Alaska Airlines and Horizon Air 2014 Annual Report Download

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Table of contents

  • Page 1

  • Page 2

  • Page 3
    ... a program called "Ready, Safe, Go," designed to increase safety awareness across the Air Group system. We have a strong safety record at both Alaska and Horizon, and this will help us be even better. #1 on-time airline: Our frontline folks and the leaders throughout our operation continue to run an...

  • Page 4
    .... J.D. Power also published its first-ever Airline Loyalty Program Satisfaction Report in 2014, in which Alaska was ranked highest by frequent fliers. We ... rest of the industry. Our level of employee engagement was 82% in our annual employee survey, up 3 points from the prior year, and up 19 points ...

  • Page 5
    ...Alaska's costs - and our fares - are now much closer to low-cost carriers' than to legacy airlines'. And low fares mean that we can grow. In 2014...are talented and dedicated and who enjoy working together to help Alaska and Horizon compete and win. Their caring and dedication comes from their ...

  • Page 6
    ...We are undertaking several key initiatives to keep our airline strong. These initiatives include rolling out Alaska Beyond (our new inflight experience), developing new technology ...Thank you for supporting and investing in Alaska Air Group. Sincerely, Brad Tilden Chairman and Chief Executive Officer

  • Page 7
    2015 PROXY STATEMENT Å Proxy

  • Page 8

  • Page 9
    ... Directors set March 18, 2015 as the record date for the Annual Meeting. This means that owners of Alaska Air Group common stock as of the close of business on that date... Stockholders may access, view and download the 2015 Proxy Statement and 2014 Annual Report at www.edocumentview.com/alk. Å Proxy

  • Page 10

  • Page 11
    ALASKA AIR GROUP, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT TABLE OF CONTENTS GENERAL INFORMATION Annual Meeting Information Questions and Answers about the Annual... Public Accountants Audit Committee Report 32 33 DIRECTOR COMPENSATION 2014 Director Compensation Director Stock...

  • Page 12

  • Page 13
    ...2014 Annual Report (the Annual Meeting Materials). The Company's Questions and Answers about the Annual Meeting Why am I receiving the Annual Meeting Material? You are receiving the Annual Meeting Material from us because you owned Air...may access, view and download the Annual Meeting Materials at www...

  • Page 14
    ... the various means you can use to vote your shares without attending the Annual Meeting. You can vote on the Internet. Stockholders of record and beneficial ...can vote via the Internet regardless of whether they receive their annual meeting materials through the mail or via the Internet. Instructions ...

  • Page 15
    ...using the Internet or phone to vote, you help Alaska Air Group conserve natural resources and reduce postage and proxy ... non-votes" on each of the other items at the Annual Meeting. For a description of the effect of broker nonvotes... or before November 28, 2014 and complied with the other requirements included in...

  • Page 16
    .... What does it mean if I receive more than one proxy card, voting instruction form or email notification from the Company? It means that you hold Alaska Air Group stock in more than one account. Please complete and submit all proxies to ensure that all your shares are voted or vote by Internet...

  • Page 17
    ... the record date, 3,822,103 shares were held in trust for Alaska Air Group 401(k) plan participants. The trustees, Vanguard Fiduciary Trust Company (.... Can I attend the Annual Meeting, and what do I need for admission? Admission to the Annual Meeting is limited to Air Group stockholders as of March...

  • Page 18
    ...voting. How many votes must the nominees have to be elected? The Company's Bylaws (as amended April 30, 2010) require that each director be elected annually 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...

  • Page 19
    ... as its nominees in this Proxy Statement. Because the Company has not received notice from any stockholder of an intent to nominate directors at the Annual Meeting, each of the directors must be elected by a majority of votes cast. "Abstain" votes and broker non-votes are not treated as votes cast...

  • Page 20
    ... results of the Annual Meeting? We will publish the voting results on Form 8-K on or about May 13, 2015. You can read or print a copy of that report by going to Investor...'s Bylaws, please contact: Corporate Secretary Alaska Air Group, Inc. P.O. Box 68947 Seattle, WA 98168 8 GENERAL INFORMATION

  • Page 21
    ... as a partner and as a CPA during her 27-year career with the firm. She serves on the boards of Alaska Airlines and Horizon Air (subsidiaries of Alaska Air Group), the Overlake Hospital Medical Center Board, the Oregon State University Board of Trustees, and the University of Washington Foster...

  • Page 22
    ... of Southern California Gas Company, both subsidiaries of Sempra Energy. From 2010 to 2014, he was chairman and CEO of San Diego Gas & Electric. From 2006 to.... Mr. Knight serves on the boards of Alaska Airlines and Horizon Air (subsidiaries of Alaska Air Group), the Timken Museum of Art in San...

  • Page 23
    ...Alaska qualify her to serve on the Alaska Air Group Board. Katherine J. Savitt Director since 2014 Age - 51 Ms. Savitt was appointed to the Alaska Air Group Board in October 2014... also serves on the boards of Alaska Airlines and Horizon Air (subsidiaries of Alaska Air Group), and the Vitamin Shoppe, ...

  • Page 24
    ... of Alaska Air Group and of Alaska Airlines and Horizon Air (subsidiaries of Alaska Air Group) since January 2014. He has served as president of Alaska Airlines since December 2008. In May 2012, Mr. Tilden was named president and CEO of Alaska Air Group and CEO of Alaska Airlines and Horizon Air. He...

  • Page 25
    ... Kamehameha Schools Audit Committee, Aloha United Way, and the Harold K.L. Castle Foundation. He is also a director of Alaska Airlines and Horizon Air (subsidiaries of Alaska Air Group), Alexander & Baldwin, the United States Telcom Association, and is a member of the Hawaii Asia Pacific Association...

  • Page 26
    ...and Leadership Development Committee during 2014. Highlights of these executive compensation...the 25th percentile relative to the Company's airline peer group with the opportunity to earn ...advisory vote on the following resolution at the 2015 Annual Meeting: RESOLVED, that the compensation paid to ...

  • Page 27
    ...2015 Annual ...reported in 2014) are an added incentive to vote for this proposal: GMI was concerned with excessive CEO perks and pension benefits. Unvested equity awards partially or fully accelerate upon CEO termination. Meanwhile shareholders had a potential 14% stock dilution. GMI rated Alaska Air...

