Alaska Airlines and Horizon Air 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 Alaska Airlines and Horizon Air annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 208

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208

2009 ANNUAL REPORT

Table of contents

  • Page 1
    2 0 0 9 A N N U A L R E P O R T

  • Page 2
    On the cover: Alaska Air Group is proud of its long affiliation with the New York Stock Exchange. On November 10, 2009, the entrance to the exchange displayed our company's banner.

  • Page 3
    Alaska Air Group 2009 Annual Report

  • Page 4

  • Page 5
    ...year: Å Alaska Air Group's 2009 financial results were among the best in the industry, marking our sixth consecutive year of profitability and extending our profitability to 31 of the last 37 years. Alaska Air Group CEO Bill Ayer, Alaska Airlines President Brad Tilden and Horizon Air President and...

  • Page 6
    .... Alaska Air Group has been widely recognized for having state-of-the-art safety and compliance practices in all areas of our operation. People - Getting everyone aligned around the same goals is powerful. During 2009, we made significant progress toward having all employees at both airlines in...

  • Page 7
    ... some routes in response to falling demand, we established a presence in new markets with the potential for future growth, adding 13 new city pairs at Alaska and Horizon during 2009. For example, Hawaii - which we began serving in 2007 - now makes up about 13 percent of...

  • Page 8
    ...32 and 44 of Alaska Air Group's 2009 Annual Report on Form 10-K. Current Initiatives As in 2009, our 2010 key ...Horizon Air and vacation offerings, thereby Alaska Airlines $175 providing customers with convenient, 157 157 one-stop shopping. In addition, we 145 $150 143 plan to equip our 737 fleet...

  • Page 9
    ... 2002 2003 2004 2005 2006 2007 2008 2009 Load factors held steady at Horizon Air and improved at Alaska Airlines as a result of reduced and redeployed capacity...goals of providing a preferred product for customers, good careers for employees, and a healthy return for you, our shareholders. Because ...

  • Page 10
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 11
    Notice of Annual Meeting of Shareholders and Proxy Statement Å Proxy

  • Page 12

  • Page 13
    ...Alaska Air Group's 2010 proxy statement and 2009 annual report to stockholders, and for voting online or by telephone, to stockholders who did not receive a full set of proxy materials. Employees...may access, view and download the 2010 proxy statement and our 2009 Annual Report over the Internet on ...

  • Page 14

  • Page 15
    ...16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE ...INDEPENDENT AUDITORS ...AUDIT COMMITTEE REPORT ...SECURITY OWNERSHIP ...PROPOSAL ...REDUCE DUPLICATIVE MAILINGS ...SUBMISSION OF PROPOSALS FOR NEXT ANNUAL MEETING ...EXHIBIT A-ALASKA AIR GROUP, INC. 2010 EMPLOYEE STOCK PURCHASE PLAN ...1 1 8 12 13 18 ...

  • Page 16

  • Page 17
    ...2009 is included in the 2009 Annual Report. It was filed with the Securities and Exchange Commission ("SEC") on February 19, 2010. Internet Availability of Annual Meeting Materials Under SEC rules, Alaska Air...download this proxy statement and our 2009 Annual Report... shares. Employees of the Company who...

  • Page 18
    ... of the Company's named executive officers, to approve the Company's 2010 Employee Stock Purchase Plan, and, if properly presented, to vote on one...below are the various means - internet, phone and mail - you can use to vote your shares without attending the Annual Meeting. You can vote on the ...

  • Page 19
    ...gave written notice to the Company on or before November 30, 2009, and complied with the other requirements included in Article II of... beneficial owners of the Company's common stock can vote by phone. Instructions for voting by phone are provided along with your proxy card or voting instruction form...

  • Page 20
    ...It means that you have more than one account for your Alaska Air Group shares. Please complete and submit all proxies to ensure ...that all your shares are voted or vote by internet or telephone using each of the identification numbers...

  • Page 21
    ... were held in trust for Alaska Air Group 401(k) plan participants. The... the shares must be voted by the trustee, employees who hold shares through the 401(k) plans may ...postage costs, as well as the number of paper documents you will receive... at any time after the Annual Meeting and can read additional...

  • Page 22
    ... Company has amended its Bylaws (effective September 10, 2009) to require each director to be elected at each annual meeting by a majority of votes cast with respect to that director. This means that the number of votes "for" a director must exceed the number of votes "against" that director. In the...

  • Page 23
    ...are included for purposes of determining the number of shares constituting a majority of ... of our officers, directors and employees. Is a list of stockholders entitled... valid purpose related to the Annual Meeting. Where can I find... read or print a copy of that report by going directly to the SEC EDGAR ...

  • Page 24
    ...1999 Age - 55 Mr. Ayer has served as chair, president and CEO of Alaska Air Group as well as chair of Alaska Airlines and Horizon Air since May 2003. He has been CEO of Alaska Airlines since 2002, and served as president of Alaska Airlines from 1997 to 2008. Prior to 2003, Mr. Ayer worked in various...

  • Page 25
    ... boards of Horizon Air, the Joshua Green Corporation, and Nordstrom, where she serves as chair of the audit committee. Until February 2009, Ms. ... Francisco Examiner newspapers. Mr. Knight also serves on the boards of Alaska Airlines, the San Diego Padres Baseball Club, and the Timken Museum of ...

  • Page 26
    ...2009. Mr. Langland has also served as chair, president and CEO of the bank's parent company, Northrim BanCorp, Inc. since December 2001. In 2001, Mr. Langland was inducted into the Alaska...He also serves on the boards of Alaska Airlines, Horizon Air, Pivotlink Software, the Western Washington ...

  • Page 27
    ..., Inc., the parent company's oil and gas producing division based in Anchorage, Alaska. He also serves on the boards of Horizon Air, Tetra Tech, and Coeur d'Alene Mines Corporation, and serves on a number of community service organizations. Mr. Thompson also serves on the governance/nominating and...

  • Page 28
    ... vote on the proposal is required to ratify the selection of KPMG as Air Group's independent auditor for the current fiscal year. THE BOARD OF DIRECTORS ...REGARDING THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS In March 2009, the Board of Directors announced its decision to become one of...

  • Page 29
    ...ALASKA AIR GROUP, INC. 2010 EMPLOYEE STOCK PURCHASE PLAN Overview At the Annual Meeting, stockholders are being asked to approve the Alaska Air Group, Inc. Employee...under the ESPP. The participant's contributions under the ESPP will be credited to a bookkeeping account in his or her name. Subject to ...

  • Page 30
    ...(referred to as the "Purchase Date"). The number of shares acquired by a participant upon exercise ...No interest will be paid to any participant or credited to any account under the ESPP. participate in an...of March 1, 2010, approximately 13,700 employees of the Company and its subsidiaries, including...

