ALASKA AIR GROUP, INC. - Quarter Report: 2025 March (Form 10-Q)

Other - net()()Net cash provided by operating activities Cash Flows from Investing Activities: Property and equipment additions Aircraft and aircraft purchase deposits() Other flight equipment()()Other property and equipment()()Supplier proceeds Purchases of marketable securities()()Sales and maturities of marketable securities Other investing activities() Net cash provided by (used in) investing activities() Cash Flows from Financing Activities: Proceeds from issuance of long-term debt, net of issuance costs Long-term debt payments()()Common stock repurchases()()Other financing activities ()Net cash used in financing activities()()Net increase (decrease) in cash and cash equivalents() Cash, cash equivalents, and restricted cash at beginning of period Cash, cash equivalents, and restricted cash at end of the period$ $ Supplemental disclosure:Cash paid during the period for:Interest, net of amount capitalized$ $ Non-cash transactions: Right-of-use assets acquired through operating leases$ $

Merger-related costs

For the three months ended March 31, 2025, the Company incurred costs directly attributable to the merger activities of $ million. These costs are presented within Special items - operating within the unaudited condensed consolidated statements of operations. Refer to Note 12 for further information on special items. The Company expects to incur additional merger-related costs in 2025.

Pro forma impact of the acquisition

The unaudited pro forma financial information presented in the table below represents a summary of the consolidated results of operations for the Company and Hawaiian as if the acquisition of Hawaiian had been consummated as of January 1, 2023. The pro forma results do not include any anticipated synergies, or other expected benefits of the acquisition. Accordingly, the unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of January 1, 2023.

million assumed to have been incurred on January 1, 2023.

$ Net loss()()

NOTE 3.

$ Passenger ancillary revenue Loyalty program passenger revenue Total Passenger revenue$ $

Domestic passenger revenue includes operations in the U.S., including between the Hawaiian Islands (the Neighbor Island routes), and Canada. Latin America passenger revenue includes operations in Mexico, Costa Rica, Guatemala, Belize, and Bahamas. Pacific passenger revenue includes operations in the South Pacific, Australia, New Zealand, and Asia.

$ Latin America Pacific Total Passenger revenue$ $

Loyalty Program Revenue

$ Loyalty program other revenue Total Loyalty program revenue$ $

$ Other revenue Total Cargo and other revenue$ $

Air Traffic Liability and Deferred Revenue

Passenger ticket and ancillary services liabilities

The Company recognized Passenger revenue of $ million and $ million from the prior year-end air traffic liability balance for the three months ended March 31, 2025 and 2024.

Loyalty program assets and liabilities

The Company records a receivable for amounts due from affinity card partners and from other partners as mileage credits are sold until the payments are collected. The Company had $ million of such receivables as of March 31, 2025 and $ million as of December 31, 2024.

$ Travel miles and companion certificate redemption - Passenger revenue()()Miles redeemed on partner airlines - Loyalty program other revenue()()Increase in liability for mileage credits issued Total Deferred Revenue balance at March 31$ $

NOTE 4.

billion. Differences in cost basis and fair value of marketable securities are primarily a result of changes in interest rates and general market conditions. The Company does not believe any unrealized losses are the result of credit quality based on its evaluation of industry and duration exposure, credit ratings of the securities, liquidity profiles, and other observable information as of March 31, 2025.

$ $ $ Equity mutual funds Asset-backed securities Mortgage-backed securities Corporate notes and bonds Municipal securities and other Total Marketable securities$ $ $ $

$ $ $ Equity mutual funds Asset-backed securities Mortgage-backed securities Corporate notes and bonds

Municipal securities and other

Total Marketable securities$ $ $ $

The fair value of derivative instruments, including fuel hedge contracts and interest rate swaps, was not material as of March 31, 2025 and December 31, 2024.

Activity and maturities for marketable securities

$ Due after one year through five years Due after five years through ten years Due after ten years No maturity date Total$ $

Fair value of other financial instruments

The Company uses the following methods and assumptions to determine the fair value of financial instruments that are not recognized at fair value as described below.

Debt: The estimated fair value of fixed-rate Enhanced Equipment Trust Certificate (EETC) debt and certain variable rate debt is Level 2, while the estimated fair value of $ million of certain variable-rate and fixed-rate debt, including PSP notes payable and Japanese Yen denominated debt, is classified as Level 3.