  • Page 28
    ... THE FOLLOWING REASONS: At the Company's 2014 annual meeting of stockholders, Mr. Chevedden proposed...Board informed about the Company's business and the airline industry, and consults with board members in a... promotes a clear, unified vision for Alaska Air Group by assuring that the strategies adopted...

  • Page 29
    ... of importance; • approves information sent to board members; • leads the independent directors' annual evaluation of the CEO's performance; • conducts interviews of independent directors annually prior to nomination for election; • discusses proposed changes to committee assignments with...

  • Page 30
    ... the fact that five directors serving on the Board as of November 2, 2014 have tenures of 10 years or more, and the Board wishes to provide...that Alaska Air Group reported a $120 million "charge" related to its Bank of America credit card agreement. In connection with modifications to Alaska Airlines'...

  • Page 31
    ...not "for cause." The arrangements are in line with market practice and are designed to If a change in control occurs and the CEO is terminated not "for cause," dilution of less than 0.5% would occur based on the acceleration of the CEO's unvested equity under existing change-in-control arrangements...

  • Page 32
    Structure of the Board of Directors In accordance with the Delaware General Corporation Law and the Company's Certificate of Incorporation and Bylaws, the Company's business affairs are managed under the direction of the Board of Directors. Directors meet their responsibilities by, among other ...

  • Page 33
    ... all auditing and nonauditing services they are to perform; review annual and quarterly financial statements and filings made with the SEC; ... regard to matters pertaining to controls: a. review major financial reporting risk exposure and adequacy and effectiveness of associated internal controls; ...

  • Page 34
    ...for tax-qualified retirement plans by monitoring the Alaska Air Group Pension/Benefits Administrative Committee, Defined Contribution Retirement...3. 4. 5. 4. 5. Prepare the Audit Committee Report required for the annual proxy statement. Annually review and reassess the adequacy of the Committee's ...

  • Page 35
    ...2014, and due to a schedule conflict, was unable to attend the Board and committee meetings that occurred immediately following her appointment. 11. Produce the report on executive compensation required for the annual proxy statement. 12. Annually...of the Air Group ...all aspects of airline safety. 2....

  • Page 36
    ... employment as chief marketing officer at Yahoo!, Inc. (Yahoo!), the Board also considered Alaska Airlines' purchase of online marketing services from Yahoo! having a value of less than 0.1% of each party's annual gross revenues. After consideration of these matters and in accordance with the Board...

  • Page 37
    ...the purposes of these standards, "Company" includes all Alaska Air Group subsidiaries and other affiliates. "Immediate family member"...on the 120th day, prior to the first anniversary of the prior year's annual meeting. The written notice submitted by a stockholder must also satisfy the additional ...

  • Page 38
    ...date that the Company's proxy statement was released to stockholders in connection with the previous year's annual meeting. No such notice was received in connection with the 2014 Annual Meeting. Any candidate recommended by a Qualified Stockholder must be independent of the Qualified Stockholder in...

  • Page 39
    ... 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 will ... will also be considered on the basis of the Committee's annual evaluations of the effectiveness of the Board, its committees and...

  • Page 40
    ...discussions at the Governance and Nominating Committee. In addition, on an annual basis, as part of the Board's self-evaluation, the Board assesses...the CEO has a depth of understanding of the many complexities of the airline business, the regulatory environment, and the Company's strategy - all of ...

  • Page 41
    ...design and implementation of the program. Under the program, an Alaska Air Group risk matrix has been developed and the organization's most ... minimum, the Audit Committee receives quarterly updates regarding the program and an annual in-person review of the program's status by the chief risk officer....

  • Page 42
    ...specifically reviewed and discussed with executive management during an annual executive officer planning session, held during the third quarter... with a deep understanding of the highly technical and complex nature of the airline business. Code of Conduct and Ethics The Company has adopted a Code of...

  • Page 43
    ...Alaska Airlines, Inc. is a party to aircraft and facilities services agreements with NANA Management Services, LLC (NMS) worth $3 million annually...group, may write to: Board of Directors Alaska Air Group, Inc. PO Box 68947 Seattle,...the exception of the transactions reported here, the amounts involved ...

  • Page 44
    ...20,000 1,244,300 All Other Fees(4) Total Fees for 2014 2013 Audit Fees for the Company's Annual Financial Statements and Quarterly Reviews(1) Audit-Related Fees(2) Tax Fees(3)...year. (2) Includes fees paid in connection with the audit of Air Group's employee benefit plans in all years. In addition, ...

  • Page 45
    ... and KPMG, the Company's independent accountants, the Company's audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The Committee believes that management maintains an effective system of internal controls that results in...

  • Page 46
    ... 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, 2014. Audit Committee Independence and Financial Expertise All members of the Audit Committee meet the independence...

  • Page 47
    ...annual retainer of $1,000 to non-employee directors for service on the board of Alaska Airlines and $1,000 for service on the board of Horizon Air... until his or her termination of service on the Board. If no election is made the year prior to payment, common stock is issued. In 2014, Ms. Blakey, Mr...

  • Page 48
    ... the Alaska Airlines and Horizon Air products and services. The All Other Compensation column (g) includes the value of reimbursements for taxes on the transportation benefits provided to each director. (4) Ms. Savitt and Mr. Fonseca were appointed directors in October 2014, therefore, their annual...

  • Page 49
    ...Horizon Air Industries and executive vice president of Alaska Air Group; and Keith Loveless, former general counsel and executive vice president of Alaska Air Group. 2014 Company Performance Highlights Alaska Air...was vice president marketing of Alaska Airlines until May 9, 2014, when he was elected ...

  • Page 50
    ...Alaska Air Group. Therefore, the Committee structured executive compensation for 2014 in a way that is generally consistent with that of 2013. Stockholders have an opportunity annually...that is based 50% on shareholder return relative to an airline industry peer group and 50% relative to the Standard ...

  • Page 51
    ...50th percentile of airline peers and provides executives an opportunity to achieve total direct compensation at the 50th percentile if annual and long-... compensation-setting philosophy and practice from year-to-year. In 2014, the Compensation and Leadership Development Committee set base salary for ...

  • Page 52
    ... other services to Alaska Air Group or its ...period ended December 31, 2014 represents less than one percent of Meridian's total annual revenues for calendar year 2014. • Meridian maintains ... awards; • scaling compensation to the airline industry; • considering internal equity among Company...

  • Page 53
    ... total direct compensation for the Named Executive Officers annually. In analyzing the information for 2014, the Committee reviewed the total direct compensation for executives of a peer group of airlines excluding any companies that ceased reporting compensation data during the period because they...

