OPERATING SEGMENT INFORMATION

9 Months Ended

Sep. 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 September 30, 2023
	Mainline		Regional		Horizon		Consolidating & Other(a)		Air Group Adjusted(b)			Special Items(c)		Consolidated
Operating Revenue
Passenger revenue	$	2,225	$	393	$	—	$	—	$	2,618		$	—	$	2,618
CPA revenue	—		—		104		(104)		—			—		—
Mileage Plan other revenue	146		13		—		—		159			—		159
Cargo and other revenue	60		—		—		2		62			—		62
Total Operating Revenue	2,431		406		104		(102)		2,839			—		2,839
Operating Expenses
Operating expenses, excluding fuel	1,484		297		89		(92)		1,778			156		1,934
Fuel expense	621		108		—		—		729			(35)		694
Total Operating Expenses	2,105		405		89		(92)		2,507			121		2,628
Non-operating Income (Expense)	—		—		(11)		1		(10)			(8)		(18)
Income (Loss) Before Income Tax	$	326	$	1	$	4	$	(9)	$	322		$	(129)	$	193
Pretax Margin									11.4		%			6.8		%
	Three Months Ended September 30, 2022
	Mainline		Regional		Horizon		Consolidating & Other(a)		Air Group Adjusted(b)			Special Items(c)		Consolidated
Operating Revenue
Passenger revenue	$	2,217	$	398	$	—	$	—	$	2,615		$	—	$	2,615
CPA revenue	—		—		93		(93)		—			—		—
Mileage Plan other revenue	133		13		—		—		146			—		146
Cargo and other revenue	65		—		—		2		67			—		67
Total Operating Revenue	2,415		411		93		(91)		2,828			—		2,828
Operating Expenses
Operating expenses, excluding fuel	1,352		292		94		(94)		1,644			245		1,889
Fuel expense	625		121		—		—		746			131		877
Total Operating Expenses	1,977		413		94		(94)		2,390			376		2,766
Non-operating Income (Expense)	8		—		(5)		—		3			—		3
Income (Loss) Before Income Tax	$	446	$	(2)	$	(6)	$	3	$	441		$	(376)	$	65
Pretax Margin									15.6		%			2.3		%