$ Estimated fair value$ $

Assets and liabilities measured at fair value on a nonrecurring basis

Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property, plant and equipment, operating and finance lease assets, goodwill, and intangible assets. These assets are subject to fair valuation when there is evidence of impairment. No material impairments were recorded during the three months ended March 31, 2025.

NOTE 5.

$ Fixed-rate PSP notes payable due through 2031

Fixed-rate EETCs payable due through 2027

Fixed-rate Japanese Yen denominated notes payable due through 2031 Variable-rate notes payable due through 2037 Loyalty financing, variable-rate term loan facility due through 2031 Loyalty financing, fixed-rate notes due through 2031 Less debt issuance costs()()Total debt

Less current portion

Long-term debt, less current portion$ $ Weighted-average fixed-interest rate % %Weighted-average variable-interest rate % %

Approximately $ million of the Company's total variable-rate notes payable are effectively fixed via interest rate swaps at March 31, 2025, resulting in an effective weighted-average interest rate for the full debt portfolio of %.

During the three months ended March 31, 2025, the Company incurred $ million of debt as part of an agreement to finance certain E175 deliveries. Debt from this agreement is reflected as a non-cash transaction within the supplemental disclosures in the unaudited condensed consolidated statements of cash flows. During the three months ended March 31, 2025, the Company made debt payments of $ million.

2026 2027 2028 2029 Thereafter

Total Principal Payments(a)

(a) The Company recognized the long-term debt assumed in the Hawaiian acquisition at fair value as of the acquisition date. As a result, the amount in the unaudited condensed consolidated balance sheets will not equal the total balance of remaining principal payments presented in this table.

Bank lines of credit

Alaska and Hawaiian have a combined revolving credit facility for $ million, expiring in September 2029, which is secured by a combination of Air Group aircraft, slots, gates, routes, and other eligible assets. The facility has a variable interest rate based on SOFR plus a specified margin. As of March 31, 2025, the Company had outstanding borrowing under this facility.

Alaska has a second credit facility for $ million, expiring in June 2025, and is secured by aircraft. Alaska has secured letters of credit against this facility.

Covenants

Certain debt agreements and credit facilities contain customary financial covenants, including compliance with certain debt service coverage ratios and minimum liquidity requirements. The Company and its subsidiaries were in compliance with these covenants as of March 31, 2025.

NOTE 6.

$ Pension expense included in Wages and benefits Interest cost Expected return on assets()()Recognized actuarial loss Pension expense included in Non-operating Income (Expense)$()$

Contingencies

The Company is a party to routine litigation matters incidental to its business and with respect to which no material liability is expected. Liabilities for litigation related contingencies are recorded when a loss is determined to be probable and estimable.

As part of the 2016 acquisition of Virgin America, Alaska assumed responsibility for the Virgin trademark license agreement with the Virgin Group. In 2019, pursuant to that agreement's venue provision, the Virgin Group sued Alaska in England, alleging that the agreement requires Alaska to pay $ million per year as a minimum annual royalty through 2039, adjusted annually for inflation and irrespective of Alaska's actual use (or non-use) of the mark. Alaska stopped making royalty payments in 2019 after ending all use of the Virgin brand. On February 16, 2023, the commercial court issued a ruling adopting Virgin Group’s interpretation of the license agreement. The Company appealed the decision. On June 11, 2024, the appellate court issued a final decision affirming the lower court ruling in favor of the Virgin Group. Alaska also commenced a separate claim for breach of the agreement against the Virgin Group that may affect the Company’s total liability in the matter. Alaska holds an accrual for $ million in Other accrued liabilities in the unaudited condensed consolidated balance sheets, representing the expenses associated with the trademark license agreement incurred through March 31, 2025, and management's current estimate of the amount due to the Virgin Group.

million. The Company is not currently required to maintain any reserve under these agreements. If Air Group were unable to obtain a waiver of, or otherwise mitigate the increase in the restriction of cash, it could have a material impact on the Company's operations, business or financial condition.

NOTE 8.

billion share repurchase program. Under this program, the Company repurchased million shares for $ million during the three months ended March 31, 2025. As of March 31, 2025, the program has $ million remaining.