  • Page 54
    ... were below the 25th percentile of the airline peer group. In setting 2014 executive compensation, the Committee also reviewed data for 29 companies in the broader transportation industry having median annual revenue similar to that of Alaska Air Group to ensure that the Company's executive...

  • Page 55
    ...Airline Peer Group) 2014 Base Salary(1) Alaska Air Group, Inc. Base Salary (Air Group peers) Air Canada United Continental Holdings, Inc. Delta Air Lines Inc. 75th Percentile Southwest Airlines Co. American Airlines...2013 base salary as reported in the respective company's 2014 proxy statement. (2) ...

  • Page 56
    ...as follows: 2014 Performance-Based Pay Metrics Threshold Goal Target Maximum Weight Alaska Horizon Alaska Horizon Alaska Horizon Operational Performance ... safety. **Adjusted pre-tax profit means the net income of Alaska Air Group as computed by Generally Accepted Accounting Principles (GAAP) and ...

  • Page 57
    Annual ...2014 Performance-Based Pay Calculation* Metrics Actual % of Target Achieved Weight Payout % Safety Risk Level 3+ Events Employee Engagement/Customer Satisfaction CASM Alaska Air Group Profitability Total Payout % Participation Rate** Payout as a % of Base Salary *Based on Alaska Airlines...

  • Page 58
    ... 20 20 20 20 20 20 20 20 20 ALASKA HORIZON In addition, all of the Company's employees, including...and the maximum annual payout for each employee is $1,200. In 2014, each employee ...their stock options only to the degree that Alaska Air Group's stockholders realize value, provided the ...

  • Page 59
    ...Alaska Air Group common stock. Performance Stock Units - The Company also grants the Named Executive Officers performance stock units annually... beginning in January 2012, 2013 and 2014. The performance stock unit awards were based... Given the nature of the airline business, the Committee believes that ...

  • Page 60
    ...Standard & Poor's 500 index. 2014 Performance Stock Unit Award Metrics Airline Peer Group S&P 500 Companies Percentage ...when combined with the base salary and annual target incentive opportunity described above, are...principles used in the Company's financial reporting) of each executive's total equity...

  • Page 61
    ...help achieve the goals of the Company's executive compensation program. In May 2014, in light of the promotion of Mr. Pedersen to executive vice ...calculated by deducting the equity grant value the executive received at the annual grant made in February from the equity grant value he would have...

  • Page 62
    ...permitted to elect to defer up to 100% of their annual Performance-Based Pay payments under the Company's Nonqualified Deferred ... Please see the tables under Pension and Other Retirement Plans and 2014 Nonqualified Deferred Compensation and the information following the tables for a description...

  • Page 63
    ...two conditions are met: (1) actual or constructive termination of employment and (2) the consummation of a ... under its current program (including the annual incentives, performance stock units and stock... under such programs may not be deductible. For 2014, the Company believes that no portion of its ...

  • Page 64
    ... discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis section be included in the Company's 2014 Annual Report on Form 10-K on file with the SEC and the Company's 2015 Proxy Statement.(1) Compensation and Leadership Development Committee of the...

  • Page 65
    ...Alaska Joseph A. Sprague(6) Sr VP Comm & Ext Affairs, Alaska Glenn S. Johnson Former President Horizon Air Keith Loveless Former EVP & Gen Counsel, Alaska Year (b) 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014..., included as part of the Company's 2014 Annual Report filed on Form 10-K with the SEC...

  • Page 66
    ... amounts reported in Column (e) of the table above also include the grant date fair value of performance-based stock unit awards granted in 2012, 2013 and 2014 to... airline industry. Also included in the total for Column (i) is the Company's incremental cost of providing flight benefits, annual ...

  • Page 67
    ...'s incremental cost of providing a flight benefit, annual physical, and the above-market amount paid for accidental death and dismemberment insurance premiums. (6) Mr. Harrison was vice president planning and revenue management of Alaska Airlines until May 9, 2014. He served as senior vice president...

  • Page 68
    ... incentive awards granted to the Named Executive Officers in 2014. Please see in the Compensation Discussion and Analysis the Performance-Based Annual Pay section for a description of the material terms of the non-equity incentive plan awards reported and the Long-Term Equity-Based Pay section for...

  • Page 69
    ... awards contained in Note 12 (Stock-Based Compensation Plans) to the Company's Consolidated Financial Statements, included as part of the Company's 2014 Annual Report filed on Form 10-K with the SEC and incorporated herein by reference. EXECUTIVE COMPENSATION 57 Å Proxy Stock Options 2/11/14...

  • Page 70
    ... Fiscal Year End The following table presents information regarding the outstanding equity awards held by each of the Named Executive Officers as of December 31, 2014, including the vesting dates for the portions of these awards that had not vested as of that date. Option Awards Stock Awards Equity...

  • Page 71
    ... dollar amounts shown 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 $59.76 (the closing price of Air Group stock on 12/31/14). The unvested options under the 2/7/11 grant will become vested as follows...

  • Page 72
    ... to CEO. The units will vest based on the goals set for the threeyear performance period ending 12/31/14. The performance stock units reported in Column (i) are eligible to vest based on the Company's performance over a three-year period as described in the Compensation Discussion and Analysis above...

  • Page 73
    ... and Stock Vested The following table presents information regarding the exercise of stock options by the Named Executive Officers during 2014 and the vesting during 2014 of other stock awards previously granted to the Named Executive Officers. Option Awards Number of Shares Acquired on Value...

  • Page 74
    ...this plan on the same general terms as other eligible employees. The Alaska Air Group, Inc. 1995 Elected Officers Supplementary Retirement Plan (the Supplementary ...Consolidated Financial Statements, included as part of the Company's 2014 Annual Report filed on Form 10-K with the SEC and incorporated ...

  • Page 75
    ...salaried Alaska Airlines ...annual retirement benefits are based. For 2014, this limit was $260,000. The tax law also limits the annual benefits that may be paid from a taxqualified retirement plan. For 2014, this limit on annual...of the Company or upon termination of the participant's employment...

  • Page 76
    ...deferred under the plan are generally distributed on termination of the participant's employment, although participants may ...'s nonqualified deferred compensation plans during 2014, and also shows the total... the change in control; • receive an annual incentive payment equal to the higher of the...