  • Page 31
    ...Adjustments As is customary in stock incentive plans of this nature, the number and kind of shares available under the ESPP, as well as ESPP...to options or the purchase of shares under the ESPP, as well as contributions credited to his or her ESPP account, may not be assigned, transferred, pledged or ...

  • Page 32
    ... time to time, without stockholder approval and without limiting the Board's amendment authority, designate those subsidiaries of the Company whose employees may participate in the ESPP and, subject only to certain limitations under the Code, change the ESPP's eligibility rules. Code. Participant...

  • Page 33
    ... the annual meeting, either in person or by proxy, and voting on the matter. Broker non-votes and abstentions will not be counted as a vote "for" or "against" this ESPP proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE ALASKA AIR GROUP, INC. 2010 EMPLOYEE...

  • Page 34
    ... responsibilities include the following: 1. Develop and monitor the Corporate Governance Guidelines. 2. Evaluate the size and composition of the Board and annually review compensation paid to members of the Board. 3. Develop criteria for Board membership. 18 4. Evaluate the independence of existing...

  • Page 35
    ... Audit Committee Report required for the annual proxy statement. 4. Matters pertaining to controls: • review major financial reporting risk exposure and... fraud that involves management or other employees with significant roles in internal controls. 5. Annually review and reassess the adequacy of ...

  • Page 36
    ...the Alaska Airlines and Horizon Air profit sharing plans. 13. Produce the report on executive compensation required for the annual proxy statement. 14. Annually review ...'s efforts to ensure the safety of passengers and employees of the Air Group companies. 2. Monitor and assist management in creating...

  • Page 37
    .... The standing Board committees held the following number of meetings in 2009: • Audit Committee - 8 • Compensation Committee...made by the Company to the University of Alaska where Mr. Hamilton is currently employed as...Company's and the charitable organizations' annual revenues. Each member of the ...

  • Page 38
    ... director nor any immediate family member was an employee or partner of the independent auditor firm within the...annual revenues. For the purposes of these standards, "Company" includes all Alaska Air... solicits ideas for possible candidates from a number of sources including, but not limited to...

  • Page 39
    ... the Corporate Secretary of the Company at least 90 days in advance of the third Tuesday in May (with respect to elections held at a regular annual meeting of stockholders), and that such notice include: • the name and address of the stockholder who intends to make the nomination and of the person...

  • Page 40
    ... continue to own the required percentage of shares through the date of the annual meeting with respect to which the candidate is nominated. • The name or..., age, business and residence address, principal occupation or employment, number of shares of the Company's stock beneficially owned, if any,...

  • Page 41
    ... first-class mail, postage prepaid, to the following address: Board of Directors Alaska Air Group, Inc. PO Box 68947 Seattle, WA 98168 The Corporate Secretary and ... will also be considered on the basis of the Committee's annual evaluations of the effectiveness of the Board, its committees and their...

  • Page 42
    ... of the Company's business, and other factors deemed relevant to Alaska Air Group Board service. Diversity is considered broadly, not merely with regard...nomination with each director whose current term will end at the next annual meeting; (e) to review and provide input to Board meeting agendas;...

  • Page 43
    ... Committee of the Air Group Board work with the Chief Compliance Officer and Air Group's Management Executive...Audit Committee receives quarterly written reports regarding the Program and an annual in-person review of the... (retained by the Committee in late 2009) and the Company's management team,...

  • Page 44
    ... any specific directors, including the Lead Director (who presides over executive sessions of the non-employee directors) or with the non-employee directors as a group, may write to: Board of Directors Alaska Air Group, Inc. PO Box 68947 Seattle, WA 98168 Depending on the subject matter, management...

  • Page 45
    ...93,948 (1) Each non-employee director received at least 70%, or approximately $36,000, of their $51,000 annual retainer for 2009 in the form of deferred ...• an annual retainer of $1,000 to non-employee directors who also served on the Boards of Directors of Alaska Airlines or Horizon Air; • ...

  • Page 46
    ...non-employee directors each held 3,335 fully vested deferred stock units. See discussion of these awards in Note 10 to the Company's Consolidated Financial Statements included as part of the Company's 2009 Annual Report filed on Form 10-K with the SEC and incorporated herein by reference. Alaska Air...

  • Page 47
    ... reviewed at least annually. The policy does... BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange... officers to send reports of their ownership ...report on a timely basis. Based on a review of copies of reports furnished to the Company and written representations that no other reports...

  • Page 48
    ... to do so. Fees Paid to Independent Auditors During fiscal years 2009, 2008 and 2007, the Company retained KPMG as its principal auditors...(iii) agreed-upon procedures regarding Air Group's employee incentive pay plans. Audit Fees for the Company's Annual Financial Statements and Quarterly Reviews(1)...

  • Page 49
    ...the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Alaska Air Group's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. Audit Committee of the Board of Directors The discussions with KPMG also included the material and...

  • Page 50
    ...(1) Consists of the aggregate total of shares of common stock held by the reporting person either directly or indirectly, including 401(k) plan holdings. (2) Total beneficial ... of the SEC and represents the sum of the columns "Number of Shares of Common Stock Owned" and "Options Exercisable within...

  • Page 51
    ... Owner Number of...2010. PRIMECAP reported in the ...Alaska Air Group, Inc. William S. Ayer; president of Alaska Airlines, Inc. Bradley D. Tilden; CFO of Alaska Air Group, Inc. Glenn S. Johnson; COO of Alaska Airlines, Inc. Benito Minicucci; and Jeffrey D. Pinneo, CEO of operating subsidiary Horizon Air...

  • Page 52
    ...LLP. With respect to 2009 executive compensation, the ... to variable pay, proportion of annual cash pay to long-term incentive..., as determined by the Alaska Air Group Board Compensation Committee, are...plan; • to align the interests of executives, employees, and stockholders by tying a large portion of...

  • Page 53
    ... by key employees whose performance and...paid out on a short-term or current basis. Annual incentives and longterm equity-based incentives are intended to... is tied to performance objectives. Excluding special equity awards, for 2009, the Committee approved target-level compensation for Mr. Ayer that ...

  • Page 54
    ...the last review of data relevant to 2009 compensation, the analysis included the use of...air carrier companies also receive greater emphasis because in the airline industry the vast majority of the Company's employees are unionized... the "Performance-Based Pay" annual incentive plan. The Committee also...

  • Page 55
    ... the focus of all employees across the Company. bottom quartile compared to the most recent information reviewed from the peer group. The chart below depicts CEO base salaries at airline peer group companies. CEO Base Pay Comparisons (Airlines) 2006 - 2009* Base Salary Alaska Air Group, Inc. Base...

  • Page 56
    ...respect to 2009 compensation, ...Annual Pay The Company's Named Executive Officers are eligible to earn annual...Alaska Horizon Target Alaska Horizon Maximum Alaska Horizon Operational Performance • Safety lost-time injuries per 100 full-time employees • Employee Engagement (as measured by the number...