CARES Act warrant issuances

As taxpayer protection required under the Payroll Support Program (PSP) under the CARES Act, the Company granted the U.S. government a total of warrants to purchase ALK common stock in 2020 and 2021. An additional warrants were issued in conjunction with a draw on the CARES Act Loan in 2020. The value of the warrants was estimated using a Black-Scholes option pricing model and was recorded in stockholders' equity at issuance. These warrants are non-voting, freely transferable, may be settled as net shares or in cash at the Company's option, and have a five-year term. In 2024, the warrants were sold at auction to a third party investor. The sale had no impact to the amount held on the Company's balance sheet.

of the warrants were exercised, with an exercise price of $ for warrants and $ for warrants, in a net share settlement for shares of ALK common stock. As of March 31, 2025, there were warrants outstanding, at an exercise price of $.

NOTE 9.

)$()

Basic weighted average shares outstanding

Dilutive effect of employee stock awards and stock warrants

Diluted weighted average shares outstanding

Basic loss per share$()$()Diluted loss per share$()$()Antidilutive amounts excluded from calculation:Employee stock awards Stock warrants

NOTE 10.

)$()$ $ $()Change in value ()() Reclassifications into earnings () Balance at March 31, 2025$()$()$ $ $()

(in millions)

Marketable Securities

Employee Benefit Plan

Interest Rate Derivatives

Tax Effect

Total

Balance at December 31, 2023

()

Change in value

Reclassifications into earnings

()

Balance at March 31, 2024

()

NOTE 11.

reportable operating segments which are described above:

•Alaska Airlines - includes scheduled air transportation on Alaska's Boeing aircraft for passengers and cargo.

•Hawaiian Airlines - includes scheduled air transportation on Hawaiian's Boeing and Airbus aircraft for passengers and cargo.

•Regional - includes Horizon's and other third-party carriers’ scheduled air transportation on E175 aircraft for passengers under CPAs. 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.

$ $ $ Loyalty program other revenue Cargo and other revenue Total segment operating revenue Reconciliation to Consolidated Operating Revenue:

Other revenue(a)

Consolidated Operating Revenue

$ Segment operating expensesWages and benefits Variable incentive pay Economic fuel Aircraft maintenance Aircraft rent Landing fees and other rentals Contracted services Selling expenses Depreciation and amortization Food and beverage service

Other(b)

Regional carrier expenses Total segment operating expenses Segment non-operating income (expense)

Interest income

Interest expense()() ()

Other(b)

Total segment non-operating income (expense)()() ()Segment pretax loss$()$()$()$()Reconciliation to Consolidated Loss Before Income Tax:

Other profit (loss)(a)

Aircraft fuel mark-to-market adjustment Losses on foreign debt()Special items - operating()Consolidated Loss Before Income Tax $()

$ $ $ Loyalty program other revenue $ Cargo and other revenue $ Total segment operating revenue Reconciliation to Consolidated Operating Revenue:

Other revenue(a)

Consolidated Operating Revenue

$ Segment operating expensesWages and benefits Variable incentive pay

Economic fuel

Aircraft maintenance

Aircraft rent

Landing fees and other rentals Contracted services Selling expenses Depreciation and amortization Food and beverage service

Other(b)

Regional carrier expenses

Total segment operating expenses Segment non-operating income (expense)

Interest income

Interest expense() ()

Other(b)

Total segment non-operating income (expense)() ()Segment pretax loss$()$ $()$()Reconciliation to Consolidated Loss Before Income Tax:

Other profit (loss)(a)

Aircraft fuel mark-to-market adjustment

Special items - operating()Consolidated Loss Before Income Tax $()

(a) Revenue and profit or loss from segments below the quantitative thresholds as well as other immaterial business units, including Air Group parent company activity, Horizon Air operations, McGee Air Services, consolidating entries and intercompany eliminations.

(b) Includes miscellaneous personnel, software, and services costs, as well as other non-operating activity.

$ Hawaiian Airlines

Other(a)

Consolidated$ $

Total assets were as follows(b):


(in millions)	March 31, 2025	December 31, 2024
Alaska Airlines	$	$
Hawaiian Airlines
Consolidating & Other	()	()
Consolidated	$	$

(a) Primarily consists of Horizon Air capital expenditures, including non-cash expenditures for debt financing of certain E175 deliveries of $ million in 2025 and $ million in 2024.

