OPERATING SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Operating Segment Information

OPERATING SEGMENT INFORMATION

Air Group has two operating airlines - Alaska Airlines and Horizon Air. Each is a regulated airline with separate management teams primarily in operational roles. Horizon sells 100% of its capacity to Alaska under a CPA, which is eliminated upon consolidation. In addition, Alaska has CPAs with SkyWest to fly certain routes and PenAir to fly in the state of Alaska. The Company attributes revenue between Mainline and Regional based on the coupon fare in effect on the date of issuance relative to the origin and destination of each flight segment. To manage the two operating airlines and the revenues and expenses associated with the CPAs, management views the business in three operating segments.

Alaska Mainline - Flying Boeing 737 jets and all associated revenues and costs.

Alaska Regional - Alaska's CPAs with 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 CPAs. Additionally, Alaska Regional includes an allocation of corporate overhead such as IT, finance, and other administrative costs incurred by Alaska and on behalf of Horizon.

Horizon - Horizon operates turboprop Q400 aircraft. All of Horizon's capacity is sold to Alaska under a CPA.  Expenses include those typically borne by regional airlines such as crew costs, ownership costs, and maintenance costs. The results of Horizon's operations are eliminated upon consolidation.

Additionally, the following table reports “Air Group adjusted,” which is not a measure determined in accordance with GAAP. The Company's chief operating decision-makers and others in management use this measure to evaluate operational performance and determine resources allocations. Adjustments are further explained below in reconciling to consolidated GAAP results. Operating segment information is as follows (in millions):

	Three Months Ended September 30, 2013
	Alaska
	Mainline			Regional			Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	960		$	—		$	—		$	—		$	960		$	—		$	960
Regional				208			—			—			208			—			208
Total passenger revenues	960			208			—			—			1,168			—			1,168
CPA revenues	—			—			88			(88		)	—			—			—
Freight and mail	31			1			—			—			32			—			32
Other - net	145			19			1			—			165			192			357
Total operating revenues	1,136			228			89			(88		)	1,365			192			1,557
Operating expenses
Operating expenses, excluding fuel	588			144			80			(88		)	724			—			724
Economic fuel	337			46			—			—			383			(20		)	363
Total operating expenses	925			190			80			(88		)	1,107			(20		)	1,087
Nonoperating income (expense)
Interest income	5			—			—			—			5			—			5
Interest expense	(9		)	—			(4		)	—			(13		)	—			(13		)
Other	8			(8		)	1			—			1			—			1
	4			(8		)	(3		)	—			(7		)	—			(7		)
Income (loss) before income tax	$	215		$	30		$	6		$	—		$	251		$	212		$	463

	Three Months Ended September 30, 2012
	Alaska
	Mainline			Regional		Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	905		$	—	$	—		$	—		$	905		$	—		$	905
Regional	—			198		—			—			198			—			198
Total passenger revenues	905			198		—			—			1,103			—			1,103
CPA revenues	—			—		96			(96		)	—			—			—
Freight and mail	28			2		—			—			30			—			30
Other - net	121			16		2			—			139			—			139
Total operating revenues	1,054			216		98			(96		)	1,272			—			1,272
Operating expenses
Operating expenses, excluding fuel	532			145		86			(97		)	666			—			666
Economic fuel	312			46		—			—			358			(21		)	337
Total operating expenses	844			191		86			(97		)	1,024			(21		)	1,003
Nonoperating income (expense)
Interest income	5			—		—			—			5			—			5
Interest expense	(11		)	—		(4		)	—			(15		)	—			(15		)
Other	6			—		—			—			6			—			6
	—			—		(4		)	—			(4		)	—			(4		)
Income (loss) before income tax	$	210		$	25	$	8		$	1		$	244		$	21		$	265

	Nine Months Ended September 30, 2013
	Alaska
	Mainline			Regional			Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	2,651		$	—		$	—		$	—		$	2,651		$	—		$	2,651
Regional	—			582			—			—			582			—			582
Total passenger revenues	2,651			582			—			—			3,233			—			3,233
CPA revenues	—			—			274			(274		)	—			—			—
Freight and mail	85			3			—			—			88			—			88
Other - net	380			49			4			—			433			192			625
Total operating revenues	3,116			634			278			(274		)	3,754			192			3,946
Operating expenses
Operating expenses, excluding fuel	1,704			440			253			(274		)	2,123			—			2,123
Economic fuel	987			135			—			—			1,122			(7		)	1,115
Total operating expenses	2,691			575			253			(274		)	3,245			(7		)	3,238
Nonoperating income (expense)
Interest income	14			—			—			—			14			—			14
Interest expense	(30		)	—			(10		)	(2		)	(42		)	—			(42		)
Other	19			(9		)	1			—			11			—			11
	3			(9		)	(9		)	(2		)	(17		)	—			(17		)
Income (loss) before income tax	$	428		$	50		$	16		$	(2	)	$	492		$	199		$	691

	Nine Months Ended September 30, 2012
	Alaska
	Mainline			Regional		Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	2,491		$	—	$	—		$	—		$	2,491		$	—		$	2,491
Regional	—			559		—			—			559			—			559
Total passenger revenues	2,491			559		—			—			3,050			—			3,050
CPA revenues	—			—		272			(272		)	—			—			—
Freight and mail	82			3		—			—			85			—			85
Other - net	339			45		6			—			390			—			390
Total operating revenues	2,912			607		278			(272		)	3,525			—			3,525
Operating expenses
Operating expenses, excluding fuel	1,583			421		248			(272		)	1,980			—			1,980
Economic fuel	923			135		—			—			1,058			29			1,087
Total operating expenses	2,506			556		248			(272		)	3,038			29			3,067
Nonoperating income (expense)
Interest income	15			—		—			—			15			—			15
Interest expense	(37		)	—		(12		)	—			(49		)	—			(49		)
Other	17			—		1			—			18			—			18
	(5		)	—		(11		)	—			(16		)	—			(16		)
Income (loss) before income tax	$	401		$	51	$	19		$	—		$	471		$	(29	)	$	442

^(a)  The adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations and does not include certain charges.

^(b)  Includes accounting adjustments related to Special mileage plan revenue and mark-to-market fuel-hedge accounting charges.

Total assets were as follows (in millions):

	September 30, 2013			December 31, 2012
Alaska(a)	$	5,731		$	5,177
Horizon	850			823
Parent company	2,403			1,832
Elimination of inter-company accounts	(3,122		)	(2,327		)
Consolidated	$	5,862		$	5,505

^(a)  There are no assets associated with purchased capacity flying at Alaska.