  • Page 57
    ...2009 Alaska Air Group profitability target was established by identifying the level of profitability achieved with a 3% adjusted pre-tax profit margin. The Safety and Employee...-Based Pay Metrics Number of Months Achieve Performance...182.7% 150% 108% Alaska average - 90% Horizon average - 94% 106...

  • Page 58
    ...annual payout for each employee is $1,200. continued employment with the Company, the restricted stock units vest on the third anniversary of the date they are granted and, upon vesting, are paid in shares of Alaska Air...granted in 2009. Equity Guidelines... performance of his job responsibilities; and ...

  • Page 59
    ...Salaried Employees ...Special Equity Awards: In 2009, the Committee granted Mr....annual amount equal to 12% of base salary is paid to each Named Executive Officer in lieu of all perquisites except for travel, life insurance, health exams, accidental death and dismemberment insurance, and Alaska Airlines...

  • Page 60
    ... its current program (including the annual incentives and stock option grants described...Air Tran Holdings, AMR Corporation, Continental Airlines, Delta Air Lines, ExpressJet, JetBlue Airways, Hawaiian Holdings, Mesa Air Group, Republic Airways Holdings, SkyWest, Southwest Airlines, United Airlines...

  • Page 61
    ...Committee is currently composed of the three non-employee directors named at the end of this report, each of whom is independent as defined by... the Compensation Discussion and Analysis section be included in the Company's 2009 Annual Report on Form 10-K on file with the SEC. Compensation Committee of...

  • Page 62
    ... Minicucci(7) 2009 259,610 Executive Vice President/ Operations and COO (Alaska Airlines) Jeffrey D. Pinneo(8) President and CEO (Horizon Air Industries) 2009 247,558... included as part of the Company's 2009 Annual Report filed on Form 10-K with the ...number of units expected to vest as of December 31...

  • Page 63
    ... 18,400 1,000 2,260 9,200 15,600 Number of Units Expected to Vest as of December 31, 2009 0 5,525 0 2,875 0 2,300 0 283...Alaska Airlines, Inc. in December 2008. His base salary is $340,000 effective December 4, 2008. (6) Mr. Johnson was elected Executive Vice President/Finance and CFO of Alaska Air...

  • Page 64
    ...Horizon Air in 2002, he was 100% vested under the Salaried Retirement Plan on account of prior service at Alaska. At that time, Horizon Air...,100 0 8,500 0 All Other Option Grant Date Awards: Number of Exercise or Fair Value Securities Base Price of Stock and ...the Company's 2009 Annual Report filed on ...

  • Page 65
    ...not include any dividend rights. Restricted Stock Units Column (i) of the table above reports awards of restricted stock units granted to the Named Executive Officers for 2009. Each restricted stock unit represents a contractual right upon vesting to receive one share of our common stock. Restricted...

  • Page 66
    ...each of the Named Executive Officers as of December 31, 2009, including the vesting dates for the portions of these awards...Shares or Units of Stock That Have Not Vested ($)(1) (h) Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) (i) William S....

  • Page 67
    ...in Column (h) and Column (j) are determined by multiplying the number of shares or units reported in Column (g) and Column (i), respectively, by $34.56 ...(the closing price of our common stock on the last trading day of fiscal 2009)....

  • Page 68
    (8) The performance stock units reported in Column (i) are eligible to vest based on the Company's ... to purchases under the ESPP for the purchase period that ended December 31, 2009. Of the aggregate number of shares that remained available for future issuance, 1,390,843 shares were available...

  • Page 69
    ...2009 PENSION BENEFITS Pension and Other Retirement Plans The Company maintains two primary defined benefit pension plans covering Named Executive Officers, other than Mr. Minicucci. The Alaska Air Group, Inc. Retirement Plan for Salaried Employees...pension plans. Number of Years Credit Service (#)(1) ...

  • Page 70
    ...Employee Benefits Plans) to the Company's Consolidated Financial Statements, included as part of the Company's 2009 Annual Report... plan for salaried Alaska Airlines employees hired prior to April...employee's final average base salary times years of credited service (limited to 40 years). Annual...

  • Page 71
    ... the Deferred Compensation Plan, the Named Executive Officers and other key employees may elect to receive a portion of some or all of their Performance-Based Pay awards on a deferred basis. There were no deferrals in 2009. The crediting interest rate for amounts deferred in prior years is based on...

  • Page 72
    ...annual incentive payments for the three years preceding the year in which the change in control occurs; • continue to accrue age and service credit...options, restricted stock units and the target number of performance stock units would become vested... as of December 31, 2009 are described above under ...

  • Page 73
    ... actuarial equivalent of an additional three years of age and service credit under our qualified and non-qualified retirement plan using the executive's...the closing price of our stock on the last trading day of fiscal 2009). (5) For purposes of this calculation, we have assumed that the executive's...

  • Page 74
    ... be considered in the context of the need for improvement in our company's 2009 reported corporate governance status: Our Board failed to adopt a shareholder proposal which won majority vote at our 2008 annual meeting: Cumulative Voting (51%-support). We thus had no shareholder right to cumulative...

  • Page 75
    ...about board independence, director recruitment and succession planning. The Alaska Air board was the only the significant directorship for five of..., Patricia Bedient and Jessie Knight. The voting figures at our 2007 annual meeting were withheld from shareholders for two months - except for certain ...

  • Page 76
    ... system, which permits stockholders to act by unanimous written consent and to raise, consider and vote upon proposals each year at the Company's annual meeting of stockholders, is the appropriate process to assure that all of the Company's stockholders have an opportunity to consider in advance any...

  • Page 77
    ... at the address and phone number at the end of ...annual reports, or if you are receiving multiple statements and reports...Alaska Air Group, Inc., P.O. Box 68947, Seattle, WA 98168, or by calling (206) 392-5131. SUBMISSION OF PROPOSALS FOR NEXT ANNUAL MEETING The Company expects to hold its next annual...

  • Page 78
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 79
    ...ALASKA AIR GROUP, INC. 2010 EMPLOYEE STOCK PURCHASE PLAN PURPOSE The purpose of this Plan is to assist Eligible Employees in acquiring a stock ownership interest in the Company, at a favorable price and upon favorable terms, pursuant to a plan which is intended to qualify as an "employee... credited ...

  • Page 80
    "Company" means Alaska Air Group, Inc., a Delaware corporation, and its successors. "Effective Date" means March 11, 2010, the date on which this Plan was initially adopted by the Board. "Eligible Employee" means any employee of the Company, or of any Subsidiary which has been designated in writing ...