(b) No assets are allocated to the Regional segment as it represents only revenue and expenses associated with regional flying. The related assets associated with regional flying are allocated to other segments.

NOTE 12.

Integration costs Special items - operating$ $


ITEM 2. 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. MD&A is provided as a supplement to – and should be read in conjunction with – our unaudited condensed consolidated financial statements and the accompanying notes. All statements in the following discussion that are not statements of historical information or descriptions of current accounting policy are forward-looking statements. 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" of our Annual Report on Form 10-K for the year ended December 31, 2024. This overview summarizes the MD&A, which includes the following sections:

•First Quarter Review - highlights from the first quarter of 2025 outlining some of the major events that occurred during the period, as well as forward-looking statements.

•Results of Operations - an in-depth analysis of our financial and operational results for the three months ended March 31, 2025.

•Liquidity and Capital Resources - an overview of our financial position, analysis of cash flows, and relevant material cash commitments.

•GAAP to Non-GAAP Reconciliations and Operating Statistics - reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis, as well as operating statistics we use to measure operating performance.

Dollar amounts in the MD&A are generally 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.

Items affecting comparability

As Hawaiian Holdings, Inc. was acquired by Air Group on September 18, 2024, its financial results were not reflected in reported figures in the periods preceding the acquisition date. Due to the size of the two companies prior to the acquisition, the reported results for 2025 and 2024 are not comparable. To assist with the discussion of 2025 and 2024 results on a comparable basis and provide more meaningful discussion, certain supplemental unaudited pro forma income statement information is provided for the first quarter of 2024. Pro forma historical results were included with the Form 8-K filed on January 22, 2025. This information does not purport to reflect what our financial and operational results would have been had the acquisition been consummated at the beginning of the periods presented.

FIRST QUARTER REVIEW

Overview

We reported a loss before income tax under GAAP for the first quarter of 2025 of $233 million, compared to $178 million for the first quarter of 2024. On a pro forma basis, the pretax loss for the first quarter of 2024 was $343 million. Refer below for a more detailed discussion of the items impacting these results.

Labor update

In the first quarter, Alaska flight attendants, represented by the Association of Flight Attendants (AFA), ratified a new three-year Collective Bargaining Agreement (CBA) that includes wage increases and other improvements to benefits. Horizon is in negotiations with its pilots, represented by International Brotherhood of Teamsters (IBT), and its flight attendants, represented by AFA, for updated CBAs.

Subsequent to quarter end, Horizon technicians, represented by the Aircraft Mechanics Fraternal Association (AMFA) ratified a four-year CBA and Hawaiian flight attendants, represented by AFA, ratified a three-year extension of their existing CBA.

Alaska and Hawaiian are working towards joint collective bargaining agreements (JCBA) for workgroups represented by common unions. Alaska and Hawaiian have Transition and Process Agreements for certain workgroups which define the process for negotiating JCBAs and set forth interim agreements until a JCBA is reached.

Outlook

We remain focused on the successful integration of Hawaiian into Air Group. Looking ahead to the second quarter, on a pro forma basis, we anticipate capacity growth of 2% to 3%. We anticipate the percent change in unit revenue to be flat to down low single digits and the percent change in unit cost to be up mid to high single digits. Given recent economic uncertainty and volatility, we are not providing an update to our full year 2025 guidance. We are assessing a variety of scenarios, and expect to be profitable in 2025 even if revenue remains pressured throughout the second half of the year. Despite the softer macroeconomic outlook, areas of our business within our control are performing well and in line with our prior expectations.

RESULTS OF OPERATIONS

PRO FORMA OPERATING STATISTICS

Below are operating statistics presented on a pro forma basis, which assumes Hawaiian is included in both 2024 and 2025.


