FLEET TRANSITION

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Fleet Transition and Related Activities Disclosure

In 2022, the Company announced plans to accelerate the transition of its Mainline operations to an all-Boeing 737 fleet. The Company also announced plans to transition Horizon's Regional operations to an all-Embraer fleet. The Company operated 12 leased A320 aircraft, ten leased A321neo aircraft, ten owned Q400 aircraft, and one leased Q400 aircraft as of December 31, 2022. All A320 and Q400 aircraft were removed from operating service in January 2023. Alaska also operates ten A321neo aircraft, and plans to remove them from its operating fleet by no later than the end of 2023.

Valuation of long-lived assets

The Company reviews its long-lived assets for impairment whenever events or changes indicate that the total carrying amount of an asset or asset group may not be recoverable. In 2022, the Company recorded an impairment charge of $70 million related to the Q400 fleet, reflecting the amount by which carrying value exceeded fair value of the owned Q400 aircraft. The Company evaluated the fair market value for the Q400 fleet using available market price information with adjustments based on quantitative and qualitative considerations. This amount is recorded within the Special items - fleet transition and other line in the consolidated statement of operations.

The Company adjusted useful lives and depreciation schedules for Airbus and Q400 capitalized leasehold improvements, spare engines, inventory, and other fixed assets, as well as the amortization schedules for the right of use assets and aircraft rent expenses. These accelerated schedules reflect the dates the aircraft are removed from operating service. Incremental costs associated with the accelerated schedules are recognized within the Special items - fleet transition and other line item.

The Company has estimated future lease return costs for the leased Airbus aircraft. Costs of returning leased aircraft begin accruing when the costs are probable and reasonably estimable, and are recognized over the remaining operating life of the aircraft. These estimates are based on the time remaining on the lease, planned aircraft usage, and lease terms. These estimates may change as actual amounts due to any lessor upon return may not be known with certainty until lease termination. In 2022, all lease return costs are recorded within the Special items - fleet transition and other line in the consolidated statement of operations.

A summary of special charges for fleet transition activities is included below for 2022. The impairment charges were one-time in nature, while the other special charges were recorded consistent with the schedules described above. The Company continues to evaluate options for the ten leased A321neo aircraft, and anticipates recording incremental special charges in 2023 as those decisions evolve.

	Twelve Months Ended December 31, 2022
(in millions)	Airbus		Q400		Total
Lease return costs and other expenses	$	238	$	—	$	238
Accelerated aircraft ownership expenses	140		33		173
Impairment of long-lived assets	—		70		70
Special items - fleet transition and other	$	378	$	103	$	481

In 2020, the Company recorded $22 million to the Special items - fleet transition and other line in the consolidated statement of operations as a contingency in the Bernstein v. Virgin America litigation. In 2022, in light of a damages ruling issued by the federal district court after remand from the Ninth Circuit Court of Appeals, the Company recorded an additional $15 million to the Special items - fleet transition and other line to reflect what the Company considers its probable and estimable liability exposure as of December 31, 2022. Refer to Note 10 to the consolidated financial statements for additional details.