OPERATING SEGMENT INFORMATION

9 Months Ended

Sep. 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 reconciliation to consolidated GAAP results. Operating segment information is as follows (in millions):

	Three Months Ended September 30, 2014
	Alaska
	Mainline			Regional		Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	1,030		$	—	$	—		$	—		$	1,030		$	—		$	1,030
Regional	—			219		—			—			219			—			219
Total passenger revenues	1,030			219		—			—			1,249			—			1,249
CPA revenues	—			—		99			(99		)	—			—			—
Freight and mail	30			2		—			—			32			—			32
Other - net	161			22		1			—			184			—			184
Total operating revenues	1,221			243		100			(99		)	1,465			—			1,465
Operating expenses
Operating expenses, excluding fuel	605			162		85			(97		)	755			—			755
Economic fuel	338			52		—			—			390			4			394
Total operating expenses	943			214		85			(97		)	1,145			4			1,149
Nonoperating income (expense)
Interest income	5			—		—			—			5			—			5
Interest expense	(8		)	—		(4		)	—			(12		)	—			(12		)
Other	7			—		—			—			7			—			7
	4			—		(4		)	—			—			—			—
Income (loss) before income tax	$	282		$	29	$	11		$	(2	)	$	320		$	(4	)	$	316

	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

	Nine Months Ended September 30, 2014
	Alaska
	Mainline			Regional			Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	2,858		$	—		$	—		$	—		$	2,858		$	—		$	2,858
Regional	—			605			—			—			605			—			605
Total passenger revenues	2,858			605			—			—			3,463			—			3,463
CPA revenues	—			—			277			(277		)	—			—			—
Freight and mail	84			4			—			—			88			—			88
Other - net	448			59			4			—			511			—			511
Total operating revenues	3,390			668			281			(277		)	4,062			—			4,062
Operating expenses
Operating expenses, excluding fuel	1,783			464			257			(274		)	2,230			—			2,230
Economic fuel	980			149			—			—			1,129			(17		)	1,112
Total operating expenses	2,763			613			257			(274		)	3,359			(17		)	3,342
Nonoperating income (expense)
Interest income	15			—			—			—			15			—			15
Interest expense	(25		)	(1		)	(10		)	—			(36		)	—			(36		)
Other	34			—			—			—			34			—			34
	24			(1		)	(10		)	—			13			—			13
Income (loss) before income tax	$	651		$	54		$	14		$	(3	)	$	716		$	17		$	733

	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

^(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 and accounting adjustments related to Special mileage plan revenue.

Total assets were as follows (in millions):

	September 30, 2014			December 31, 2013
Alaska(a)	$	6,655		$	5,832
Horizon	836			840
Parent company	3,324			2,762
Elimination of inter-company accounts	(4,579		)	(3,596		)
Consolidated	$	6,236		$	5,838

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