OPERATING SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

OPERATING SEGMENT INFORMATION

OPERATING SEGMENT INFORMATION

Alaska Air Group has two operating airlines—Alaska (including Virgin America after the single operating certificate received in January 2018) 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 scheduled air transportation on Alaska's Boeing or Airbus jet aircraft for passengers and cargo throughout the U.S., and in parts of Canada, Mexico, and Costa Rica.

• 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, McGee Air Services, 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, 2018
	Mainline			Regional			Horizon			Consolidating & Other(a)			Air Group Adjusted(b)			Special Items(c)			Consolidated
Operating revenues
Passenger revenues	$	1,442		$	243		$	—		$	—		$	1,685		$	—		$	1,685
CPA revenues	—			—			110			(110		)	—			—			—
Mileage plan other revenue	98			9			—			—			107			—			107
Cargo and other	39			—			1			—			40			—			40
Total operating revenues	1,579			252			111			(110		)	1,832			—			1,832
Operating expenses
Operating expenses, excluding fuel	1,131			239			104			(111		)	1,363			31			1,394
Economic fuel	367			55			—			—			422			(13		)	409
Total operating expenses	1,498			294			104			(111		)	1,785			18			1,803
Nonoperating income (expense)
Interest income	11			—			—			(3		)	8			—			8
Interest expense	(22		)	—			(5		)	3			(24		)	—			(24		)
Interest capitalized	4			—			1			—			5			—			5
Other—net	(5		)	(7		)	—			—			(12		)	—			(12		)
Total Nonoperating income (expense)	(12		)	(7		)	(4		)	—			(23		)	—			(23		)
Income (loss) before income tax	$	69		$	(49	)	$	3		$	1		$	24		$	(18	)	$	6

	Three Months Ended March 31, 2017(d)
	Mainline			Regional			Horizon			Consolidating & Other(a)			Air Group Adjusted(b)			Special Items(c)			Consolidated
Operating revenues
Passenger revenues	$	1,375		$	227		$	—		$	—		$	1,602		$	—		$	1,602
CPA revenues	—			—			97			(97		)	—			—			—
Mileage plan other revenue	93			7			—			—			100			—			100
Cargo and other	36			1			1			—			38			—			38
Total operating revenues	1,504			235			98			(97		)	1,740			—			1,740
Operating expenses
Operating expenses, excluding fuel	1,000			200			103			(98		)	1,205			39			1,244
Economic fuel	292			37			—			—			329			10			339
Total operating expenses	1,292			237			103			(98		)	1,534			49			1,583
Nonoperating income (expense)
Interest income	7			—			—			—			7			—			7
Interest expense	(23		)	—			(2		)	—			(25		)	—			(25		)
Interest capitalized	4			—			—			—			4			—			4
Other—net	(1		)	—			—			—			(1		)	—			(1		)
Total Nonoperating income (expense)	(13		)	—			(2		)	—			(15		)	—			(15		)
Income (loss) before income tax	$	199		$	(2	)	$	(7	)	$	1		$	191		$	(49	)	$	142

(a) Includes consolidating entries, Parent Company, McGee Air Services, 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, mark-to-market fuel-hedge accounting charges, and other special items.

(d) Certain historical information has been adjusted to reflect the adoption of new accounting standards.

Total assets were as follows (in millions):

	March 31, 2018			December 31, 2017
Mainline	$	15,088		$	16,663
Horizon	945			929
Consolidating & Other	(5,185		)	(6,846		)
Consolidated	$	10,848		$	10,746