  • Page 77
    ... period. EXECUTIVE COMPENSATION 65 Å Proxy average of the executive's annual incentive payments for the three years preceding the year in which the...the executive's employment was terminated. The outstanding equity awards held by the executives as of December 31, 2014 are described in the...

  • Page 78
    ...on factors such as transaction price, timing of employment termination and payments, methodology for valuing stock options, changes in... than ten years of service are entitled to flight benefits on Alaska Airlines and Horizon Air. Flight benefits for the Named Executive Officers are for positive-space...

  • Page 79
    ...awards that would vest upon termination of employment in the circumstances ...annual usage amounts in 2012 through 2014, and that the annual value of the benefit is equal to the annual incremental cost to the Company, which will be the same as the average of the incremental cost incurred to provide air...

  • Page 80
    ...863,724 (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 ownership is determined...and which are described in the 2014 Grants of Plan Based Awards table. 68 SECURITIES OWNERSHIP

  • Page 81
    ...reported for non-employee directors also include underlying common shares to be issued upon the director's resignation from the Board in connection with deferred stock units granted as part of their annual...18, 2014. (2) A Schedule 13G/A filed on January 12, 2015 by BlackRock, Inc. reported sole ...

  • Page 82
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  • Page 83
    Annual Report on Form 10-K Å Form 10-K

  • Page 84

  • Page 85
    ... ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2014 OR ' TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-8957 ALASKA AIR...

  • Page 86
    ALASKA AIR GROUP, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2014 TABLE OF CONTENTS PART I ITEM ITEM ITEM ITEM ITEM ITEM PART II ITEM 4 4 20 26 26 27 27 28 28 30 31 60 61 99 ...

  • Page 87
    ... 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 88
    ... 1. OUR BUSINESS Alaska Air Group ("Air Group") operates Alaska Airlines ("Alaska") and Horizon Air ("Horizon"), which together with its partner regional airlines serve more than 100 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada and Mexico. During 2014, we carried 29...

  • Page 89
    ...consecutive year Alaska Airlines has received the award and the 13th time in the last 15 years for Horizon. In 2014, we ...annual employee survey, up from 79% in the prior year. To help develop and train our people on core leadership principles and promote engagement across our airlines, all of Air...

  • Page 90
    ... San Diego to Kona, and from Portland to St. Louis. AIR GROUP Alaska Air Group is a Delaware corporation incorporated in 1985 and the holding company of Alaska Airlines and Horizon Air. Although Alaska and Horizon both operate as airlines, their business plans, competition, and economic risks differ...

  • Page 91
    ...that Alaska receives all passenger revenue from those flights. Horizon operates a fleet of turboprop aircraft and sells all of its capacity to Alaska pursuant...of our capacity by region is as follows: 2014 West Coast Transcon/midcon Hawaii Alaska Mexico Canada Total MAINLINE We offer extensive north/...

  • Page 92
    .... Horizon is the largest regional airline in the Pacific Northwest and carries about 90% of Air Group's regional revenue passengers. In 2014, we... 2014, Horizon's operating fleet consisted of 51 Bombardier Q400 turboprop aircraft. Horizon flights are listed under Alaska's designator code in airline ...

  • Page 93
    ...Alaska Airlines, which led to our Mileage Planâ„¢ receiving the highest rank by frequent fliers in the first-ever J.D. Power Airline Loyalty/Rewards Program Satisfaction Report in 2014. Mileage Planâ„¢ revenues represent approximately 10% of Air...000 in 3 months $95 2x Annual fee Miles for "on" spend...

  • Page 94
    ... termination ...Air LAN S.A. Fiji Airways(b) Qantas Regional Airlines SkyWest(b) Era Alaska PenAir(b) Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes 10 Codeshare - Codeshare - Alaska Flight # on Other Airline Flight # Flights Operated by on Flights Operated by Other Airline Alaska /Horizon...

  • Page 95
    ...flier program. However, Alaska's Mileage Planâ„¢ members can earn and redeem miles on these airlines' route systems. The following is the financial impact of our marketing alliances: 2014 Air Group Marketed Revenues Codeshare Agreements: American Airlines Delta Air Lines Others Interline Agreements...

  • Page 96
    ...airlines...average annual ...end of 2014, the ...annually. Said another way, a one-cent change in our fuel price per gallon will impact our expected annual... 2014... 2014,...are as follows: 2014 Crude oil Refining...2014...Alaska operates an all-Boeing 737 fleet and Horizon operates an all-Bombardier Q400 turboprop fleet...

  • Page 97
    ...-time performance, passenger amenities - including first class seating, quality of buy-on-board products, aircraft type, and comfort. In 2014, Alaska Airlines ranked "Highest in Customer Satisfaction among Traditional Network Carriers" by J.D. Power and Associates for the seventh year in a row. All...

  • Page 98
    ...14 of our partner carriers. In addition to domestic or foreign airlines that we compete with on most of our routes, we ... through these call centers. ‰ ‰ Our sales by channel are as follows: 2014 Alaskaair.com Traditional agencies Online travel agencies Reservation call centers Total 57% 25% ...

  • Page 99
    ... 13,952 (10,846 at Alaska and 3,106 at Horizon) active full-time and part-time employees. Wages and benefits, including variable incentive pay, represented approximately 41% of our total non-fuel operating expenses in both 2014 and 2013. Most major airlines, including ours, have employee groups...

  • Page 100
    Alaska's union contracts at December 31, 2014 were as follows: Union Air Line Pilots Association International (ALPA) Association of ...Amendable 10/17/2016 85 Amendable 9/29/2014 41 Amendable 3/24/2015 Horizon's union contracts at December 31, 2014 were as follows: Union International Brotherhood of ...

  • Page 101
    ...of Horizon Air Industries, Inc. Chief Ethics & Compliance Officer, General Counsel, and Vice President of Legal at Alaska Air Group, Inc. 48 2003 Andrew Harrison 44 2008 Dave Campbell 53 2014 Herman Wacker 66 2014 Mr. Tilden joined Alaska Airlines in 1991, became Controller of Alaska Air...

  • Page 102
    ... joined Horizon Air in 2014 as President and Chief Operating Officer. Prior to joining Horizon, Mr...Alaska Air Group, Inc. and Alaska Airlines, Inc. since May 2014 and was elected General Counsel in October 2014. Mr. Wacker has been Vice President of Legal at Alaska Air Group, Inc. since February 2014...

