OPERATING SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

OPERATING SEGMENT INFORMATION

OPERATING SEGMENT INFORMATION

Alaska Air Group has three operating airlines—Alaska, Virgin America and Horizon. Each is regulated 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. GAAP, 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.

Operating segment information is as follows (in millions):

	Three Months Ended March 31, 2017
	Mainline			Regional			Horizon			Consolidating & Other(a)			Air Group Adjusted(b)			Special Items(c)			Consolidated
Operating revenues
Passenger
Mainline	$	1,272		$	—		$	—		$	—		$	1,272		$	—		$	1,272
Regional	—			212			—			—			212			—			212
Total passenger revenues	1,272			212			—			—			1,484			—			1,484
CPA revenues	—			—			97			(97		)	—			—			—
Freight and mail	23			1			—			—			24			—			24
Other—net	222			17			1			1			241			—			241
Total operating revenues	1,517			230			98			(96		)	1,749			—			1,749
Operating expenses
Operating expenses, excluding fuel	998			200			103			(97		)	1,204			40			1,244
Economic fuel	292			36			—			1			329			10			339
Total operating expenses	1,290			236			103			(96		)	1,533			50			1,583
Nonoperating income (expense)
Interest income	7			—			—			—			7			—			7
Interest expense	(22		)	—			(2		)	(1		)	(25		)	—			(25		)
Other	3			—			—			1			4			—			4
	(12		)	—			(2		)	—			(14		)	—			(14		)
Income (loss) before income tax	$	215		$	(6	)	$	(7	)	$	—		$	202		$	(50	)	$	152

	Three Months Ended March 31, 2016
	Mainline			Regional		Horizon			Consolidating & Other(a)			Air Group Adjusted(b)			Special Items(c)			Consolidated
Operating revenues
Passenger
Mainline	$	927		$	—	$	—		$	—		$	927		$	—		$	927
Regional	—			206		—			—			206			—			206
Total passenger revenues	927			206		—			—			1,133			—			1,133
CPA revenues	—			—		103			(103		)	—			—			—
Freight and mail	23			1		—			—			24			—			24
Other—net	172			17		1			—			190			—			190
Total operating revenues	1,122			224		104			(103		)	1,347			—			1,347
Operating expenses
Operating expenses, excluding fuel	701			186		105			(102		)	890			—			890
Economic fuel	144			25		—			—			169			(2		)	167
Total operating expenses	845			211		105			(102		)	1,059			(2		)	1,057
Nonoperating income (expense)
Interest income	6			—		—			—			6			—			6
Interest expense	(12		)	—		(1		)	—			(13		)	—			(13		)
Other	7			—		—			2			9			—			9
	1			—		(1		)	2			2			—			2
Income (loss) before income tax	$	278		$	13	$	(2	)	$	1		$	290		$	2		$	292

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

(b) The Air Group 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 income and charges.

(c) Includes merger-related costs and mark-to-market fuel-hedge accounting charges.

Total assets were as follows (in millions):

	March 31, 2017			December 31, 2016
Mainline	$	15,735		$	15,260
Horizon	719			690
Consolidating & Other	(6,152		)	(5,988		)
Consolidated	$	10,302		$	9,962