  • Page 81
    ... such term in Section 19(c). "Plan" means this Alaska Air Group, Inc. 2010 Employee Stock Purchase Plan, as it may be amended or restated...subject to adjustments pursuant to Section 17. Individual Share Limit. The maximum number of shares of Common Stock that any one individual may acquire upon ...

  • Page 82
    ... effective, and must set forth a whole percentage (or, if the Committee so provides, a stated amount) of the Eligible Employee's Compensation to be credited to the Participant's Account as Contributions each pay period. Contribution Limits. Notwithstanding the foregoing, a Participant may not elect...

  • Page 83
    ... which indicates such election. If a Participant elects to discontinue his or her Contributions pursuant to this Section 7(e), the Contributions previously credited to the Participant's Account for that Offering Period shall be used to exercise the Participant's Option as of the applicable Exercise...

  • Page 84
    ... of Shares. On each Grant Date, each Eligible Employee who is a participant during that Offering Period shall be granted an Option to purchase a number of shares of Common Stock. The Option shall be exercised on the Exercise Date. The number of shares of Common Stock subject to the Option shall...

  • Page 85
    ...or her Option on the Exercise Date to purchase the number of shares that he or she is allocated shall be... issued or delivered the amount of the balance credited to his or her Account that would have ... if a Participant ceases to be an Eligible Employee for any reason (including, without limitation, due...

  • Page 86
    ...Section 7(d)), and the Contributions previously credited to the Participant's Account for ...Plan, unless the person continues as an employee of the Company or another Subsidiary. ...Board may, at any time, increase or decrease the number of members of the Committee, may remove from membership...

  • Page 87
    ... or made or omitted in good faith. Delegation. The Committee may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or a Subsidiary. DESIGNATION OF BENEFICIARY If the Committee permits beneficiary designations with respect to this Plan, then...

  • Page 88
    ... in accordance with the provisions of this Plan. Amounts payable or shares deliverable pursuant to this Plan shall be paid or delivered only to (or credited in the name of, as the case may be) the Participant or, in the event of the Participant's death, the Participant's beneficiary pursuant to...

  • Page 89
    REPORTS Statements shall be provided (either electronically or in written form,... Participant's Account balance immediately prior to the exercise of his or her Option, the Option Price, the number of whole shares purchased and his or her remaining Account balance, if any. ADJUSTMENTS OF AND CHANGES IN...

  • Page 90
    ...pursuant to any other provision of this Plan, the Committee shall have the right (1) to designate from time to time the Subsidiaries whose employees may be eligible to participate in this Plan (including, without limitation, any Subsidiary that may first become such after the date stockholders first...

  • Page 91
    ... to do so furthers the interest of the Company and is consistent with the purposes of this Plan as to such persons in the circumstances. EMPLOYEES' RIGHTS No Employment Rights. Nothing in this Plan (or in any Subscription Agreement or other document related to this Plan) will confer upon any...

  • Page 92
    ... employ or other service of the Company or any Subsidiary, constitute any contract or agreement of employment or other service or effect an employee's status as an employee at will, nor shall interfere in any way with the right of the Company or any Subsidiary to change such person's compensation or...

  • Page 93
    ... any) which the Company reasonably determines it or any Subsidiary may be required to withhold with respect to such exercise. In such event, the maximum number of whole shares subject to such Option (subject to the other limits set forth in this Plan) shall be purchased at the Option Price with...

  • Page 94
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 95
    Annual Report on Form 10-K Å Form 10-K

  • Page 96

  • Page 97
    ...2009 OR ' TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission File Number 1-8957 ALASKAA AIR... of common stock of Alaska Air Group, Inc. held by nonaffiliates on June 30, 2009, was approximately $653...

  • Page 98
    ALASKA AIR GROUP, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009 TABLE OF CONTENTS PART I ...ITEM 1. OUR BUSINESS ...WHERE YOU CAN FIND MORE INFORMATION ...OUR AIRLINES ...ALASKA ...HORIZON ...INDUSTRY CONDITIONS ...FUEL ...MARKETING AND COMPETITION ...ALLIANCES WITH OTHER ...

  • Page 99
    ... in this Form 10-K, the terms "Air Group," "our," "we" and the "Company" refer to Alaska Air Group, Inc. and its subsidiaries, unless the context indicates otherwise. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and together as our...

  • Page 100
    ... our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent...

  • Page 101
    ..., their business plans, competition, and economic risks differ substantially. Alaska is a major airline that operates an all-jet fleet with an average passenger trip length in 2009 of 1,180 miles. Horizon is a regional airline, operates turboprop and jet aircraft, and its average passenger trip...

  • Page 102
    ...-Seattle, and Boise-Seattle. At December 31, 2009, Horizon's operating fleet consisted of 18 jets and 40 turboprop aircraft. Horizon flights are listed under the Alaska Airlines designator code in airline reservation systems. Alaska and Horizon integrate their flight schedules to provide convenient...

  • Page 103
    ... help offset the demand decline, airlines continued down the path of adding...in traffic, but certainly not all of it. During 2009, our key initiative was to optimize revenue. We ...additional fuel cost annually. A one-cent change in our fuel price per gallon will impact our expected annual fuel cost by ...

  • Page 104
    ...fleet. Because of these changes, Alaska's fuel burn expressed in available seat miles flown per gallon (ASMs/g) improved from 65.9 ASMs/g in 2006 to 75.9 ASMs/g in 2009. Similarly, Horizon...AIRLINES We have marketing alliances with several airlines that provide reciprocal frequent flyer mileage credit...

  • Page 105
    ... airlines as of December 31, 2009 are as follows: Codeshare- Other Airline Flight # On Flights Operated by Alaska/ Horizon Frequent Flyer Agreement Codeshare- Alaska Flight # on Flights Operated by Other Airline Major U.S. or International Airlines American Airlines/ American Eagle ...Air...

  • Page 106
    ... generally do not have unionized work forces, which can be a competitive advantage for those airlines. We had 12,440 (9,046 at Alaska and 3,394 at Horizon) active full-time and part-time employees at December 31, 2009, compared to 14,143 (10,250 at Alaska and 3,893 at Horizon) as of December 31...

  • Page 107
    Alaska's union contracts at December 31, 2009 were as follows: Number of Active Employees Union Employee Group Contract Status Air Line Pilots ...arbitration provision. Horizon's union contracts at December 31, 2009 were as follows: Number of Active Employees Union Employee Group Contract Status...

  • Page 108
    ... Affairs, General Counsel and Corporate Secretary of Alaska Air Group, Inc. and Alaska Airlines, Inc. Bradley D. Tilden ...President of Alaska Airlines, Inc. Jeffrey D. Pinneo ...President and Chief Executive Officer of Horizon Air Industries, Inc. Benito Minicucci ...Executive Vice President...