  • Page 103
    ...2014 and $13 million each year in 2013 and 2012. The Department of Justice and DOT have jurisdiction over airline... and Capacity Act of 1990, the Clean Air Act, the Resource Conservation and Recovery Act,...and other greenhouse gas emissions. Alaska and Horizon have transitioned to more fuel-efficient...

  • Page 104
    ...Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available on... and financial results could be harmed in the event of an airline accident or incident. An accident or incident involving one of our...

  • Page 105
    ... time 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 view... initiatives. In addition, in recent years, Alaska and Horizon have subcontracted their heavy aircraft maintenance, fleet ...

  • Page 106
    ....) due to government shutdown; congestion at airports or air traffic control problems; adverse weather conditions; increased security measures... and Alaska, we believe a large portion of our operation is more susceptible to adverse weather conditions. A general reduction in airline passenger traffic...

  • Page 107
    ... of operations. We are dependent on a limited number of suppliers for aircraft and parts. Alaska is dependent on Boeing as its sole supplier for aircraft and many aircraft parts. Horizon is similarly dependent on Bombardier. Additionally, each carrier is dependent on sole suppliers for aircraft...

  • Page 108
    ... for codeshare and frequent flier marketing arrangements. Alaska and Horizon are parties to marketing agreements with a number of domestic and international air carriers, or "partners," including, but not limited to, American Airlines and Delta Air Lines. These agreements provide that certain flight...

  • Page 109
    ... costs due to the maintenance schedules of our aircraft fleet. As of December 31, 2014, the average age of our NextGen aircraft (B737-800, -900, -900ERs) was...our brand appeal to a diverse and evolving demographic of airline travelers. These efforts could include significant improvements to our ...

  • Page 110
    ... us. As of December 31, 2014, labor unions represented approximately 83% of Alaska's and 48% of Horizon's employees. Although we have been ... attention from other projects and issues. We compete against the major U.S. airlines and other businesses for labor in many highly skilled positions. If we are...

  • Page 111
    ...and Horizon have the option to extend most of the leases for additional periods, or the right to purchase the aircraft at the end of the lease term, usually at the thenfair-market value of the aircraft. GROUND FACILITIES AND SERVICES We own terminal buildings in various cities in the state of Alaska...

  • Page 112
    ... is listed on the New York Stock Exchange (symbol: ALK). The following table shows the trading range of Alaska Air Group, Inc. common stock on the New York Stock Exchange: 2014 High First Quarter Second Quarter Third Quarter Fourth Quarter SALES OF NON-REGISTERED SECURITIES None PURCHASES OF EQUITY...

  • Page 113
    ... stockholder return since December 31, 2009 with the S&P 500 Index and the Dow Jones U.S. Airlines Index. The graph assumes that the value of the investment in our common stock and each index...12/31/12 12/31/13 12/31/14 Period Ending Alaska Air Group Dow Jones US Airlines S&P 500 29 Å Form 10-K

  • Page 114
    ITEM 6. SELECTED FINANCIAL AND OPERATING DATA 2014 2013 2012 2011 2010 CONSOLIDATED OPERATING RESULTS (audited) Year Ended December 31 (in millions, except pershare amounts): Operating Revenues(a) Operating Expenses Operating Income Nonoperating income (...

  • Page 115
    ...million, $21 million, $18 million, $12 million, and $6 million for 2014, 2013, 2012, 2011, and 2010, respectively. Includes flights under Capacity Purchase ...-looking statements in light of the risks referred to in this report's introductory cautionary note and the risks mentioned in Part I, "...

  • Page 116
    ...2014 include: ‰ Reported...70 per diluted share in 2013 Reported net income for the full ...2014. Became one of only two U.S. airlines with investment grade credit ratings. Named "Top Dividend Stock of the Dow Transports" at Dividend Channel with 1.2% yield. Year-to-date highlights of Alaska Air...

  • Page 117
    ... at every seat on our 737-800/900/900ER aircraft. Received the 2014 Community Impact Award from Seattle Business Magazine. Celebrated the opening of the Alaska Airlines Center sports complex at the University of Alaska Anchorage. ‰ ‰ ‰ ‰ Flew 13 relief flights to Los Cabos, Loreto, and...

  • Page 118
    ... 2x Weekly (Seasonal) 3x Weekly Daily Daily Daily Daily Start Date 6/9/2014 6/10/2014 6/11/2014 6/12/2014 6/16/2014 6/16/2014 6/18/2014 6/9/2014 6/12/2014 6/20/2014 9/2/2014 9/4/2014 9/18/2014 11/4/2014 11/6/2014 11/20/2014 Start Date 1/15/2015 3/5/2015 3/11/2015 7/1/2015 7/1/2015 7/1/2015 Capital...

  • Page 119
    ... compliant and reliable operations at our airlines. In addition to our primary objective... our in-flight experience with our Alaska Beyondâ„¢ in-flight experience featuring Tom... We expect Delta Air Lines, our largest direct competitor, to increase its overlapping capacity from 41% in 2014 to 50% in...

  • Page 120
    ... mark-to-market gains or losses related to our fuel hedge positions. For 2014, we recognized net mark-to-market adjustments of $23 million ($15 million ...measures used by management and by the Air Group Board of Directors in assessing quarterly and annual cost performance; Our results excluding fuel...

  • Page 121
    ...results to those of other airlines. Although we are presenting ... item, our adjusted consolidated net income for 2014 was $571 million, or $4.18 per...70 (in millions, except per-share amounts) Net income and diluted EPS as reported $ Mark-to-market fuel hedge adjustments, net of tax Special items, net...

  • Page 122
    Our operating costs per ASM (CASM) are summarized below: Twelve Months Ended December 31, 2014 2013 % Change Consolidated: Total operating expenses per ASM (CASM) Less the following components: Aircraft fuel, including hedging gains and losses Special items CASM, excluding fuel ...

  • Page 123
    OPERATING STATISTICS SUMMARY (unaudited) Alaska Air Group, Inc. Below are operating statistics we use to measure performance. We often refer to unit revenues and adjusted unit costs, which is a non-GAAP measure. 2014 Consolidated Operating Statistics:(a) Revenue passengers (000) RPMs (000,000) "...

  • Page 124
    ... data includes information related to regional CPA flying with Horizon, SkyWest and PenAir. See reconciliation of this measure ...fleet as part of our cabin improvement project, and delivery of 10 737-900ERs in 2014. The increase in PRASM was driven by a 1.9% increase in ticket yield, partially offset...

