debt to Capitalization, adjusted for          52%:48%        54%:46%
operating leases
Number of common shares outstanding           70.009         70.377



OPERATING STATISTICS SUMMARY (unaudited)
Alaska Air Group, Inc.
                   Three Months Ended June 30,     Six Months Ended June 30,
                   2013       2012      Change     2013      2012      Change
Consolidated
Operating
Statistics:^(a)
Revenue passengers 6,980      6,565     6.3    %   13,326    12,560    6.1   %
(000)
RPMs (000,000)     7,385      6,869     7.5    %   14,181    13,101    8.2   %
"traffic"
ASMs (000,000)     8,547      7,939     7.6    %   16,530    15,283    8.2   %
"capacity"
Load factor        86.4    %  86.5   %  (0.1 pts)  85.8   %  85.7   %  0.1 pts
Yield              14.73   ¢  15.29  ¢  (3.7)  %   14.56  ¢  14.86  ¢  (2.0) %
PRASM              12.73   ¢  13.23  ¢  (3.8)  %   12.49  ¢  12.74  ¢  (2.0) %
RASM               14.70   ¢  15.28  ¢  (3.8)  %   14.46  ¢  14.74  ¢  (1.9) %
CASM excluding     8.31    ¢  8.38   ¢  (0.8)  %   8.46   ¢  8.60   ¢  (1.6) %
fuel^(b)
Economic fuel cost $  3.28    $ 3.40    (3.5)  %   $ 3.38    $ 3.41    (0.9) %
per gallon^(c)
Fuel gallons       113        106       6.6    %   219       206       6.3   %
(000,000)
Average number of
full-time          12,059     11,965    0.8    %   12,036    11,899    1.2   %
equivalent
employees
Mainline Operating
Statistics:
Revenue passengers 5,074      4,752     6.8    %   9,608     9,027     6.4   %
(000)
RPMs (000,000)     6,729      6,231     8.0    %   12,901    11,868    8.7   %
"traffic"
ASMs (000,000)     7,743      7,130     8.6    %   14,946    13,705    9.1   %
"capacity"
Load factor        86.9    %  87.4   %  (0.5 pts)  86.3   %  86.6   %  (0.3
                                                                       pts)
Yield              13.31   ¢  13.85  ¢  (3.9)  %   13.11  ¢  13.36  ¢  (1.9) %
PRASM              11.57   ¢  12.10  ¢  (4.4)  %   11.32  ¢  11.57  ¢  (2.2) %
RASM               13.50   ¢  14.13  ¢  (4.5)  %   13.24  ¢  13.55  ¢  (2.3) %
CASM excluding     7.35    ¢  7.46   ¢  (1.6)  %   7.47   ¢  7.67   ¢  (2.6) %
fuel^(b)
Economic fuel cost $  3.28    $ 3.40    (3.6)  %   $ 3.37    $ 3.40    (0.9) %
per gallon^(c)
Fuel gallons       100        93        7.2    %   193       180       7.3   %
(000,000)
Average number of
full-time          9,457      9,165     3.2    %   9,404     9,088     3.5   %
equivalent
employees
Aircraft           10.9       10.9      (0.2)  %   10.7      10.6      0.9   %
utilization
Average aircraft   1,156      1,149     0.6    %   1,188     1,151     3.2   %
stage length
Operating fleet    128        120       8 a/c      128       120       8 a/c
Regional Operating
Statistics:^(d)
Revenue passengers 1,907      1,813     5.2    %   3,718     3,533     5.2   %
(000)
RPMs (000,000)     656        638       2.8    %   1,280     1,233     3.8   %
"traffic"
ASMs (000,000)     804        809       (0.7)  %   1,584     1,578     0.4   %
"capacity"
Load factor        81.6    %  78.9   %  2.7 pts    80.8   %  78.1   %  2.7 pts
Yield              29.29   ¢  29.40  ¢  (0.3)  %   29.19  ¢  29.23  ¢  (0.2) %
PRASM              23.91   ¢  23.19  ¢  3.2    %   23.60  ¢  22.84  ¢  3.3   %
Operating fleet    48         50        (2) a/c    48        50        (2) a/c
(Horizon only)

           Except for full-time equivalent employees, data includes
^(a) information related to third-party regional capacity purchase
           flying arrangements.
           See a reconciliation of operating expenses excluding fuel and
^(b) certain special items and Note A for a discussion of why these
           measures may be important to investors in the accompanying pages.
^(c) See a reconciliation of economic fuel cost in the accompanying
           pages.
^(d) Data presented includes information related to flights operated by
           Horizon Air and third-party carriers.