  • Page 109
    ... Vice President/ Human Resources and Labor Relations in 2009. She is a member of Air Group's Management Executive Committee. Mr. Pedersen joined Alaska Airlines in 2003 as Staff Vice President/Finance and Controller of Alaska Air Group and Alaska Airlines and was elected Vice President/Finance and...

  • Page 110
    ...is collected by the air carriers and submitted ...2009, 2008 and 2007. The Department of Justice has jurisdiction over airline...employee...airlines to reduce fuel burn and, in turn, reduce emissions. For example, Alaska and Horizon have transitioned or are transitioning to more fuelefficient aircraft fleets...

  • Page 111
    ..., and 2007, respectively, of the total passenger miles flown on Alaska and Horizon. For the years 2009, 2008, and 2007, approximately 181,000, 214,000, and 243,000, respectively, round-trip flight awards were redeemed and flown on airline partners. In November 2008, we began charging a $25 fee for...

  • Page 112
    ... weather conditions (particularly in the state of Alaska and the Pacific Northwest) than some of ... high-volume customers. INSURANCE We carry Airline Hull, Spares and Comprehensive Legal Liability Insurance...recession resulted in a decline in demand for air travel. If the economic climate does not ...

  • Page 113
    ... for the years ended December 31, 2009 and 2008, respectively. Significant increases in...harmed. Alaska is required to comply with specific financial covenants in certain agreements. We cannot be certain that Alaska will ..., airline accidents or other events adversely affecting the airline industry...

  • Page 114
    ...to time that could significantly increase the cost of airline operations or reduce the demand for air travel. Although lawmakers may impose these additional fees and...transmission of confidential information over public networks, including credit card information. A compromise of our security systems ...

  • Page 115
    ... result in a grounding of commercial air traffic by the FAA. compromised. Many of the services necessary for the operation of our airlines are located in the valley, e.g.,... flights occurs to and from our Seattle hub. In 2009, passengers to and from Seattle accounted for 64% of our total passengers.

  • Page 116
    ...of our airline. Vendor bankruptcies, unionization, regulatory ...number of suppliers for aircraft and parts. Alaska is dependent on Boeing as its sole supplier for aircraft and many of its aircraft parts. Horizon...recent years, Alaska has subcontracted its heavy aircraft maintenance, fleet service, ...

  • Page 117
    ... 34% and 25% of our total operating expenses in 2009 and 2008, respectively. As of December 31, 2009, labor unions represented approximately 82% of Alaska's and 46% of Horizon's employees. Each of our represented employee groups has a separate collective bargaining agreement, and could make...

  • Page 118
    ...Leased Total Years Aircraft Type Alaska Airlines Boeing: 737-400 ...737-400C* . . 737-400F* . . 737-700 ...737-800 ...737-900 ...Total ...Horizon Air Bombardier: Q400 ...CRJ-700 ...Total ... Alaska completed its transition to an all-Boeing operating fleet during 2008. Horizon's long-term goal is to...

  • Page 119
    ...Phoenix, Ariz. and Boise, Idaho. Alaska uses its own employees for ground handling services at most of our airports in the state of Alaska. At other airports throughout our system, those services are contracted to various third-party vendors. Horizon owns its Seattle corporate headquarters building...

  • Page 120
    ... EQUITY SECURITIES As of December 31, 2009, there were 35,591,008 shares of common stock of Alaska Air Group, Inc. issued and outstanding and... that can be Number of Paid purchased Shares per under the Purchased Share plan June 11, 2009 - June 30, 2009 (1) ...July 1, 2009 - July 31, 2009 (1) ... 700,...

  • Page 121
    ... and each index (including reinvestment of dividends) was $100 on December 31, 2004. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Alaska Air Group, Inc., The S&P 500 Index And The Dow Jones US Airlines Index $140 $120 $100 $80 $60 $40 $20 $0 12/04 12/05 12/06 12/07 12/08 12/09...

  • Page 122
    ...unaudited) ...Statistics (unaudited) Alaska Airlines Mainline Operating Data: Revenue ...number of full-time equivalent employees ...Operating fleet at period-end ...Horizon Air...$2.7 million, $10.6 million, $17.7 million, and $12.6 million for 2009, 2008, 2007, 2006, 2005, 2004, 2003, 2002, 2001, 2000,...

  • Page 123
    ...unaudited) Alaska Airlines Mainline ...number of full-time equivalent employees ...Operating fleet at period-end ...Horizon Air...Alaska in 2007 through 2009. (d) See reconciliation of this measure to the most directly related GAAP measure in the "Results of Operations" section for both Alaska and Horizon...

  • Page 124
    ... and Highlights Accomplishments and highlights from 2009 include: • Alaska and Horizon both improved their operational performance again in 2009 as measured by on-time arrivals and completion rate as reported to the Department of Transportation (DOT). At Alaska, we led the ten largest carriers...

  • Page 125
    ...on Labor Negotiations Both Alaska and Horizon have had success recently with new bargaining agreements or contract extensions with a number of represented employees. All of the new agreements or extensions ratified in 2009 include participation by the represented employees in Air Group's Performance...

  • Page 126
    ... PBP. Horizon Fleet Transition Horizon's long-term goal is to transition to an all-Q400 fleet. In the first quarter of 2009, Horizon removed the...Horizon and Alaska employees, Horizon has also added 30 New Mileage Plan Affinity Card Agreement In June 2009, we revised our Mileage Plan affinity credit...

  • Page 127
    ...$15.60. Through December 31, 2009, we had repurchased 1,324,578 ...employee involvement in our marketing efforts. In addition to the focus on revenue, both of our airlines have initiatives under way designed to reduce costs. Alaska is focused on improving productivity and controlling overhead. Horizon...

  • Page 128
    ... Horizon reported pretax income of $183.8 million and $22.8 million, respectively, in 2009. Financial and statistical data and an in -depth discussion of the results of Alaska and Horizon are on the following pages. For a reconciliation of these subsidiary results to the consolidated results of Air...

  • Page 129
    ALASKA AIRLINES FINANCIAL AND STATISTICAL DATA Three Months Ended December 31 % 2009 2008 Change Financial Data (in millions) ...000) ...Average number of full-time equivalent employees ...Aircraft utilization (blk hrs/day) ...Average aircraft stage length (miles) ...Operating fleet at period-end ...

  • Page 130
    ALASKA AIRLINES Alaska reported income before income taxes of $183.8 million in 2009 compared to a loss before income taxes of $153.3 million in 2008. Excluding certain items as noted in the table below, Alaska would have reported income before income taxes of $145.9 million in 2009, compared to $25...

  • Page 131
    ...with the way expenses are reported internally and evaluated by management: Years Ended December 31 % 2009 2008 Change declined in step...number of full-time equivalent employees. These declines will likely be partially offset by increased pilot wage rates stemming from the full year impact of the 2009...

