LEASES

12 Months Ended

Dec. 31, 2024

Leases [Abstract]

LEASES

LEASES

The Company leases property and equipment in the normal course of business under operating and finance leases. Leased assets are categorized into four asset classes: aircraft, capacity purchase arrangements for aircraft operated by third-party carriers (CPA aircraft), airport and terminal facilities, and corporate real estate and other equipment. Operating rent expense is recognized on a straight-line basis over the term of the lease.

As most leases do not provide a readily determinable implicit interest rate, the Company typically utilizes the incremental borrowing rate (IBR) based on information available at the commencement date of the lease to determine the present value of lease payments. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rate.

Aircraft and engines

At December 31, 2024, Alaska had leases for 10 B737-800 aircraft, 2 B737-800 freighter aircraft, and 14 B737-9 aircraft. Hawaiian had leases for 12 A330-200 aircraft and 4 A321-200neo aircraft. Of these leases, 2 are accounted for as finance leases, while the others are accounted for as operating leases. Alaska and Hawaiian lease 4 aircraft engines that are accounted for as operating leases. Hawaiian also leases 6 A330-300 freighter aircraft under the ATSA, but because Hawaiian does not have the right to control the use of the aircraft, the aircraft are not accounted for as leases in the consolidated financial statements. Remaining lease terms for Alaska's and Hawaiian's aircraft and engines range from 1 to 11 years. Some leases have options to extend, subject to negotiation at the end of the term. As extension is not certain, and rates are highly likely to be renegotiated, the extended term is only capitalized when it is reasonably determinable. While aircraft rent is primarily fixed, certain leases contain rental adjustments throughout the lease term which would be recognized as variable expense as incurred.

Capacity purchase agreements with aircraft (CPA aircraft)

At December 31, 2024, Alaska had a CPA with SkyWest covering 42 E175 aircraft. Under this agreement, Alaska pays the carrier an amount which is based on a determination of their cost of operating those flights and other factors intended to

approximate market rates for those services. Alaska's CPA with Horizon, a wholly owned subsidiary, does not involve any leased aircraft.

The CPA aircraft have remaining lease terms ranging from 5 years to 10 years. Financial arrangements of the CPA include a fixed component, representing the costs to operate each aircraft which is capitalized. The CPA also includes variable rent based on actual levels of flying, which is expensed as incurred.

Airport and terminal facilities

The Company leases ticket counters, gates, cargo and baggage space, lounge space, office space and other support areas at numerous airports. For this asset class, the Company has elected to combine lease and non-lease components. The majority of airport and terminal facility leases are not capitalized because they do not meet the definition of controlled assets under the standard, or because the lease payments are entirely variable. For airports where leased assets are identified, and where the contract includes fixed lease payments, operating lease assets and lease liabilities have been recorded. The Company is also commonly responsible for maintenance, insurance and other facility-related expenses and services under these agreements. These costs are recognized as variable expense in the period incurred.

The Company leases twelve airport slots at LaGuardia Airport, eight airport slots at Reagan National Airport, and one airport gate at Dallas Love Field to third parties.

Corporate real estate and other leases

Leased corporate real estate is primarily for office space in hub cities, training centers, land leases, and reservation centers. For this asset class, the Company has elected to combine lease and non-lease components under the standard. Other leased assets are comprised of other ancillary contracts and items including leased data center space and ground equipment.

Lease position

Lease-related assets and liabilities recorded on the consolidated balance sheet was as follows:

(in millions)	Balance Sheet Presentation	2024			2023
Assets
Operating lease assets	Operating lease assets	$	1,296		$	1,195
Finance lease assets	Property and equipment, net	53			—
Total lease assets		$	1,349		$	1,195
Liabilities
Current
Operating	Current portion of operating lease liabilities	$	207		$	158
Finance	Current portion of finance lease liabilities	8			64
Noncurrent
Operating	Operating lease liabilities, net of current portion	1,198			1,125
Finance	Finance lease liabilities, net of current portion	47			—
Total lease liabilities		$	1,460		$	1,347
Weighted-average remaining lease term (in years)
Operating leases		8.9			9.6
Finance leases		6.5			0
Weighted-average discount rate
Operating leases		6.4		%	6.2		%
Finance leases		6.3		%	—		%