OPERATING SEGMENTS (unaudited)
Alaska Air Group,
Inc.
             Three Months Ended June 30, 2013
             Alaska
(in          Mainline  Regional  Horizon  Consolidating  Air Group     Special  Consolidated
millions)                                                Adjusted^(a)  Items
Operating
revenues
Passenger
 Mainline $  896    $  —      $  —     $    —         $   896       $ —      $   896
 Regional           192       —        —              192           —        192

Total        896       192       —        —              1,088         —        1,088
passenger
revenues
CPA revenues —         —         91       (91)           —                      —
Freight and  29        1         —        —              30            —        30
mail
Other-net    120       16        2        —              138           —        138
Total
operating    1,045     209       93       (91)           1,256         —        1,256
revenues
Operating
expenses
Operating
expenses,    569       149       84       (92)           710           —        710
excluding
fuel
Economic     327       44        —        —              371           1        372
fuel
Total
operating    896       193       84       (92)           1,081         1        1,082
expenses
Nonoperating
income
(expense)
Interest     4         —         —        —              4             —        4
income
Interest     (9)       —         (4)      (1)            (14)          —        (14)
expense
Other        6         (1)       1        (1)            5             —        5
             1         (1)       (3)      (2)            (5)           —        (5)
Income
(loss)       $  150    $  15     $  6     $    (1)       $   170       $ (1)    $   169
before
income tax
             Three Months Ended June 30, 2012
             Alaska
(in          Mainline  Regional  Horizon  Consolidating  Air Group     Special  Consolidated
millions)                                                Adjusted^(a)  Items
Operating
revenues
Passenger
 Mainline $  863    $  —      $  —     $    —         $   863       $ —      $   863
 Regional —         188       —        —              188           —        188

Total        863       188       —        —              1,051         —        1,051
passenger
revenues
CPA revenues —         —         89       (89)           —             —        —
Freight and  30        1         —        —              31            —        31
mail
Other-net    115       15        2        —              132           —        132
Total
operating    1,008     204       91       (89)           1,214         —        1,214
revenues
Operating
expenses
Operating
expenses,    532       139       83       (89)           665           —        665
excluding
fuel
Economic     317       46        —        —              363           70       433
fuel
Total
operating    849       185       83       (89)           1,028         70       1,098
expenses
Nonoperating
income
(expense)
Interest     4         —         —        1              5             —        5
income
Interest     (12)      —         (4)      (1)            (17)          —        (17)
expense
Other        5         —         —        —              5             —        5
             (3)       —         (4)      —              (7)           —        (7)
Income
(loss)       $  156    $  19     $  4     $    —         $   179       $ (70)   $   109
before
income tax

     The adjusted column represents the financial information that is reviewed
^(a) by management to assess performance of operations and determine capital
     allocations and does not include certain charges. See Note A for further
     information in the accompanying pages.





OPERATING SEGMENTS (unaudited)
Alaska Air Group,
Inc.
             Six Months Ended June 30, 2013
             Alaska
(in          Mainline  Regional  Horizon  Consolidating  Air Group     Special  Consolidated
millions)                                                Adjusted^(a)  Items
Operating
revenues
Passenger
 Mainline $ 1,692   $  —      $  —     $    —         $   1,692     $ —      $   1,692
 Regional —         374       —        —              374           —        374

Total        1,692     374       —        —              2,066         —        2,066
passenger
revenues
CPA revenues —         —         186      (186)          —             —        —
Freight and  54        2         —        —              56            —        56
mail
Other-net    234       31        3        —              268           —        268
Total
operating    1,980     407       189      (186)          2,390         —        2,390
revenues
Operating
expenses
Operating
expenses,    1,116     296       173      (187)          1,398         —        1,398
excluding
fuel
Economic     650       90        —        —              740           13       753
fuel
Total
operating    1,766     386       173      (187)          2,138         13       2,151
expenses
Nonoperating
income
(expense)
Interest     9         —         —        —              9             —        9
income
Interest     (21)      —         (7)      (1)            (29)          —        (29)
expense
Other        11        (1)       1        (1)            10            —        10
             (1)       (1)       (6)      (2)            (10)          —        (10)
Income
(loss)       $ 213     $  20     $  10    $    (1)       $   242       $ (13)   $   229
before
income tax