  • Page 132
    ...internal management reporting and incentive pay plans. Our economic fuel expense is calculated as follows: Years Ended December 31 % 2009 2008 Change ...reduction in aircraft flight hours and the improved fuel efficiency of our fleet as we completed the transition to newer, more fuel-efficient B737-800...

  • Page 133
    ...were delivered in 2009 and are ...in the number of flights ...Alaska's pilots in the second quarter. Restructuring Charges and Fleet Transition Costs In the third quarter of 2008, we announced work force reductions among union and non-union employees. The affected non-union employees...as credit card...

  • Page 134
    ...December 31 % 2009 2008 Change Total ...Horizon and by our Board of Directors in assessing quarterly and annual cost performance. For Alaska Airlines, these decision-makers evaluate operating results of the "mainline" operation, which includes the operation of the B737 fleet branded in Alaska Airlines...

  • Page 135
    ... and full year of 2010 to be flat and down 3%, respectively, compared to 2009. The expected decline in unit cost stems from lower pension costs and lower projected ...to 2008. Of the total, $261.7 million was paid to Horizon under the CPA for 1.4 billion ASMs. This expense is eliminated in consolidation. 39...

  • Page 136
    HORIZON AIR FINANCIAL AND STATISTICAL DATA Three Months Ended December 31 % 2009 2008 Change Financial Data (in millions):...000,000) ...Average number of full-time equivalent employees ...Aircraft utilization (blk hrs/day) ...Average aircraft stage length (miles) ...Operating fleet at period-end ...NM...

  • Page 137
    HORIZON AIR Horizon reported income before income taxes of $22.8 million in 2009 compared to a loss of $55.8 million in 2008. The improvement is primarily due to declines in aircraft fuel costs and non-fuel operating expenses, partially ...

  • Page 138
    ... $8.6 million and $1 million was related to PBP in 2009 and 2008, respectively. Variable pay increased for the same performance reasons cited in the Alaska discussion and the addition of Horizon's flight attendants and non-represented employees into Air Group's PBP plan. 42 Raw fuel expense ...$113...

  • Page 139
    ... remuneration costs and flight crewrelated costs such as hotels and per-diems. Fleet Transition Costs Fleet transition costs associated with the removal of Q200 aircraft from the operating fleet were $8.8 million during 2009 compared to $10.2 million in 2008. All Q200 aircraft have been removed...

  • Page 140
    ... ongoing transitions out of the MD-80 and CRJ-700 fleets; and a $42.3 million benefit ($26.5 million after... pretax income or loss for 2009 was 40.1%, compared to 36...expenses, such as employee per-diem costs...reduction in work force at Alaska; ALASKA AIRLINES Alaska reported a loss before income taxes ...

  • Page 141
    ....3 NM = Not Meaningful ALASKA EXPENSES For the year,...including hedging gains and losses), fleet transition charges and restructuring charges...consistent with the way expenses are reported internally and evaluated by management....miles to our non-airline partners. (in millions...employees compared to 2007.

  • Page 142
    ... in capacity and the improved fuel efficiency of our fleet as we completed the fleet transition out of the less-efficient MD-80 aircraft ... fuel-hedge portfolio in 2008, we terminated a number of contracts originally scheduled to settle in 2009 and 2010 and replaced them with new positions having...

  • Page 143
    ...was paid to Horizon under the capacity purchase arrangement (CPA) for 1.4 billion ASMs. This expense is eliminated in consolidation. Restructuring Charges and Fleet Transition Costs In the third quarter of 2008, we announced reductions in work force among union and non-union employees, resulting in...

  • Page 144
    HORIZON AIR Horizon reported a loss before income taxes of $55.8 million during 2008 compared to $10.7 million in 2007. The $45.1 million decline in profitability is primarily due to higher fuel costs and fleet...load factor. Revenue from the CPA with Alaska totaled $293.7 million during 2008 compared ...

  • Page 145
    .... Like Alaska, as part of the effort to restructure our fuel-hedge portfolio, we terminated a number of contracts originally scheduled to settle in 2009 and 2010...in 2007. As those aircraft were redeployed into the Horizon fleet, Horizon began purchasing the fuel, whereas under the JetExpress ...

  • Page 146
    number... own all of these new aircraft. Fleet Transition Costs Fleet transition costs associated with the sublease of... 2007 was positively impacted by $2.1 million in credits resulting from a favorable outcome of the state ... of nondeductible expenses, such as employee per-diem costs and stock-based...

  • Page 147
    ...credits minus the amount we defer) is recorded as other-net revenue when the cash is received. The deferred revenue is recognized as passenger revenue when awards are issued and flown on Alaska or Horizon, and as other-net revenue for awards issued and flown on partner airlines. At December 31, 2009...

  • Page 148
    ...airlines. We estimate the number of awards that will be redeemed on Alaska or Horizon versus on other airlines and accrue the estimated costs based on historical redemption patterns. If the number of awards redeemed on other airlines...over employees' ... As of December 31, 2009, we estimate that the ...

  • Page 149
    ...Horizon announced plans to ultimately exit its CRJ-700 fleet and transition to an all-Q400 fleet...2009 and update the current guidance pertaining to multiple-element revenue arrangements. This new guidance will be effective for our annual reporting... million bank line-of-credit facility; Our $80 million...

  • Page 150
    ...leases are capitalized at seven times annualized rent ...76%:24% The following... ANALYSIS OF OUR CASH FLOWS Cash Provided by Operating Activities During 2009, net cash provided by operating activities was $305.3 million, ...of capital expenditures associated with our fleet transitions and, to a lesser ...

  • Page 151
    ...-credit facility. Additionally, we repurchased $23.8 million of our common stock in 2009...2009, Alaska entered into an agreement with Boeing to defer the delivery of a number of B737-800 aircraft and agreed to purchase an additional four aircraft to be delivered in 2014 and 2015. In July 2009, Horizon...

  • Page 152
    ...of which are no longer in our operating fleets. We have accrued for these leases commitments...has fluctuated significantly in the past two years. In 2009, our plan assets recovered some of the value lost...operating income. Credit Card Agreements We have agreements with a number of credit card companies...

  • Page 153
    ...did we in the periods presented in this report. However, our strategic plan is built on... jet fuel required to operate our aircraft fleet. We purchase the majority of our jet... held by counterparties to these agreements as of December 31, 2009. We continue to believe that our fuel hedge program is ...

  • Page 154
    ... DATA SELECTED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (unaudited) (in millions, except per share) 1st Quarter 2009 2008 2nd Quarter 2009 2008 3rd Quarter 2009 2008 4th Quarter 2009 2008 Operating revenues ...$742.4 $839.5 $843.9 Operating income (loss) ...(11.9) (52.0) 66.7 Net income...

  • Page 155
    ... audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Alaska Air Group, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of...