	Three Months Ended March 31,
	2025	2024 As Reported	2024 Hawaiian Airlines	2024 Pro forma	% Change
Consolidated Operating Statistics:
Revenue passengers (000)	13,159	9,774	2,621	12,395	6.2%
RPMs (000,000) "traffic"	17,257	12,524	4,073	16,597	4.0%
ASMs (000,000) "capacity"	21,219	15,378	5,051	20,429	3.9%
Load factor	81.3%	81.4%	80.6%	81.2%	0.1 pts
Yield	16.28¢	16.00¢	14.26¢	15.57¢	4.6%
PRASM	13.24¢	13.03¢	11.50¢	12.66¢	4.6%
RASM	14.79¢	14.51¢	12.78¢	14.08¢	5.0%
CASMex	11.89¢	11.60¢	11.82¢	11.65¢	2.1%
Economic fuel cost per gallon	$2.61	$3.08	$2.88	$3.02	(13.6)%



Fuel gallons (000,000)	262	188	68	256	2.3%
Departures (000)	123.8	95.7	20.3	116.0	6.7%
Average full-time equivalent employees (FTEs)	29,773	23,013	6,705	29,718	0.2%

PRO FORMA OPERATING REVENUE

On a pro forma basis, total operating revenue increased $260 million or 9%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized in the following table:


	Three Months Ended March 31,								Change
(in millions)	2025		2024 As Reported		2024 Hawaiian Airlines(a)		2024 Pro forma		$ Change		% Change
Passenger revenue	$	2,808	$	2,004	$	581	$	2,585	$	223	9%
Loyalty program other revenue	207		164		29		193		14		7%
Cargo and other revenue	122		64		35		99		23		23%
Total Operating Revenue	$	3,137	$	2,232	$	645	$	2,877	$	260	9%

(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.

The table below presents total operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) and the percentage of change of certain operational results on a pro forma basis for the three months ended March 31, 2025.


	Three Months Ended March 31, 2025		% Change vs. Pro forma Prior Year
(in millions)	Total Operating Revenue		Passenger Revenue	RPMs	ASMs	Yield	PRASM
Domestic	$	2,742	9%	5%	5%	4%	3%
Latin America	242		8%	(1)%	(1)%	9%	9%
Pacific	153		1%	—%	(7)%	—%	7%
Total	$	3,137	9%	4%	4%	5%	5%

Passenger revenue

On a pro forma basis, Passenger revenue increased $223 million, or 9%, as traffic increased by 4% and yield grew by 5%. Hawaiian passenger revenue has improved meaningfully compared to 2024, driven by the integration of its operations into Air Group's combined network and increased asset utilization. Prior year results were negatively impacted by $150 million due to the B737-9 grounding in the first quarter of 2024.

Loyalty program other revenue

On a pro forma basis, Loyalty program other revenue increased $14 million, or 7%, due to higher commission revenue from bank card and third party partners driven by increased consumer spend. Incremental credit card acquisitions of the Alaska Airlines Visa Signature and Hawaiian Airlines World Elite Mastercard co-branded credit cards also contributed to the increase.

Cargo and other revenue

On a pro forma basis, Cargo and other revenue increased $23 million, or 23%, driven by an additional B737-800F aircraft in Alaska's cargo fleet and six additional A330-300F aircraft in Hawaiian's cargo fleet, utilized under the ATSA with Amazon, since the first quarter of 2024.

PRO FORMA OPERATING EXPENSES

On a pro forma basis, total operating expenses increased $132 million, or 4%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized below. 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:


	Three Months Ended March 31,								Change
(in millions)	2025		2024 As Reported		2024 Hawaiian Airlines(a)		2024 Pro forma		$ Change		% Change
Aircraft fuel, including hedging gains and losses	$	681	$	565	$	194	$	759	$	(78)	(10)%
Non-fuel operating expenses, excluding special items	2,562		1,799		602		2,401		161		7%
Special items - operating	91		$	34	$	8	42		49		117%
Total Operating Expenses	$	3,334	$	2,398	$	804	$	3,202	$	132	4%

(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments and the impact of purchase accounting.

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. 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. 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.

Alaska's fuel hedge program was suspended in 2023 and all remaining positions were settled as of March 31, 2025. Hawaiian's fuel hedge program, which uses crude oil call options, was suspended in the first quarter of 2025, and has open positions, based in Brent crude oil, that will settle through the third quarter of 2025. The call options are designed to effectively cap the cost of the crude oil component of our jet fuel purchases. 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 previously paid for hedge premiums.

A summary of Hawaiian's Brent crude positions is provided below:


	Approximate % of Hawaiian's Expected Fuel Requirements		Weighted-Average Crude Oil Price per Barrel	Average Premium Cost per Barrel





























Hawaiian:



Second Quarter of 2025	19	%	$93	$2
Third Quarter of 2025	5	%	$91	$2

(a) A330-300 freighter aircraft to be utilized under the ATSA with Amazon. The ATSA provides for the operation of ten aircraft with customer options to expand the fleet.

