OPERATING SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2015

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, for which all intercompany transactions are 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 the regional operations.

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 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, 2015
	Alaska
	Mainline			Regional		Horizon			Consolidating			Air Group Adjusted(a)			Special Items(b)			Consolidated
Operating revenues
Passenger
Mainline	$	1,057		$	—	$	—		$	—		$	1,057		$	—		$	1,057
Regional	—			240		—			—			240			—			240
Total passenger revenues	1,057			240		—			—			1,297			—			1,297
CPA revenues	—			—		105			(105		)	—			—			—
Freight and mail	29			1		—			—			30			—			30
Other - net	167			20		1			—			188						188
Total operating revenues	1,253			261		106			(105		)	1,515			—			1,515
Operating expenses
Operating expenses, excluding fuel	667			181		93			(104		)	837			—			837
Economic fuel	205			35		—			—			240			5			245
Total operating expenses	872			216		93			(104		)	1,077			5			1,082
Nonoperating income (expense)
Interest income	5			—		—			—			5			—			5
Interest expense	(7		)	—		(3		)	—			(10		)	—			(10		)
Other	7			—		—			2			9			—			9
	5			—		(3		)	2			4			—			4
Income before income tax	$	386		$	45	$	10		$	1		$	442		$	(5	)	$	437

	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 before income tax	$	282		$	29	$	11		$	(2	)	$	320		$	(4	)	$	316

	Nine Months Ended September 30, 2015
	Alaska
	Mainline		Regional	Horizon		Consolidating		Air Group Adjusted(a)		Special Items(b)		Consolidated
Operating revenues
Passenger
Mainline	2,977		—	—		—		2,977		—		2,977
Regional	—		638	—		—		638		—		638
Total passenger revenues	2,977		638	—		—		3,615		—		3,615
CPA revenues	—		—	303		(303	)	—		—		—
Freight and mail	79		4	—		—		83		—		83
Other-net	465		55	3				523		—		523
Total operating revenues	3,521		697	306		(303	)	4,221		—		4,221
Operating expenses
Operating expenses, excluding fuel	1,951		514	274		(302	)	2,437		—		2,437
Economic fuel	641		101	—		—		742		(1	)	741
Total operating expenses	2,592		615	274		(302	)	3,179		(1	)	3,178
Nonoperating income (expense)
Interest income	15		—	—		1		16		—		16
Interest expense	(21	)	—	(8	)	(3	)	(32	)	—		(32	)
Other	21		—	—		5		26		—		26
	15		—	(8	)	3		10		—		10
Income before income tax	944		82	24		2		1,052		1		1,053

	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 before income tax	651		54		14		(3	)	716		17		733

^(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):

	September 30, 2015			December 31, 2014
Alaska	$	7,922		$	6,772
Horizon	763			818
Parent company	4,161			3,552
Elimination of inter-company accounts	(6,282		)	(4,961		)
Consolidated	$	6,564		$	6,181