  • Page 156
    ALASKA AIR GROUP, INC. CONSOLIDATED BALANCE SHEETS As of December 31 (in millions) 2009 2008 ASSETS Current Assets Cash and cash equivalents ...Marketable securities ...Total cash and marketable securities ...Receivables-less allowance for doubtful accounts of $1.5 ...Inventories and supplies-...

  • Page 157
    ALASKA AIR GROUP, INC. CONSOLIDATED BALANCE SHEETS-(Continued) As of December 31 (in millions except share amounts) 2009 2008 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable ...$ 63.3 Accrued aircraft rent ...54.0 Accrued wages, vacation and payroll taxes ...155.4 Other ...

  • Page 158
    ALASKA AIR GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31 (in millions except per share amounts) 2009 2008 2007 Operating Revenues ...costs ...Restructuring charges ...Fleet transition costs-MD-80 ...Fleet transition costs-CRJ-700 ...Fleet transition costs-Q200 ...Total...

  • Page 159
    ALASKA AIR GROUP, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Common Shares Common ... stock ...Stock-based compensation ...Treasury stock issued under stock plans ...Stock issued for employee stock purchase plan ...Stock issued under stock plans, including $0.4 tax benefit ...Balances ...

  • Page 160
    ALASKA AIR GROUP, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY-(Continued) Common Shares Common Outstanding Stock Capital in Accumulated Excess Treasury Other of Par Stock, Comprehensive Retained Value at Cost Loss Earnings (In millions) Total Balances at December 31, 2008 ...2009 net ...

  • Page 161
    ALASKA AIR GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31 (in millions) 2009 2008 2007 Cash flows from operating activities: Net income (loss) ...$ 121.6 $(135.9) $ Adjustments to reconcile net income (loss) to net cash provided by operating activities: ...

  • Page 162
    ... 31, 2009 NOTE 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Basis of Presentation The consolidated financial statements include the accounts of Alaska Air Group, Inc. (Air Group or the Company) and its subsidiaries, Alaska Airlines, Inc. (Alaska) and Horizon Air...

  • Page 163
    ... $14.0 million and $15.9 million at December 31, 2009 and 2008, respectively. Repairable and rotable aircraft parts inventories are...rotable and repairable spare inventories, which are depreciated over the associated fleet life unless otherwise noted. Maintenance and repairs, other than engine ...

  • Page 164
    ... claims and employee health care benefits...2009 and December 31, 2008, respectively. Revenue Recognition Passenger revenue is recognized when the passenger travels. Tickets sold but not yet used are reported as air...of mileage credits. This ... flying on Alaska or Horizon and through airline partners, the...

  • Page 165
    ...flown on Alaska or Horizon, and as other-net revenue for awards redeemed and flown on other airlines (less the cost paid to the other airline). The...temporary employees, data processing fees, and other similar services. Current Liabilities: Other accrued liabilities ...Other Liabilities and Credits: ...

  • Page 166
    ...reporting...and tax credit carryforwards. ...annual statements for the fair value of financial instruments. This new standard was effective for the Company as of June 30, 2009...employees as well as the Company's Employee Stock Purchase Plan (ESPP), which features a look-back provision and allows employees...

  • Page 167
    ...2009, 2008 and 2007. NOTE 2. FLEET TRANSITION AND IMPAIRMENT Horizon Transition to All-Q400 Fleet Horizon's long-term goal is to transition to an all-Q400 fleet. As of December 31, 2009, Horizon... employee severance charges related to the fleet transition... Alaska Transition to All-Boeing 737 Fleet ...

  • Page 168
    ... Company also realized losses of $50 million on fuel hedge contracts terminated in the fourth quarter of 2008 that had scheduled settlement dates in 2009 and 2010. These amounts represent the difference between the cash paid or received at settlement and the amount of premiums paid for the contracts...

  • Page 169
    ... May 19, 2009, Alaska announced that its pilots, represented by the Air Line Pilots Association...reported as "New pilot contract transition costs" in the consolidated statements of operations. Restructuring Charges In 2008, Alaska announced reductions in work force among union and non-union employees...

  • Page 170
    ..., 35% mature in 2010, 24% in 2011, and 41% thereafter. Some of the Company's asset-backed securities held at December 31, 2009 had credit losses, as defined in the accounting standards. Based on a future cash flow analysis, the Company determined that it does not expect to recover the full ...

  • Page 171
    ... rate on the pre-delivery payment and bank line-of-credit facilities, was 2.5% and 4.0% as of December 31, 2009 and 2008, respectively. At December 31, 2009, all of the Company's borrowings were secured by flight equipment. Alaska has an $80 million variable-rate revolving pre-delivery payment...

  • Page 172
    ... 31, 2009. As of December 31, 2009, there were no borrowings outstanding under this credit facility. Management...2009, Alaska was committed to purchasing 15 B737-800 aircraft, four of which will be delivered in 2010. The company also has options to purchase an additional 40 B737-800 aircraft. Horizon...

  • Page 173
    ... groups of Alaska and Horizon. The defined-benefit plans provide benefits based on an employee's term of service and average compensation for a specified period of time before retirement. With the ratification of the pilot collective bargaining agreement in 2009, the qualified defined-benefit...

  • Page 174
    ...follows (dollars in millions): 2009 2008 Level Nonqualified Defined-Benefit Pension Plan Alaska also maintains an unfunded, noncontributory... ...408.0 Non-U.S. equity fund ...164.4 U.S. debt index fund ...147.6 Government/credit bond index fund ...96.3 Plan assets ...$906.9 $ - 1 2 2 2 2 316...

  • Page 175
    ... the status of the plans for 2009 and 2008 (in millions): Qualified 2009 2008 Nonqualified 2009 2008 Projected benefit obligation (PBO) ... plans, approximately 57% represents the obligation of the plan covering Alaska's pilots. The accumulated benefit obligation for the combined qualified defined-...

  • Page 176
    ... LOSS (AOCI): Qualified 2009 Nonqualified Qualified 2008 Nonqualified Prior service cost (credit) ...$ (17.5) Net... the defined-benefit pension plans from the assets of those plans as of December 31, 2009 are as follows (in millions): Qualified Nonqualified 2010 ...2011 ...2012 ...2013 ...2014 ......

  • Page 177
    ...and vision benefits by paying all or a portion of the active employee plan premium until eligible for Medicare, currently age 65. This results... amendment and the transfer to the pilot long-term disability plan in 2009 were the result of plan changes in the new pilot collective bargaining agreement...

  • Page 178
    ... 2010 as pilots that elected to freeze or reduce their service credits in the defined-benefit pension plan will receive a higher Company ...sheet at December 31, 2009 and 2008. Employee Incentive-Pay Plans Alaska and Horizon have three separate plans that pay employees based on certain financial and...

  • Page 179
    ...2009 2008 three months or less. They are carried at cost, which approximates fair value. Other Accrued Liabilities (current) Airline... following at December 31 (in millions): 2009 2008 * Other consists of accrued workers' compensation and deferred credits on aircraft purchases, among other items. ...