Components of lease expense

The components of lease expense for operating and finance leases were as follows:

(in millions)	2024		2023		2022
Expense
Operating lease cost(a)	$	217	$	218	$	290
Amortization of finance lease assets	2		—		—
Interest on finance lease liabilities	1		—		—
Variable and short-term lease costs(a)	557		472		418
Total lease expense	777		690		708
Revenue
Lease revenue(b)	(15)		(15)		(15)
Net lease impact	$	762	$	675	$	693

(a) Presented within Aircraft rent and Landing fees and other rentals in the consolidated statements of operations

(b) Presented within Cargo and other revenue in the consolidated statements of operations

Supplemental cash flow information

The cash paid for leases was as follows:

(in millions)	2024	2023	2022
Operating cash flows for operating leases	241	348	354
Financing cash flows for finance leases(a)	31	211	—

(a) Primarily consists of payments made for A321neo finance leases, with associated expenses recognized within Special items - operating in the consolidated statements of operations.

Maturities of lease liabilities

Future minimum lease payments under non-cancellable leases as of December 31, 2024:

	Operating Leases				Finance Leases
(in millions)	Aircraft(a)		Other		Aircraft(a)		Other
2025	$	258	$	28	$	11	$	—
2026	248		26		11		—
2027	219		20		11		—
2028	199		18		11		—
2029	183		15		11		—
Thereafter	449		215		6		7
Total Lease Payments(a)	1,556		322		61		7
Less: Imputed interest	(301)		(154)		(9)		(4)
Total	$	1,255	$	168	$	52	$	3

(a) Future minimum lease payments in the table reflect incentive credits related to leased B737-9 aircraft. As a result, the operating lease liabilities presented on the consolidated balance sheet will not agree to this table.

As of December 31, 2024, there are no material leases that have been entered into but have yet to commence.

LEASES

LEASES

The Company leases property and equipment in the normal course of business under operating and finance leases. Leased assets are categorized into four asset classes: aircraft, capacity purchase arrangements for aircraft operated by third-party carriers (CPA aircraft), airport and terminal facilities, and corporate real estate and other equipment. Operating rent expense is recognized on a straight-line basis over the term of the lease.

As most leases do not provide a readily determinable implicit interest rate, the Company typically utilizes the incremental borrowing rate (IBR) based on information available at the commencement date of the lease to determine the present value of lease payments. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rate.

Aircraft and engines

At December 31, 2024, Alaska had leases for 10 B737-800 aircraft, 2 B737-800 freighter aircraft, and 14 B737-9 aircraft. Hawaiian had leases for 12 A330-200 aircraft and 4 A321-200neo aircraft. Of these leases, 2 are accounted for as finance leases, while the others are accounted for as operating leases. Alaska and Hawaiian lease 4 aircraft engines that are accounted for as operating leases. Hawaiian also leases 6 A330-300 freighter aircraft under the ATSA, but because Hawaiian does not have the right to control the use of the aircraft, the aircraft are not accounted for as leases in the consolidated financial statements. Remaining lease terms for Alaska's and Hawaiian's aircraft and engines range from 1 to 11 years. Some leases have options to extend, subject to negotiation at the end of the term. As extension is not certain, and rates are highly likely to be renegotiated, the extended term is only capitalized when it is reasonably determinable. While aircraft rent is primarily fixed, certain leases contain rental adjustments throughout the lease term which would be recognized as variable expense as incurred.

Capacity purchase agreements with aircraft (CPA aircraft)

At December 31, 2024, Alaska had a CPA with SkyWest covering 42 E175 aircraft. Under this agreement, Alaska pays the carrier an amount which is based on a determination of their cost of operating those flights and other factors intended to

approximate market rates for those services. Alaska's CPA with Horizon, a wholly owned subsidiary, does not involve any leased aircraft.

