OPERATING SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Operating Segment Information

OPERATING SEGMENT INFORMATION

Alaska Air Group has three operating airlines—Alaska, Virgin America and Horizon. Each is a regulated airline by the U.S. Department of Transportation’s Federal Aviation Administration. Alaska has CPAs for regional capacity with Horizon, as well as with third-party carriers SkyWest and PenAir, under which Alaska receives all passenger revenues.

Under U.S. General Accepted Accounting Principles, operating segments are defined as components of a business for which there is discrete financial information that is regularly assessed by the Chief Operating Decision Maker ("CODM") in making resource allocation decisions. Financial performance for the operating airlines and CPAs is managed and reviewed by the Company's CODM as part of three reportable operating segments:

• Mainline - includes Alaska's and Virgin America’s scheduled air transportation for passengers and cargo throughout the U.S., and in parts of Canada, Mexico, Costa Rica and Cuba.

• Regional - includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S. under CPAs. This segment includes the actual revenues and expenses associated with regional flying, as well as an allocation of corporate overhead incurred by Air Group on behalf of the regional operations.

• Horizon - includes the capacity sold to Alaska under CPA. Expenses include those typically borne by regional airlines such as crew costs, ownership costs and maintenance costs.

The CODM makes resource allocation decisions for these reporting segments based on flight profitability data, aircraft type, route economics and other financial information.

The "Consolidating and Other" column reflects parent company activity, consolidating entries and other immaterial business units of the company. The “Air Group Adjusted” column represents a non-GAAP measure that is used by the Company CODM to evaluate performance and allocate resources. Adjustments are further explained below in reconciling to consolidated GAAP results.

The operating segment information that follows (in millions) includes financial results for Virgin America for the period from December 14, 2016 to December 31, 2016 and the impact of purchase accounting as of December 14, 2016.

Year Ended December 31, 2016	Mainline(a)			Regional		Horizon			Consolidating & Other(b)			Air Group Adjusted(c)			Special Items(d)			Consolidated
Operating revenues
Passenger
Mainline	$	4,098		$	—	$	—		$	—		$	4,098		$	—		$	4,098
Regional	—			908		—			—			908			—			908
Total passenger revenues	4,098			908		—			—			5,006			—			5,006
CPA revenues	—			—		424			(424		)	—			—			—
Freight and mail	104			5		—			(1		)	108			—			108
Other-net	738			74		4			1			817			—			817
Total operating revenues	4,940			987		428			(424		)	5,931			—			5,931
Operating expenses
Operating expenses, excluding fuel	2,883			769		407			(425		)	3,634			117			3,751
Fuel expense	719			125		—			—			844			(13		)	831
Total operating expenses	3,602			894		407			(425		)	4,478			104			4,582
Nonoperating income (expense)
Interest income	26			—		1			—			27			—			27
Interest expense	(42		)	—		(9		)	(4		)	(55		)	—			(55		)
Other	19			—		1			4			24			—			24
	3			—		(7		)	—			(4		)	—			(4		)
Income (loss) before income tax	$	1,341		$	93	$	14		$	1		$	1,449		$	(104	)	$	1,345

Year Ended December 31, 2015	Mainline			Regional		Horizon			Consolidating & Other(b)			Air Group Adjusted(c)			Special Items(d)			Consolidated
Operating revenues
Passenger
Mainline	$	3,939		$	—	$	—		$	—		$	3,939		$	—		$	3,939
Regional	—			854		—			—			854			—			854
Total passenger revenues	3,939			854		—			—			4,793			—			4,793
CPA revenues	—			—		408			(408		)	—			—			—
Freight and mail	103			5		—			—			108			—			108
Other-net	621			72		4			—			697			—			697
Total operating revenues	4,663			931		412			(408		)	5,598			—			5,598
Operating expenses
Operating expenses, excluding fuel	2,653			695		375			(409		)	3,314			32			3,346
Fuel expense	823			131		—			—			954			—			954
Total operating expenses	3,476			826		375			(409		)	4,268			32			4,300
Nonoperating income (expense)
Interest income	19			—		—			2			21			—			21
Interest expense	(28		)	—		(10		)	(4		)	(42		)	—			(42		)
Other	28			—		1			6			35			—			35
	19			—		(9		)	4			14			—			14
Income (loss) before income tax	$	1,206		$	105	$	28		$	5		$	1,344		$	(32	)	$	1,312

Year Ended December 31, 2014	Mainline			Regional			Horizon			Consolidating & Other(b)			Air Group Adjusted(c)			Special Items(d)			Consolidated
Operating revenues
Passenger
Mainline	$	3,774		$	—		$	—		$	—		$	3,774		$	—		$	3,774
Regional	—			805			—			—			805			—			805
Total passenger revenues	3,774			805			—			—			4,579			—			4,579
CPA revenues	—			—			371			(371		)	—			—			—
Freight and mail	109			5			—			—			114			—			114
Other-net	592			78			5			—			675			—			675
Total operating revenues	4,475			888			376			(371		)	5,368			—			5,368
Operating expenses
Operating expenses, excluding fuel	2,417			623			349			(371		)	3,018			(30		)	2,988
Fuel expense	1,251			190			—			—			1,441			(23		)	1,418
Total operating expenses	3,668			813			349			(371		)	4,459			(53		)	4,406
Nonoperating income (expense)
Interest income	20			—			—			1			21			—			21
Interest expense	(32		)	—			(12		)	(4		)	(48		)	—			(48		)
Other	39			(1		)	2			—			40			—			40
	27			(1		)	(10		)	(3		)	13			—			13
Income (loss) before income tax	$	834		$	74		$	17		$	(3	)	$	922		$	53		$	975

(a) Includes Alaska activity for the full period and Virgin America financial results for the period December 14, 2016 through December 31, 2016, and the impacts associated with purchase accounting as of December 14, 2016.

(b) Includes consolidating entries, Parent Company and other immaterial business units.

(c) The adjusted column excludes certain charges described in (d) and represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations.

(d) Includes accounting adjustments related to mark-to-market fuel hedge accounting charges (all years), merger-related costs (2016), pension settlement charge (2015), litigation-related matter (2015), non-cash curtailment gain (2014) and a gain related to a legal matter (2014).

	2016			2015			2014
Depreciation and amortization:
Mainline	$	296		$	268		$	243
Horizon	67			52			51
Consolidated	$	363		$	320		$	294
Capital expenditures:
Mainline	$	608		$	821		$	659
Horizon	70			10			35
Consolidated	$	678		$	831		$	694
Total assets at end of period:
Mainline	$	15,260		$	8,127
Horizon	690			717
Consolidating & Other	(5,988		)	(2,314		)
Consolidated	$	9,962		$	6,530