             Six Months Ended June 30, 2012
             Alaska
(in          Mainline  Regional  Horizon  Consolidating  Air Group     Special  Consolidated
millions)                                                Adjusted^(a)  Items
Operating
revenues
Passenger
 Mainline $ 1,586   $  —      $  —     $     —        $   1,586     $ —      $   1,586
 Regional —         361       —        —              361           —        361

Total        1,586     361       —        —              1,947         —        1,947
passenger
revenues
CPA revenues —         —         176      (176)          —             —        —
Freight and  53        2         —        —              55            —        55
mail
Other-net    218       29        4        —              251           —        251
Total
operating    1,857     392       180      (176)          2,253         —        2,253
revenues
Operating
expenses
Operating
expenses,    1,051     276       161      (175)          1,313         —        1,313
excluding
fuel
Economic     611       90        —        —              701           50       751
fuel
Total
operating    1,662     366       161      (175)          2,014         50       2,064
expenses
Nonoperating
income
(expense)
Interest     9         —         —        1              10            —        10
income
Interest     (25)      —         (8)      —              (34)          —        (34)
expense
Other        10        —         1        —              11            —        11
             (6)       —         (7)      1              (13)          —        (13)
Income
(loss)       $ 189     $  26     $  12    $     —        $   226       $ (50)   $   176
before
income tax

     The adjusted column represents the financial information that is reviewed
^(a) by management to assess performance of operations and determine capital
     allocations and does not include certain charges. See Note A for further
     information in the accompanying pages.



FUEL RECONCILIATIONS (unaudited)
Alaska Air Group, Inc.
                        Three Months Ended June 30,
                        2013                         2012
(in millions, except    Dollars      Cost/Gallon     Dollars      Cost/Gallon
for per-gallon amounts)
Raw or "into-plane"     $  347       $    3.07       $  351       $    3.29
fuel cost
(Gains) losses on       24           0.21            12           0.11
settled hedges
Consolidated economic   371          3.28            363          3.40
fuel expense
Mark-to-market fuel     1            0.01            70           0.66
hedge adjustment
GAAP fuel expense       $  372       $    3.29       $  433       $    4.06
Fuel gallons            113                          106
                        Six Months Ended June 30,
                        2013                         2012
(in millions, except    Dollars      Cost/Gallon     Dollars      Cost/Gallon
for per gallon amounts)
Raw or "into-plane"     $  704       $    3.22       $  688       $    3.34
fuel cost
(Gains) losses on       36           0.16            13           0.07
settled hedges
Consolidated economic   $  740       $    3.38       $  701       $    3.41
fuel expense
Mark-to-market fuel     13           0.06            50           0.24
hedge adjustment
GAAP fuel expense       $  753       $    3.44       $  751       $    3.65
Fuel gallons            219                          206
Breakout of Fuel Expense:
                        Three Months Ended June 30,  Six Months Ended June 30,
(in millions)           2013         2012            2013         2012
Mainline economic fuel  $  327       $    317        $  650       $    611
expense
Regional economic fuel  44           46              90           90
expense
Consolidated economic   $  371       $    363        $  740       $    701
fuel expense
Mainline Economic Cost per Gallon Reconciliation:
                        Three Months Ended June 30,  Six Months Ended June 30,
(in millions, except    2013         2012            2013         2012
for per-gallon amounts)
Mainline economic fuel  $  327       $    317        $  650       $    611
expense
Mainline fuel gallons   100          93              193          180
Mainline economic cost  $  3.28      $    3.40       $  3.37      $    3.40
per gallon

