OPERATING SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

OPERATING SEGMENT INFORMATION

OPERATING SEGMENT INFORMATION

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 and SkyWest, under which Alaska receives all passenger revenue.

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, Costa Rica, and Belize.

•Regional - includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S. and Canada under a CPA. This segment includes the actual revenue 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, 2023
	Mainline		Regional		Horizon		Consolidating & Other(a)		Air Group Adjusted(b)			Special Items(c)		Consolidated
Operating Revenue
Passenger revenue	$	2,228	$	370	$	—	$	—	$	2,598		$	—	$	2,598
CPA revenue	—		—		92		(92)		—			—		—
Mileage Plan other revenue	158		12		—		—		170			—		170
Cargo and other revenue	67		—		—		3		70			—		70
Total Operating Revenue	2,453		382		92		(89)		2,838			—		2,838
Operating Expenses
Operating expenses, excluding fuel	1,468		279		87		(92)		1,742			186		1,928
Fuel expense	490		81		—		1		572			1		573
Total Operating Expenses	1,958		360		87		(91)		2,314			187		2,501
Non-operating Income (Expense)	3		—		(10)		1		(6)			(6)		(12)
Income (Loss) Before Income Tax	$	498	$	22	$	(5)	$	3	$	518		$	(193)	$	325
Pretax Margin									18.3		%			11.5		%
	Three Months Ended June 30, 2022
	Mainline		Regional		Horizon		Consolidating & Other(a)		Air Group Adjusted(b)			Special Items(c)		Consolidated
Operating Revenue
Passenger revenue	$	2,028	$	390	$	—	$	—	$	2,418		$	—	$	2,418
CPA revenue	—		—		101		(101)		—			—		—
Mileage Plan other revenue	159		16		—		—		175			—		175
Cargo and other revenue	64		—		—		1		65			—		65
Total Operating Revenue	2,251		406		101		(100)		2,658			—		2,658
Operating Expenses
Operating expenses, excluding fuel	1,262		289		98		(100)		1,549			146		1,695
Fuel expense	617		119		—		—		736			40		776
Total Operating Expenses	1,879		408		98		(100)		2,285			186		2,471
Non-operating Income (Expense)	3		—		(5)		—		(2)			—		(2)
Income (Loss) Before Income Tax	$	375	$	(2)	$	(2)	$	—	$	371		$	(186)	$	185
Pretax Margin									14.0		%			7.0		%