  • Page 125
    ...it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management: Twelve Months Ended December 31, 2014 2013 % Change $ 1,418 $ 3,018 (30) 4,406 $ 1,467 2,851 - 4,318 (3) 6 NM 2 (in millions) Fuel expense Non-fuel...

  • Page 126
    ...and benefits $ Wages increased 9%, primarily due to annualization of new labor contracts that included higher rates, a 4.7% increase in full-time employee equivalents, and an $8 million signing bonus paid to Alaska's flight attendants in December 2014 when a new collective bargaining agreement was...

  • Page 127
    ... evaluate our results using this measure, and it is the basis for most internal management reporting and incentive pay plans. Losses recognized for hedges that settled during the year were $41 million in 2014, compared to losses of $52 million in 2013. These amounts represent the cash received, or...

  • Page 128
    ... for both fleet types. Landing Fees and Other Rentals Landing fees and other rental expenses increased $17 million, or 6%, primarily due to increased flying in 2014 as we increased capacity and entered into new markets. We expect landing fees and other rental expenses to increase in 2015 due to the...

  • Page 129
    ... and other personnel expenses. Special Items In the fourth quarter of 2014, we recorded special items for $30 million. This is primarily... or decreased either more or less than capacity. Twelve Months Ended December 31, 2013 2014 2013 Amount CASM CASM $ 1,086 105 247 119 262 221 179 270 84 278...

  • Page 130
    ... and repair of three aircraft that were previously subleased to another carrier. Horizon Pretax profit for Horizon was $17 million in 2014 compared to $20 million in 2013. CPA Revenues (100% of which are from Alaska and eliminated in consolidation) increased due to additional capacity in the state...

  • Page 131
    ...383 $ 3.58 $ (0.03) (0.85) 2.70 $ 316 $ 23 - 339 $ 2.20 0.17 - 2.37 (in millions, except per-share amounts) Net income and diluted EPS as reported Mark-to-market fuel hedge adjustments, net of tax Special mileage plan revenue Non-GAAP adjusted income and per-share amounts Revenues adjusted for the...

  • Page 132
    ... by a 0.9% decrease in ticket yield and a 0.5 point decrease in load factor compared to the prior year. Increased competition in the state of Alaska and along the west coast put downward pressures on yield and load factor. Passenger Revenue - Regional Regional passenger revenue increased by $31...

  • Page 133
    ...to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management: Twelve Months Ended December 31, 2013 2011 % ... 6%, primarily due to a ratified contract with Alaska's pilots that was effective April 1, 2013. Additionally...

  • Page 134
    ..., primarily due to a $14 million increase in lease return provisions. During the year we modified one of our power-by-thehour agreements and terminated another related to our B737 fleet, resulting in a decrease in expense under those agreements but an increase in engine events and related expense...

  • Page 135
    Contracted Services Contracted services increased $21 million, or 11%, primarily due to more capacity purchase flying with SkyWest and higher rates with PenAir. Additionally, we experienced higher passenger and ramp handling costs, and other services as a result of an increase in the number of ...

  • Page 136
    ...which are from Alaska and eliminated in consolidation) decreased due to lower operational incentives being met. The $3 million increase in Horizon's non-fuel ... strong balance sheet and financial performance, in 2014 we became one of only two airlines in the U.S. with investment grade credit ratings...

  • Page 137
    ...requirements. ANALYSIS OF OUR CASH FLOWS Cash Provided by Operating Activities In 2014, we generated over $1 billion in operating cash flows compared to $...B737-900ERs and three Q400s in the prior year. As of December 31, 2014, we had firm commitments for 73 B737 aircraft through 2022 with options to ...

  • Page 138
    ... B737-800 aircraft, and two Q400 aircraft in the prior year. Cash Used by Financing Activities Cash used by financing activities was $462 million during 2014, compared to $325 million in 2013. During the current year, we made debt payments of $119 million, stock repurchases of $348 million, and cash...

  • Page 139
    The following table summarizes our projected fleet count by year, as of February 11, 2015: Actual Fleet Count Dec 31, Dec 31, 2013 2014 6 125 131 51 - 8 59 190 6 131 137 51 - 8 59 196 Expected Fleet Activity(a) 2015 Dec 31, 2016 - 2017 Dec 31, Changes 2015 Changes 2017 - 10 ...

  • Page 140
    ... shown above using interest rates in effect as of December 31, 2014. Includes minimum obligations under our long-term power-by-the-hour...using an accelerated depreciation method or bonus depreciation if available. For financial reporting purposes, the majority of our assets are depreciated over 15 to ...

  • Page 141
    ...available, as well as other legislative changes that are beyond our control. In 2014, we made tax payments of $326 million, and had an effective tax rate... transportation, to non-airline partners, such as hotels, car rental agencies, and a major bank that offers Alaska Airlines affinity credit cards. In...

  • Page 142
    ... 31, 2014, we ...each of the multiple deliverables. This relative allocation is evaluated annually and updated according to changes in the assumptions of the...patterns. 4. The number of awards redeemed for travel on our airlines versus other airlines: The cost for us to carry an award passenger is ...

  • Page 143
    ... his or her award ticket on one of our airlines, incremental costs such as food, fuel and insurance are... from the pension plans. At December 31, 2014, we refined the yield curve to use a...settlement rates, as we are taking steps to ultimately terminate or settle plans that are frozen and move toward...

  • Page 144
    ... we have had jet fuel refining margin swap contracts, but we have discontinued the use of the refining margin swaps in the third quarter of 2014. Call options effectively cap our pricing for the crude oil, limiting our exposure to increasing fuel prices for about half of our planned fuel consumption...

  • Page 145
    ...% increase or decrease in crude oil prices as of December 31, 2014 would increase or decrease the fair value of our crude oil hedge ... have any collateral held by counterparties to these agreements as of December 31, 2014. We continue to believe that our fuel hedge program is an important part ...

  • Page 146
    ..., 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, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee...

  • Page 147
    ... equipment Less accumulated depreciation and amortization Total Property and Equipment - Net Other Assets Total Assets See accompanying notes to consolidated financial statements. 2014 2013 $ 107 1,110 1,217 259 58 117 105 1,756 $ 80 1,250 1,330 152 60 113 107 1,762 5,165 896 555 6,616 2,317...

  • Page 148
    ... Accounts payable Accrued wages, vacation and payroll taxes Air traffic liability Other accrued liabilities Current portion of long... par value Authorized: 200,000,000 shares, Issued: 2014 - 131,556,573 shares; 2013 - 137,533,382 shares, Outstanding: 2014 - 131,481,473 shares; 2013 - 137,491,...