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. 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. 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. 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. 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. 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. 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. 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 that disclosing the impact of these items as noted above 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.

•Although we disclose our unit revenue, we do not, nor are we able to, evaluate unit revenue 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 revenue 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.

Although we are presenting these non-GAAP amounts for the reasons above, investors and other readers should not consider them a substitute for GAAP figures.

GAAP TO NON-GAAP RECONCILIATIONS (unaudited)


Loss before income tax	$	(233)		$	(178)
Adjusted for:
Mark-to-market fuel hedge adjustment	(3)			(13)
Losses on foreign debt	5			—
Special items - operating	91			34
Adjusted loss before income tax	$	(140)		$	(157)

Pretax margin	(7.4)		%	(8.0)		%
Adjusted pretax margin	(4.5)		%	(7.0)		%


	Three Months Ended March 31,
	2025				2024
(in millions, except per share amounts)	Dollars		Per Share		Dollars		Per Share
Net loss	$	(166)	$	(1.35)	$	(132)	$	(1.05)
Adjusted for:
Mark-to-market fuel hedge adjustments	(3)		(0.02)		(13)		(0.10)
Losses on foreign debt	5		0.04		—		—
Special items - operating	91		0.74		34		0.27
Income tax effect of adjustments above	(22)		(0.18)		(5)		(0.04)
Adjusted net loss	$	(95)	$	(0.77)	$	(116)	$	(0.92)


(in millions, except unit metrics)	2025			2024
Total operating expenses	$	3,334		$	2,398
Less the following components:
Aircraft fuel, including hedging gains and losses	681			565
Freighter costs	41			15
Special items - operating	91			34
Total operating expenses, excluding fuel, freighter costs, and special items	$	2,521		$	1,784

ASMs	21,219			15,378
CASMex	11.89		¢	11.60		¢

OPERATING STATISTICS (unaudited)

Below are operating statistics we use to measure operating performance. Figures for the three months ended March 31, 2024 are as previously reported and do not include Hawaiian operations.


	Three Months Ended March 31,
	2025	2024	Change
Consolidated Operating Statistics(a):
Revenue passengers (000)	13,159	9,774	34.6%
RPMs (000,000) "traffic"	17,257	12,524	37.8%
ASMs (000,000) "capacity"	21,219	15,378	38.0%
Load factor	81.3%	81.4%	(0.1) pts
Yield	16.28¢	16.00¢	1.8%
PRASM	13.24¢	13.03¢	1.6%
RASM	14.79¢	14.51¢	1.9%
CASMex	11.89¢	11.60¢	2.5%
Economic fuel cost per gallon(b)(c)	$2.61	$3.08	(15.3)%
Fuel gallons (000,000)(c)	262	188	39.4%
ASMs per gallon	80.9	81.8	(1.1)%
Departures (000)	123.8	95.7	29.4%
Average full-time equivalent employees (FTEs)	29,773	23,013	29.4%
Operating fleet(d)	399	315	84 a/c
Alaska Airlines Operating Statistics:

RPMs (000,000) "traffic"	11,723	11,422	2.6%
ASMs (000,000) "capacity"	14,345	14,035	2.2%





Economic fuel cost per gallon	$2.61	$3.05	(14.4)%







Hawaiian Airlines Operating Statistics:
RPMs (000,000) "traffic"	4,307	—	n/a
ASMs (000,000) "capacity"	5,366	—	n/a
Economic fuel cost per gallon(c)	$2.50	—	n/a
Regional Operating Statistics:(e)

RPMs (000,000) "traffic"	1,227	1,102	11.3%
ASMs (000,000) "capacity"	1,508	1,343	12.3%
Economic fuel cost per gallon	$2.80	$3.27	(14.4)%

(a)Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.

(b)See reconciliation of this non-GAAP measure to the most directly related GAAP measure in the accompanying pages.

(c)Excludes operations under the Air Transportation Services Agreement (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 capacity purchase agreements. Excludes all aircraft removed from operating service.

(e)Data presented includes information related to flights operated by Horizon and third-party carriers.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to our critical accounting estimates during the three months ended March 31, 2025. For information regarding our critical accounting estimates, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2024.

