OPERATING SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2020

Alaska Air Group has two operating airlines—Alaska 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, 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 a CPA. 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 Air Group 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's 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 June 30, 2020
	Mainline		Regional		Horizon		Consolidating & Other^(a)		Air Group Adjusted^(b)		Special Items^(c)		Consolidated
Operating Revenues
Passenger revenues	$	225	$	84	$	—	$	—	$	309	$	—	$	309
CPA revenues	—		—		81		(81)		—		—		—
Mileage Plan other revenue	56		17		—		—		73		—		73
Cargo and other	39		—		—		—		39		—		39
Total Operating Revenues	320		101		81		(81)		421		—		421
Operating Expenses
Operating expenses, excluding fuel	746		210		68		(82)		942		(292)		650
Economic fuel	45		20		—		—		65		(6)		59
Total Operating Expenses	791		230		68		(82)		1,007		(298)		709
Nonoperating Income (Expense)
Interest income	11		—		—		(4)		7		—		7
Interest expense	(18)		—		(5)		6		(17)		—		(17)
Interest capitalized	1		—		—		—		1		—		1
Other - net	6		—		—		—		6		—		6
Total Nonoperating Income (Expense)	—		—		(5)		2		(3)		—		(3)
Income (Loss) Before Income Tax	$	(471)	$	(129)	$	8	$	3	$	(589)	$	298	$	(291)

	Three Months Ended June 30, 2019
	Mainline		Regional		Horizon		Consolidating & Other^(a)		Air Group Adjusted^(b)		Special Items^(c)		Consolidated
Operating Revenues
Passenger revenues	$	1,767	$	344	$	—	$	—	$	2,111	$	—	$	2,111
CPA revenues	—		—		112		(112)		—		—		—
Mileage Plan other revenue	105		13		—		—		118		—		118
Cargo and other	57		—		—		2		59		—		59
Total Operating Revenues	1,929		357		112		(110)		2,288		—		2,288
Operating Expenses
Operating expenses, excluding fuel	1,167		268		95		(116)		1,414		8		1,422
Economic fuel	422		77		—		—		499		3		502
Total Operating Expenses	1,589		345		95		(116)		1,913		11		1,924
Nonoperating Income (Expense)
Interest income	17		—		—		(6)		11		—		11
Interest expense	(19)		—		(7)		6		(20)		—		(20)
Interest capitalized	3		—		—		—		3		—		3
Other - net	(7)		—		—		—		(7)		—		(7)
Total Nonoperating Income (Expense)	(6)		—		(7)		—		(13)		—		(13)
Income (Loss) Before Income Tax	$	334	$	12	$	10	$	6	$	362	$	(11)	$	351


	Six Months Ended June 30, 2020
	Mainline	Regional	Horizon	Consolidating & Other^(a)	Air Group Adjusted^(b)	Special Items^(c)	Consolidated
Operating Revenues
Passenger revenues	1,459	331	—	—	1,790	—	1,790
CPA revenues	—	—	186	(186)	—	—	—
Mileage Plan other revenue	154	28	—	—	182	—	182
Cargo and other	83	—	—	2	85	—	85
Total Operating Revenues	1,696	359	186	(184)	2,057	—	2,057
Operating Expenses
Operating expenses, excluding fuel	1,905	479	160	(192)	2,352	(129)	2,223
Economic fuel	358	82	—	—	440	3	443
Total Operating Expenses	2,263	561	160	(192)	2,792	(126)	2,666
Nonoperating Income (Expense)
Interest income	25	—	—	(9)	16	—	16
Interest expense	(30)	—	(10)	10	(30)	—	(30)
Interest capitalized	4	—	—	—	4	—	4
Other - net	12	—	—	(1)	11	—	11
Total Nonoperating Income (Expense)	11	—	(10)	—	1	—	1
Income (Loss) Before Income Tax	(556)	(202)	16	8	(734)	126	(608)

	Six Months Ended June 30, 2019
	Mainline	Regional	Horizon	Consolidating & Other^(a)	Air Group Adjusted^(b)	Special Items^(c)	Consolidated
Operating Revenues
Passenger revenues	3,189	638	—	—	3,827	—	3,827
CPA revenues	—	—	228	(228)	—	—	—
Mileage Plan other revenue	205	23	—	—	228	—	228
Cargo and other	105	1	1	2	109	—	109
Total Operating Revenues	3,499	662	229	(226)	4,164	—	4,164
Operating Expenses
Operating expenses, excluding fuel	2,319	542	192	(234)	2,819	34	2,853
Economic fuel	780	143	—	—	923	(1)	922
Total Operating Expenses	3,099	685	192	(234)	3,742	33	3,775
Nonoperating Income (Expense)
Interest income	33	—	—	(13)	20	—	20
Interest expense	(40)	—	(15)	13	(42)	—	(42)
Interest capitalized	7	—	—	—	7	—	7
Other - net	(17)	—	—	—	(17)	—	(17)
Total Nonoperating Income (Expense)	(17)	—	(15)	—	(32)	—	(32)
Income (Loss) Before Income Tax	383	(23)	22	8	390	(33)	357

(a)Includes consolidating entries, Air Group 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 excludes certain income and charges.

(c)Includes payroll support program grant wage offsets, special items and mark-to-market fuel hedge accounting adjustments.

Total assets were as follows (in millions):


	June 30, 2020		December 31, 2019
Mainline	$	20,261	$	19,207
Horizon	1,199		1,266
Consolidating & Other	(7,462)		(7,480)
Consolidated	$	13,998	$	12,993