Note A:Pursuant to Regulation G, we are providing disclosure of the
reconciliation of reported non-GAAP financial measures to their most directly
comparable financial measures reported on a GAAP basis. We believe that
consideration of these non-GAAP financial measures may be important to
investors for the following reasons:

  oBy eliminating fuel expense and certain special items from our cost and
    unit cost metrics, we believe that we have better visibility into the
    results of our non-fuel cost-reduction initiatives.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.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 labor rates and productivity, airport costs, maintenance costs,
    etc., which are more controllable by management.
  oCost per ASM (CASM) excluding fuel and certain special items is one of the
    most important measures used by management and by the Air Group Board of
    Directors in assessing quarterly and annual cost performance.
  oAdjusted Income before Income Taxes and CASM excluding fuel (and other
    items as specified in our plan documents) are important metrics for the
    employee incentive plan that covers all Air Group employees.
  oCASM excluding fuel and certain special items is a measure commonly used
    by industry analysts, and we believe it is the basis by which they compare
    our airlines to others in the industry.The measure is also the subject of
    frequent questions from investors.
  oDisclosure 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 that disclosing the impact of
    certain items, such as fleet transition costs, is important because it
    provides information on significant items that are not necessarily
    indicative of future performance. Industry analysts and investors
    consistently measure our performance without these items for better
    comparability between periods and among other airlines.
  oAlthough we disclose our passenger unit revenues, we do not (nor are we
    able to) evaluate unit revenues excluding the impact that changes in fuel
    costs have had on ticket prices.Fuel expense represents a large
    percentage of our total operating expenses.Fluctuations in fuel prices
    often drive changes in unit revenues in the mid-to-long term.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.

Note B: Air Group has two operating airlines - Alaska Airlines and Horizon
Air. Each is a regulated airline with separate management teams primarily in
operational roles. To manage the two operating airlines, management views the
business in three operating segments. Alaska operates a fleet of passenger
jets (Alaska Mainline) and contracts with Horizon, SkyWest Airlines, Inc.
(SkyWest), and Peninsula Airways, Inc. (PenAir) for regional capacity under
which Alaska receives all passenger revenue from those flights (Alaska
Regional). Horizon operates a fleet of turboprop aircraft and sells all of its
capacity to Alaska pursuant to a capacity purchase arrangement (Horizon). The
Company believes the amounts paid by Alaska to Horizon approximate current
market rates received by other regional carriers for similar flying and are
available to pay for various Horizon operating expenses such as crew expenses,
maintenance, and aircraft ownership costs. All inter-company revenues and
expenses between Alaska and Horizon are eliminated in consolidation.

Glossary of Terms

Mainline - represents flying Boeing 737 jets and all associated revenues and
costs

Regional - represents capacity purchased by Alaska from Horizon, SkyWest, and
PenAir. In this segment, Alaska Regional records actual on-board passenger
revenue, less costs such as fuel, distribution costs, and payments made to
Horizon, SkyWest and PenAir under the respective capacity purchased
arrangement (CPAs). Additionally, Alaska Regional includes an allocation of
corporate overhead such as IT, finance, other administrative costs incurred by
Alaska and on behalf of Horizon.

RPMs - revenue passenger miles, or "traffic"; represents the number of seats
that were filled with paying passengers; one passenger traveling one mile is
one RPM

ASMs - available seat miles, or "capacity"; represents total seats available
across the fleet multiplied by the number of miles flown

Load Factor - RPMs as a percentage of ASMs; represents the number of available
seats that were filled with paying passengers

Yield - passenger revenue per RPM; represents the average revenue for flying
one passenger one mile

PRASM - passenger revenue per ASM; commonly called "passenger unit revenue"

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

CASM - operating costs per ASM, or "unit cost"; represents all operating
expenses including fuel and special items

CASMex - operating costs excluding fuel and special items per ASM; this metric
is used to help track progress toward reduction of non-fuel operating costs
since fuel is largely out of our control

Economic Fuel - best estimate of the cash cost of fuel, net of the impact of
our fuel-hedging program

Aircraft Utilization - block hours per day; this represents the average number
of hours our aircraft are flying

Aircraft Stage Length - represents the average miles flown per aircraft
departure

Diluted Earnings per Share - represents earnings per share 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

Productivity - number of revenue passengers per full-time equivalent employee

Debt to Capitalization ratio - represents adjusted debt (long-term debt plus
seven times annualized aircraft rent) divided by total equity plus adjusted
debt



SOURCE Alaska Air Group

Website: http://www.alaskaair.com
Contact: Media contact: Bobbie Egan, Media Relations Manager, (206) 392-5134;
or Investor/analyst contact: Chris Berry, Managing Director of Investor
Relations, (206) 392-5260