The CPA aircraft have remaining lease terms ranging from 5 years to 10 years. Financial arrangements of the CPA include a fixed component, representing the costs to operate each aircraft which is capitalized. The CPA also includes variable rent based on actual levels of flying, which is expensed as incurred.

Airport and terminal facilities

The Company leases ticket counters, gates, cargo and baggage space, lounge space, office space and other support areas at numerous airports. For this asset class, the Company has elected to combine lease and non-lease components. The majority of airport and terminal facility leases are not capitalized because they do not meet the definition of controlled assets under the standard, or because the lease payments are entirely variable. For airports where leased assets are identified, and where the contract includes fixed lease payments, operating lease assets and lease liabilities have been recorded. The Company is also commonly responsible for maintenance, insurance and other facility-related expenses and services under these agreements. These costs are recognized as variable expense in the period incurred.

The Company leases twelve airport slots at LaGuardia Airport, eight airport slots at Reagan National Airport, and one airport gate at Dallas Love Field to third parties.

Corporate real estate and other leases

Leased corporate real estate is primarily for office space in hub cities, training centers, land leases, and reservation centers. For this asset class, the Company has elected to combine lease and non-lease components under the standard. Other leased assets are comprised of other ancillary contracts and items including leased data center space and ground equipment.

Lease position

Lease-related assets and liabilities recorded on the consolidated balance sheet was as follows:

(in millions)	Balance Sheet Presentation	2024			2023
Assets
Operating lease assets	Operating lease assets	$	1,296		$	1,195
Finance lease assets	Property and equipment, net	53			—
Total lease assets		$	1,349		$	1,195
Liabilities
Current
Operating	Current portion of operating lease liabilities	$	207		$	158
Finance	Current portion of finance lease liabilities	8			64
Noncurrent
Operating	Operating lease liabilities, net of current portion	1,198			1,125
Finance	Finance lease liabilities, net of current portion	47			—
Total lease liabilities		$	1,460		$	1,347
Weighted-average remaining lease term (in years)
Operating leases		8.9			9.6
Finance leases		6.5			0
Weighted-average discount rate
Operating leases		6.4		%	6.2		%
Finance leases		6.3		%	—		%

Components of lease expense

The components of lease expense for operating and finance leases were as follows:

(in millions)	2024		2023		2022
Expense
Operating lease cost(a)	$	217	$	218	$	290
Amortization of finance lease assets	2		—		—
Interest on finance lease liabilities	1		—		—
Variable and short-term lease costs(a)	557		472		418
Total lease expense	777		690		708
Revenue
Lease revenue(b)	(15)		(15)		(15)
Net lease impact	$	762	$	675	$	693

(a) Presented within Aircraft rent and Landing fees and other rentals in the consolidated statements of operations

(b) Presented within Cargo and other revenue in the consolidated statements of operations

Supplemental cash flow information

The cash paid for leases was as follows:

(in millions)	2024	2023	2022
Operating cash flows for operating leases	241	348	354
Financing cash flows for finance leases(a)	31	211	—

(a) Primarily consists of payments made for A321neo finance leases, with associated expenses recognized within Special items - operating in the consolidated statements of operations.

Maturities of lease liabilities

Future minimum lease payments under non-cancellable leases as of December 31, 2024:

	Operating Leases				Finance Leases
(in millions)	Aircraft(a)		Other		Aircraft(a)		Other
2025	$	258	$	28	$	11	$	—
2026	248		26		11		—
2027	219		20		11		—
2028	199		18		11		—
2029	183		15		11		—
Thereafter	449		215		6		7
Total Lease Payments(a)	1,556		322		61		7
Less: Imputed interest	(301)		(154)		(9)		(4)
Total	$	1,255	$	168	$	52	$	3

(a) Future minimum lease payments in the table reflect incentive credits related to leased B737-9 aircraft. As a result, the operating lease liabilities presented on the consolidated balance sheet will not agree to this table.

As of December 31, 2024, there are no material leases that have been entered into but have yet to commence.