About Alaska Air Group

Alaska Air Group, Inc., through its subsidiaries, provides air transportation services. The company operates two airlines, Alaska Airlines, Inc. (Alaska) and Horizon Air Industries, Inc. (Horizon). The company also includes McGee Air Services, an aviation services provider that was established as a wholly-owned subsidiary of Alaska and other subsidiaries. Alaska and Horizon operate as separate airlines. Segments The company operates through three segments, Mainline, Regional, and Horizon. Mainline - includes scheduled air transportation on Alaska's Boeing 737 (B737) aircraft for passengers and cargo throughout the U.S., and in parts of Mexico, Costa Rica, Belize, the Bahamas, and Guatemala. Regional - includes Horizon's and other third-party carriers’ scheduled air transportation on Embraer E175 (E175) aircraft for passengers across a shorter distance network within the U.S., Canada, and Mexico under capacity purchase agreements (CPA). This segment includes the actual revenue and expenses associated with regional flying, as well as an allocation of corporate overhead incurred by Air Group on behalf of the regional operations. Horizon - includes the capacity sold to Alaska under a CPA. Expenses include those typically borne by regional airlines, such as crew costs, ownership costs and maintenance costs. Alaska is the fifth largest airline in the United States, offering unparalleled guest service, connectivity, and schedules from the company’s hub markets along the West Coast. With its regional partners, the company flies to more than 120 destinations throughout North America. As a member of the oneworld alliance, Alaska provides the company’s guests with global access to more than 900 destinations in 170 territories. Air Group The company’s airlines operate different aircraft and missions. Alaska operates a fleet of B737 aircraft on primarily longer stage-length routes. Alaska contracts with Horizon and SkyWest Airlines, Inc. (SkyWest) for short-haul capacity and receives all passenger revenue from those flights. Horizon operates E175 aircraft and sells all of its capacity to Alaska pursuant to a CPA. Given the capabilities of the B737 and E175 fleets, many of the company’s routes can be served by either fleet, which allows it to flexibly manage its network and schedule. The majority of the company’s revenue is generated by transporting passengers. Mainline The company’s Mainline operations include B737 service offered by Alaska. The company offers extensive passenger service from the western U.S. throughout the contiguous United States, Alaska, Hawaii, Mexico, Costa Rica, Belize, the Bahamas, and Guatemala. The company’s largest concentrations of departures are in Seattle, Portland, and the Bay Area. In 2023, the company carried 35 million revenue passengers in its Mainline operations, up from 32 million in 2022. In 2023, the company retired all Airbus aircraft and completed the transition of its Mainline operations to an all-Boeing 737 fleet. As of December 31, 2023, the company’s Mainline operating fleet consisted of 231 B737 aircraft Regional The company’s Regional operations include E175 service operated by Horizon and SkyWest. In 2023, the company’s Regional operations carried approximately nine million revenue passengers, primarily in the states of Washington, Oregon, California, Alaska, and Idaho. Horizon is the largest regional airline in the Pacific Northwest and carried approximately 47% of Air Group's Regional passengers. Based on 2023 passenger enplanements on Regional aircraft, the company’s most significant concentration of Regional activity was in Seattle and Portland. In 2023, the company transitioned its Regional operations to an all-Embraer E175 fleet. At December 31, 2023, Horizon’s operating fleet consisted of 41 E175 aircraft. The Regional fleet operated by SkyWest consisted of 42 E175 aircraft. All Bombardier Q400 aircraft were retired from the company’s fleet by January 2023. Cargo And Other Revenue The company provides freight and mail services (cargo). The company has four dedicated cargo aircraft that operate primarily to and within the state of Alaska. The majority of cargo services are provided to commercial businesses and the United States Postal Service. The company satisfies cargo service performance obligations and recognizes revenue when the shipment arrives at its final destination, or is transferred to a third-party carrier for delivery. In 2023, Alaska added a B737-800 freighter to the existing fleet of three B737-700 freighters. Alaska expects to add a second B737-800 freighter to its fleet in the first quarter of 2024. 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. Frequent Flyer Program Alaska Airlines Mileage Plan provides members with a comprehensive suite of frequent flyer benefits. Members can earn miles by flying on the company’s airline, which are awarded based on distance traveled. For the most frequent flyers, the program offers multiple tiers of MVP status, including MVP Gold, MVP Gold 75K, and MVP Gold 100K, which can be achieved annually by earning qualifying miles or by flying a specified number of segments on Alaska or any of the company’s 30 partner airlines. 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 oneworld, Mileage Plan members with tier status are provided reciprocal status and benefits when flying on other oneworld members. 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). Cardholders receive miles for spend on the card, as well as an annual companion ticket that allows members to purchase an additional ticket for $99 plus taxes, with no restrictions or black-out dates, and a free first checked bag for up to seven people traveling on the same itinerary. The co-branded credit card agreement provides the company a material cash inflow on an annual basis, and is an important source of value for Mileage Plan members. In 2023, Mileage Plan members redeemed miles and companion certificates for seven million award tickets on the company’s airlines and partner airlines. Mileage Plan revenue, including that in the Passenger revenue income statement line item, represented approximately 16% of Air Group's total revenue in 2023. Agreements with other Airlines The company’s marketing agreements with other airlines fall into three categories: frequent flyer, codeshare, and interline. As a oneworld member, Alaska's elite Mileage Plan members 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. Competition The company’s largest competitor is Delta Air Lines Inc. (Delta). Ticket Distribution The company’s tickets are distributed through multiple channels: Direct to customer: Selling direct at alaskaair.com and through the Alaska Airlines app are less expensive than other channels. The company’s direct sales are preferable from a branding and customer relationship standpoint because it can establish ongoing communication with the guest and tailor offers accordingly. As a result, the company prioritizes efforts that drive more business to its website. The company also has reservation call centers where guests can book reservations. Traditional and Online Travel Agencies: Both traditional and online travel agencies typically use Global Distribution Systems to obtain their fare and inventory data from airlines. Bookings made through these agencies result in a fee that is charged to the airline. Many large corporate customers require the company to use these agencies. Seasonality The company’s results of operations for any interim period are not necessarily indicative of those for the entire year because its business is subject to seasonal fluctuations. In typical years, the company’s profitability is generally lowest during the first and fourth quarters due principally to fewer departures and passengers. Profitability typically increases in the second and third quarters (year ended December 31, 2023) as a result of vacation travel. 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. Regulations The company is 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 the company’s operations. Environmental The company is subject to various laws and government regulations concerning environmental matters, both domestically and internationally. Domestic regulations that have an impact to its operations include the Airport Noise and Capacity Act of 1990, the Clean Air Act, Resource Conservation and Recovery Act, Clean Water Act, Safe Drinking Water Act, the Comprehensive Environmental Response and Compensation Liability Act, the National Environmental Policy Act (including Environmental Justice), Emergency Planning and Community Right-to-Know Act and the Toxic Substances Control Act. Many state and local environmental regulations exceed these federal regulations. The company expects there to be continued incremental legislation aimed at further reduction of greenhouse gas emissions, hazardous substances, and additional focus on environmental justice. History Alaska Air Group, Inc. was founded in 1932. The company, a Delaware corporation, was incorporated in 1985.