  • Page 180
    ... or the period between grant date and the date the employee becomes retirement-eligible as defined in the applicable plan. All...issued from the Company's treasury shares. The total number of outstanding options from the 1997 Plan as of December 31, 2009 is 203,100. Substantially all grantees are 25%...

  • Page 181
    ... three years, or the period from the date of grant to the employee's retirement eligibility. The Company recorded stock-based compensation expense related to RSUs of $5.8 million, $6.8 million, and $5.6 million in 2009, 2008, and 2007, respectively. These amounts are included in wages and benefits...

  • Page 182
    ...discount. Proceeds received from the issuance of shares are credited to stockholders' equity in the period in which the shares are issued. In 2009 and 2008, 184,488 shares and 169,242 shares, respectively, were purchased by Company employees under the ESPP, resulting in cash proceeds of $3.1 million...

  • Page 183
    ... and liabilities for financial reporting purposes and such amounts for...credits ...Leased aircraft return provision ...Inventory obsolescence ...Deferred gains ...Employee ...(loss) before income tax and accounting change as follows (in millions): 2009 2008 $(213.2) (74.6) 3.4 (5.1) (1.0) $ (77.3) 36.3% ...

  • Page 184
    .... The periods subject to examination for the Company's federal and Alaska income tax returns are the 2003 through 2008 tax years; however... Because of the resolution of uncertain tax positions in the fourth quarter of 2009, the Company reevaluated its tax position. As a result, the Company recorded ...

  • Page 185
    ...are recorded in AOCL in the consolidated balance sheets. At December 31, 2009, the Company had an asset of $2.4 million associated with these The fair... borrowing rate. Concentrations of Credit The Company continually monitors its positions with, and the credit quality of, the financial institutions...

  • Page 186
    ... concentration of credit risk at December 31, 2009 due to the frequency that settlement takes place and the dispersion across many industry and government segments. NOTE 13. OPERATING SEGMENT INFORMATION Accounting standards require that a public company report annual and interim financial...

  • Page 187
    ... Includes the parent company, Alaska Air Group, Inc., including its investments in Alaska and Horizon, which are eliminated in ... treasury. This action did not impact the total number of common shares outstanding. 91 Å Form 10-K On June 11, 2009, the Board of Directors authorized the Company to ...

  • Page 188
    ...stock units, using the treasury-stock method. In 2009 and 2007, 2.1 million and 1.7 million stock ...EPS because they were antidilutive. As the Company reported a net loss in 2008, no outstanding ...its Collective Bargaining Agreement (CBA) with Alaska alleging that Alaska violated the CBA by, among other...

  • Page 189
    ... Treadway Commission (the COSO Framework). Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2009. We intend to regularly review and evaluate the design and effectiveness of our disclosure controls and procedures and...

  • Page 190
    ...INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Alaska Air Group, Inc.: We have audited Alaska Air Group, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by...

  • Page 191
    ITEM 9B. OTHER INFORMATION None 95 Å Form 10-K

  • Page 192
    ... herein by reference from the definitive Proxy Statement for Air Group's 2010 Annual Meeting of Stockholders to be filed with the Securities ...and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2009...

  • Page 193
    ...ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this report: 1. Qualifying Accounts, for the years ended December 31, 2009, 2008 and 2007 on page 83. 2. Financial Statement Schedules: Financial Statement Schedule II, Valuation and Exhibits...

  • Page 194
    ... 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALASKA AIR GROUP, INC. By: /S/ WILLIAM S. AYER Date: February 19, 2010 William S. Ayer, Chairman and Chief Executive Officer...

  • Page 195
    ...as amended December 14, 2007 (Filed as Exhibit 3(ii) to Registrant's Current Report on Form 8-K, filed on December 20, 2007 and incorporated herein by reference.) Credit Agreement, dated March 25, 2005, among Alaska Airlines, Inc., as borrower, Bank of America, N.A. as administrative agent, Citicorp...

  • Page 196
    ... Airlines, Inc., summaries of 19 substantially identical lease agreements and Letter Agreement #1, dated January 22, 1990 (Filed as Exhibit 10-14 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990, filed on April 11, 1991 and incorporated herein by reference.) Alaska Air...

  • Page 197
    ..., filed on August 15, 1997 and incorporated herein by reference.) Alaska Airlines, Inc. and Alaska Air Group, Inc. Supplementary Retirement Plan for Elected Officers, as amended November 7, 1994 (Filed as Exhibit 10.15 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997...

  • Page 198
    23.1†31.1†31.2†32.1†32.2††* # Consent of Independent Registered Public Accounting Firm (KPMG LLP) Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-...

  • Page 199
    Schedule II ALASKA AIR GROUP, INC. VALUATION AND QUALIFYING ACCOUNTS (in millions) Beginning Balance ... accounts ...Obsolescence allowance for flight equipment spare parts ...Year Ended December 31, 2009 Reserve deducted from asset to which it applies: Allowance for doubtful accounts ...Obsolescence...

  • Page 200
    ... reviewed this annual report on Form 10-K of Alaska Air Group, Inc. for the period ended December 31, 2009; Based on my knowledge, this report does not contain... management or other employees who have a significant role in the registrant's internal control over financial reporting. By /s/ WILLIAM...

  • Page 201
    ... reviewed this annual report on Form 10-K of Alaska Air Group, Inc. for the period ended December 31, 2009; Based on my knowledge, this report does not ...involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By /S/ GLENN ...

  • Page 202
    ...18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Alaska Air Group, Inc. (the "Company") on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the...

  • Page 203
    ...18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Alaska Air Group, Inc. (the "Company") on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the...

  • Page 204
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 205
    ...GROUP DIRECTORS William S. Ayer Chairman, President & CEO Alaska Air Group Alaska Air Group Officers William S. Ayer Chairman, President & CEO Alaska Airlines Officers William S. Ayer Chairman & CEO Bradley D. Tilden President Horizon Air Officers William S. Ayer Chairman Jeffrey D. Pinneo President...

  • Page 206
    ...Alaska Airlines and Horizon Air, Seattle-based carriers that collectively serve 95 destinations in the United States, Canada, and Mexico. Alaska Air Group was organized as a Delaware corporation in 1985. Alaska Airlines, Inc., an Alaska... KPMG LLP Seattle, Washington Annual Meeting 2 p.m., Tuesday, ...

  • Page 207
    Alaska Airlines is proud to have been a sponsor of eight-time Olympic medalist Apolo Anton Ohno as he prepared to compete in the ... history have helped us achieve our goals, as well. Apolo Ohno is followed by his father, Yuki Ohno, as he disembarks an Alaska Airlines 737-800 that bears his likeness.

  • Page 208
    002CS1B084