  • Page 149
    ... tax expense Net Income Basic Earnings Per Share: Diluted Earnings Per Share: Shares used for computation: Basic Diluted Cash dividend declared per share $ $ $ 2014 2013 2012 $ 3,774 805 4,579 114 675 - 5,368 $ 3,490 777 4,267 113 584 192 5,156 $ 3,284 746 4,030 111 516 - 4,657 1,136 116...

  • Page 150
    ... Income tax benefit (expense) Total Other Comprehensive Income (Loss) Comprehensive Income See accompanying notes to consolidated financial statements. 2014 $ 605 $ 2013 508 $ 2012 316 2 (2) - - (9) (2) 4 (7) 9 (7) (1) 1 (210) 9 76 (125) 358 42 (150) 250 (107) 39 25 (43) (8) 6 - (2) (127...

  • Page 151
    ... repurchase Stock-based compensation Cash dividend declared Stock issued for employee stock purchase plan Stock issued under stock plans Balances at December 31, 2014 Total 811 $1,174 316 1,127 508 - - - (28) - - 1,607 605 - - - (68) - - 316 (46) (60) 15 - 4 18 1,421 508 253 (159) 16 (28) 6 12...

  • Page 152
    ... Increase (decrease) in air traffic liability Increase (decrease... issuance of common stock Terminal 6 at LAX reimbursement Other financing activities ...for: Interest Income taxes See accompanying notes to consolidated financial statements. $ $ 2014 605 $ 2013 508 $ 2012 316 - 294 6 114 (110) 67 40...

  • Page 153
    ..., 2014 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 Industries...

  • Page 154
    ...consist primarily of airline traffic (including credit card) receivables, Mileage Planâ„¢ partners, amounts due from other airlines related to interline...inventory of $21 million and $23 million at December 31, 2014 and 2013, respectively. Repairable and rotable aircraft parts inventories are included...

  • Page 155
    ... not be known with certainty until lease termination. As leased aircraft are returned, any ...million and $15 million as of December 31, 2014 and December 31, 2013, respectively. Revenue Recognition... reported as air traffic liability until travel or date of expiration. Air ...airlines, 71 Å Form 10-K

  • Page 156
    ... to air transportation and certificates for discounted companion travel until the transportation is delivered. The deferred proceeds are recognized as passenger revenue for awards redeemed and flown on Alaska or Horizon, and as Other-net revenue for awards redeemed and flown on other airlines (less...

  • Page 157
    Alaska's Mileage Planâ„¢ revenue included in the consolidated statements of operations (in millions): 2014 Passenger revenues Other-net revenues Special mileage plan revenue(a) ...cost of Mileage Planâ„¢ travel awards earned through air travel, advertising, promotional costs, commissions, and ...

  • Page 158
    ...Company uses the asset and liability approach for accounting and reporting income taxes. Deferred tax assets and liabilities are recognized ... effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The...

  • Page 159
    ... 2. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES Components for cash, cash equivalents and marketable securities (in millions): December 31, 2014 Cash Cash equivalents Cash and cash equivalents U.S. government and agency securities Foreign government bonds Asset-backed securities Mortgage-backed...

  • Page 160
    ...expire from February 2020 through March 2021 to coincide with the lease termination dates. Fair Values of Derivative Instruments Fair values of derivative instruments on the consolidated balance sheet (in millions): 2014 Derivative Instruments Not Designated as Hedges Fuel hedge contracts Fuel hedge...

  • Page 161
    ... other current assets" on the consolidated balance sheet. The Company posted collateral of $3 million, $7 million and $15 million as of December 31, 2014, 2013 and 2012, respectively. The collateral was provided to a counterparty associated with the net liability position of the interest rate swap...

  • Page 162
    ... Instruments on a Recurring Basis Fair values of financial instruments on the consolidated balance sheet (in millions): December 31, 2014 Assets Marketable securities U.S. government and agency securities Foreign government bonds Asset-backed securities Mortgage-backed securities Corporate notes and...

  • Page 163
    ... fair value of long-term fixed-rate debt (in millions): 2014 Carrying Amount Fair value NOTE 5. ASSETS CONSTRUCTED FOR OTHERS In March 2012, the Company placed into service assets constructed for others (Terminal 6 at LAX), including a new baggage system, additional gates, new common use systems...

  • Page 164
    ... was in compliance with this covenant at December 31, 2014. NOTE 7. INCOME TAXES Deferred Income Taxes Deferred income ...due to differences in depreciation rates for federal income tax purposes and for financial reporting purposes, the Company has generated a net deferred tax liability. 80 $ 117...

  • Page 165
    ...and thus no valuation allowance has been recorded as of December 31, 2014. This conclusion is based on the expected future reversals of existing ... each future reporting period. Components of Income Tax Expense The components of income tax expense were as follows (in millions): 2014 Current tax ...

  • Page 166
    ...periods that are subject to examination are as follows: Jurisdiction Federal Alaska California Oregon Period 2011 2011 2010 2007 to to to to ...2014. NOTE 8. EMPLOYEE BENEFIT PLANS Four defined-benefit and five defined-contribution retirement plans cover various employee groups of Alaska and Horizon...

  • Page 167
    ... 3.93% Weighted average assumptions used to determine net periodic benefit cost: 2014 Discount rate Expected return on plan assets Rate of compensation increases(a) (a) ...settlement rates, as management has taken steps to ultimately terminate or settle plans that are frozen and move toward freezing...

  • Page 168
    ... the portfolio, and decreases the equity allocation. Actual asset allocations are reviewed regularly and periodically rebalanced as appropriate. As of December 31, 2014, all assets were invested in common commingled trust funds. The Company uses the net asset values of these funds to determine fair...

  • Page 169
    ... term Total liability recognized $ $ - 133 133 $ $ 2013 60 - - The amounts not yet reflected in net periodic benefit cost and included in AOCL: 2014 Prior service credit Net loss Amount recognized in AOCL (pretax) $ $ (12) $ 514 502 $ 2013 (14) 331 317 The expected amortization of prior service...

  • Page 170
    ...2017 2018 2019 2020 - 2024 Nonqualified Defined-Benefit Pension Plan Alaska also maintains an unfunded, noncontributory defined-benefit plan for certain ... an assumed discount rate of 4.20% and 4.85% at December 31, 2014 and 2013, respectively. The Company does not believe the U.S. Health Care Reform...

