OPERATING SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2014

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 one route 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 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 resource allocations. Adjustments are further explained below in reconciling to consolidated GAAP results. Operating segment information is as follows (in millions):

	Three Months Ended June 30, 2014
	Alaska
	Mainline			Regional			Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	974		$	—		$	—		$	—		$	974		$	—		$	974
Regional	—			200			—			—			200			—			200
Total passenger revenues	974			200			—			—			1,174			—			1,174
CPA revenues	—			—			87			(87		)	—			—			—
Freight and mail	31			1			—			—			32			—			32
Other - net	147			20			2			—			169			—			169
Total operating revenues	1,152			221			89			(87		)	1,375			—			1,375
Operating expenses
Operating expenses, excluding fuel	602			151			86			(87		)	752			—			752
Economic fuel	324			49			—			—			373			(13		)	360
Total operating expenses	926			200			86			(87		)	1,125			(13		)	1,112
Nonoperating income (expense)
Interest income	5			—			—			—			5			—			5
Interest expense	(9		)	(1		)	(2		)	—			(12		)	—			(12		)
Other	9			1			(1		)	—			9			—			9
	5			—			(3		)	—			2			—			2
Income (loss) before income tax	$	231		$	21		$	—		$	—		$	252		$	13		$	265

	Three Months Ended June 30, 2013
	Alaska
	Mainline			Regional			Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	896		$	—		$	—		$	—		$	896		$	—		$	896
Regional	—			192			—			—			192			—			192
Total passenger revenues	896			192			—			—			1,088			—			1,088
CPA revenues	—			—			91			(91		)	—			—			—
Freight and mail	29			1			—			—			30			—			30
Other - net	120			16			2			—			138			—			138
Total operating revenues	1,045			209			93			(91		)	1,256			—			1,256
Operating expenses
Operating expenses, excluding fuel	569			149			84			(92		)	710			—			710
Economic fuel	327			44			—			—			371			1			372
Total operating expenses	896			193			84			(92		)	1,081			1			1,082
Nonoperating income (expense)
Interest income	4			—			—			—			4			—			4
Interest expense	(9		)	—			(4		)	(1		)	(14		)	—			(14		)
Other	6			(1		)	1			(1		)	5			—			5
	1			(1		)	(3		)	(2		)	(5		)	—			(5		)
Income (loss) before income tax	$	150		$	15		$	6		$	(1	)	$	170		$	(1	)	$	169

	Six Months Ended June 30, 2014
	Alaska
	Mainline			Regional			Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	1,828		$	—		$	—		$	—		$	1,828		$	—		$	1,828
Regional	—			386			—			—			386			—			386
Total passenger revenues	1,828			386			—			—			2,214			—			2,214
CPA revenues	—			—			178			(178		)	—			—			—
Freight and mail	54			2			—			—			56			—			56
Other - net	287			37			3			—			327			—			327
Total operating revenues	2,169			425			181			(178		)	2,597			—			2,597
Operating expenses
Operating expenses, excluding fuel	1,178			302			172			(178		)	1,474			—			1,474
Economic fuel	642			97			—			—			739			(21		)	718
Total operating expenses	1,820			399			172			(178		)	2,213			(21		)	2,192
Nonoperating income (expense)
Interest income	10			—			—			—			10			—			10
Interest expense	(17		)	(1		)	(6		)	(1		)	(25		)	—			(25		)
Other	27			—			—			—			27			—			27
	20			(1		)	(6		)	(1		)	12			—			12
Income (loss) before income tax	$	369		$	25		$	3		$	(1	)	$	396		$	21		$	417

	Six Months Ended June 30, 2013
	Alaska
	Mainline			Regional			Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	1,692		$	—		$	—		$	—		$	1,692		$	—		$	1,692
Regional	—			374			—			—			374			—			374
Total passenger revenues	1,692			374			—			—			2,066			—			2,066
CPA revenues	—			—			186			(186		)	—			—			—
Freight and mail	54			2			—			—			56			—			56
Other - net	234			31			3			—			268			—			268
Total operating revenues	1,980			407			189			(186		)	2,390			—			2,390
Operating expenses
Operating expenses, excluding fuel	1,116			296			173			(187		)	1,398			—			1,398
Economic fuel	650			90			—			—			740			13			753
Total operating expenses	1,766			386			173			(187		)	2,138			13			2,151
Nonoperating income (expense)
Interest income	9			—			—			—			9			—			9
Interest expense	(21		)	—			(7		)	(1		)	(29		)	—			(29		)
Other	11			(1		)	1			(1		)	10			—			10
	(1		)	(1		)	(6		)	(2		)	(10		)	—			(10		)
Income (loss) before income tax	$	213		$	20		$	10		$	(1	)	$	242		$	(13	)	$	229

^(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 mark-to-market fuel-hedge accounting charges.

Total assets were as follows (in millions):

	June 30, 2014			December 31, 2013
Alaska(a)	$	6,473		$	5,832
Horizon	857			840
Parent company	3,124			2,762
Elimination of inter-company accounts	(4,140		)	(3,596		)
Consolidated	$	6,314		$	5,838

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