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

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


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There have been no material changes in market risk from the information provided in Item 7A. “Quantitative and Qualitative Disclosure About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2024.


ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2025, an evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financial officer (collectively, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in our periodic reports filed with or submitted to the Securities and Exchange Commission (the SEC) is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and includes, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our certifying officers, as appropriate, to allow timely decisions regarding required disclosure. Our certifying officers concluded, based on their evaluation, that disclosure controls and procedures were effective as of March 31, 2025.

Changes in Internal Control over Financial Reporting

On September 18, 2024, we acquired Hawaiian Holdings, Inc. As of the date of this Quarterly Report on Form 10-Q, we are making progress in further integrating Hawaiian in our evaluation of internal controls over financial reporting for the combined company. As the integration continues and business processes evolve, management will continue to evaluate the existing internal controls over financial reporting for change.

Except as noted above, there have been no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Our internal control over financial reporting is based on the 2013 framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO Framework).

PART II


ITEM 1. LEGAL PROCEEDINGS

See Note 7 to the unaudited condensed consolidated financial statements within Part I, Item 1 of this document for a discussion of the Company's ongoing legal proceedings.


ITEM 1A. RISK FACTORS

See Part I, Item 1A. "Risk Factors," in our 2024 Form 10-K for a detailed discussion of risk factors affecting Alaska Air Group.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The below table provides certain information with respect to our purchases of shares of our common stock during the first quarter of 2025. The shares were purchased pursuant to a $1 billion repurchase plan authorized by the Board of Directors in December 2024.


	Total Number of Shares Purchased	Average Price Paid per Share		Maximum remaining dollar value of shares that can be purchased under the plan (in millions)
January 1, 2025 - January 31, 2025	314,480	$	67.80
February 1, 2025 - February 28, 2025	357,221	73.62
March 1, 2025 - March 31, 2025	1,094,715	54.95






Total	1,766,416	$	61.02	$	893

As taxpayer protection required under the PSP under the CARES Act, the Company granted the U.S. government a total of 1,455,437 warrants to purchase ALK common stock in 2020 and 2021. An additional 427,080 warrants were issued in conjunction with a draw on the CARES Act Loan in 2020. In 2024, the warrants were sold at auction to a third party investor. In March 2025, 1,660,705 of the warrants were exercised, with an exercise price of $31.61 for 1,355,206 warrants and $52.25 for 305,499 warrants, in a net share settlement for 809,768 shares of ALK common stock. The shares of common stock issued in connection with the warrant exercise were issued without registration in reliance on the exemption provided by Section 3(a)(9) of the under the Securities Act of 1933, as amended.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4. MINE SAFETY DISCLOSURES

None.


ITEM 5. OTHER INFORMATION

During the three months ended March 31, 2025, no director or officer of Alaska Air Group , modified, or a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408(a) of Regulation S-K promulgated under the Securities Exchange Act of 1934.


ITEM 6. EXHIBITS

The following documents are filed as part of this report:

EXHIBIT INDEX

Exhibit
Number

Exhibit
Description

Form

Date of First Filing

Exhibit Number

3.1

Amended and Restated Certificate of Incorporation of Registrant

10-Q

August 3, 2017

3.1

3.2

Amended and Restated Bylaws of Registrant

8-K

December 15, 2015

3.2

10.1*#†

Alaska Air Group, Inc. 2016 Performance Incentive Plan, Form of Stock Unit Award Agreement

10-Q

31.1†

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

10-Q

31.2†

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

10-Q

32.1†

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

10-Q

32.2†

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

10-Q

101.INS†

XBRL Instance Document - The instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document.

101.SCH†

XBRL Taxonomy Extension Schema Document

101.CAL†

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†

XBRL Taxonomy Extension Label Linkbase Document

101.PRE†

XBRL Taxonomy Extension Presentation Linkbase Document

104†

Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

†

Filed herewith

Indicates management contract or compensatory plan or arrangement.

Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K Item 601(b)(10).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


ALASKA AIR GROUP, INC.

/s/ EMILY HALVERSON
Emily Halverson
Vice President Finance, Controller, and Treasurer

May 8, 2025

ALASKA AIR GROUP, INC. - Quarter Report: 2025 March (Form 10-Q)

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