  • Page 171
    ... benefits beginning in 2015. As a result of these changes, the Company recognized a partial curtailment gain of $25 million during December 31, 2014. The curtailment gain included $5 million associated with an embedded sick leave subsidy. This subsidy was used to establish a new compensated absence...

  • Page 172
    ... medical plans included the following components (in millions): 2014 Service cost Interest cost Amortization of prior service cost Recognized...the following effect on the Company's postretirement medical plans (in millions): 2014 Change in service and interest cost 1% higher trend rate 1% lower trend...

  • Page 173
    ...2014 and December 31, 2013, respectively. Employee Incentive-Pay Plans Alaska and Horizon...Performance Rewards Program entitles all Air Group employees to quarterly payouts ... airport and terminal facilities are also leased. Rent expense was $288 million, $290 million, and $275 million, in 2014, 2013, ...

  • Page 174
    ...purchase agreements column of the commitments table. At December 31, 2014, Alaska had CPAs with three carriers, including the Company's wholly-owned subsidiary, Horizon. Horizon sells 100% of its capacity under a CPA with Alaska. In addition, Alaska has a CPA with PenAir to fly certain routes in the...

  • Page 175
    ... as of February 24, 2015. This is a 60% increase from the most recent quarterly dividends of $0.125 per share. Common Stock Repurchase In May 2014, the Board of Directors authorized a $650 million share repurchase program, which does not have a set expiration date. In September 2012, the Board of...

  • Page 176
    ... of the Agreement. The relative selling price of the undelivered element (air transportation) is lower than the rate at which it had been deferred...the curtailment of certain postretirement benefit plans. In the fourth quarter of 2014, we recorded a one-time gain of $10 million associated with ...

  • Page 177
    ... for future grants of either options or stock awards as of December 31, 2014. Stock Options Stock options to purchase common stock are granted at the fair ...with the following weighted-average assumptions used for grants: 2014 Expected volatility Expected term Risk-free interest rate Expected dividend...

  • Page 178
    ...Life (Years) 0.6 $ Aggregate Intrinsic Value (in millions) 47 Number of Units Non-vested, December 31, 2013 Granted Vested Forfeited Non-vested, December 31, 2014 Deferred Stock Awards 1,278,430 $ 400,650 (630,390) (21,300) 1,027,390 $ 0.6 $ 61 Deferred Stock Units (DSUs) are awarded to members...

  • Page 179
    .... Employees purchased 298,283, 171,227, and 157,373 shares in 2014, 2013, and 2012 under the ESPP. NOTE 13. OPERATING SEGMENT INFORMATION Air Group has two operating airlines - Alaska Airlines and Horizon Air. Each is a regulated airline with separate management teams. To manage the two operating...

  • Page 180
    ... is as follows (in millions): Alaska Year Ended December 31, 2014 Operating revenues Passenger Mainline Regional Total passenger...368 3,774 805 4,579 - 114 675 5,368 Air Group Special Mainline Regional Horizon Consolidating Adjusted(a) Items(b) Consolidated Operating expenses Operating expenses,...

  • Page 181
    Alaska Year Ended December 31, 2013 Operating revenues Passenger Mainline Regional Total... 584 4,964 192 192 3,490 777 4,267 - 113 776 5,156 Air Group Special Mainline Regional Horizon Consolidating Adjusted(a) Items(b) Consolidated Operating expenses Operating expenses, excluding fuel Economic fuel...

  • Page 182
    Alaska Year Ended December 31, 2012 Operating revenues Passenger Mainline Regional ...030 - 111 516 4,657 3,284 746 4,030 - 111 516 4,657 Air Group Special Mainline Regional Horizon Consolidating Adjusted(a) Items(b) Consolidated Operating expenses Operating expenses, excluding fuel Economic fuel ...

  • Page 183
    2014 Depreciation: Alaska(a) Horizon Parent company Consolidated $ $ 243 51 - 294 $ 2013 223 $ 47 - 270 $ 2012 217 47 - 264 Capital expenditures: Alaska(a) Horizon Consolidated $ $ 659 $ 35 694 $ 494 $ 72 566 $ 477 41 518 Total assets at end of period: Alaska(a) Horizon... by this report. Based on...

  • Page 184
    ... 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, 2014. We intend to regularly review and evaluate the design and effectiveness of our disclosure controls and procedures and...

  • Page 185
    ... OF 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, 2014, based on criteria established in Internal Control - Integrated Framework (2013...

  • Page 186
    ... herein by reference from the definitive Proxy Statement for Air Group's 2015 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, 2014...

  • Page 187
    ... item is incorporated herein by reference from our 2015 Proxy Statement. PART IV ITEM 15. EXHIBITS The following documents are filed as part of this report: 1. Exhibits: See Exhibit Index. 103 Å Form 10-K

  • Page 188
    ... 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/ BRADLEY D. TILDEN Bradley D. Tilden President and Chief Executive Officer Date: February 11, 2015...

  • Page 189
    ... Purchase Agreement No. 3866 between The Boeing Company and Alaska Airlines, Inc. August 5, 2005 10.2 10.1 10-Q/A August 2, 2011 10.4# 10-K February 14, 2013 10.1 10.5# 10.6* 10-K February 14, 2013 10.2 May 9, 2014 10.1 Alaska Air Group Performance Based Pay Plan 10-Q (formerly "Management...

  • Page 190
    ..., as amended 1995 Elected Officers Supplementary Retirement Plan, as amended Form of Alaska Air Group, Inc. Change of Control Agreement for named executive officers, as amended and restated October 16, 2014 Subsidiaries of Registrant Consent of Independent Registered Public Accounting Firm (KPMG LLP...

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  • Page 193
    ... Safety Herman W. Wacker Vice President Legal and General Counsel ALASKA AIRLINES OFFICERS Bradley D. Tilden Chairman, President and CEO Andrew R....General Counsel Sangita C. Woerner Marketing Tamara S. Young Human Resources HORIZON AIR OFFICERS Bradley D. Tilden Chairman and CEO David L. Campbell ...

  • Page 194
    ..., Alaska provided scheduled air service for about 20.9 million passengers. Alaska flies more than 180 aircraft to 100 plus destinations throughout the United States, Canada and Mexico. For 2014, Alaska reported record financial results and one of the highest profit margins in the airline industry...

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