ALASKA AIR GROUP INC

Alaska Air Group is a Delaware corporation incorporated in 1985 that operates three airlines, Alaska Airlines, Hawaiian Airlines, and Horizon Air. Alaska Airlines was organized in 1932 and incorporated in 1937 in the state of Alaska. Hawaiian Airlines was originally incorporated in 1929 in the Territory of Hawai'i, and has been a Delaware corporation and wholly-owned subsidiary of Hawaiian Holdings, Inc. since 2005. Horizon Air is a Washington corporation that was incorporated and began service in 1981, and was acquired by Air Group in 1986. Air Group acquired Virgin America in 2016, then legally merged the entity with Alaska in 2018, at which time the airlines' operating certificates were also combined. The Company also includes McGee Air Services, an aviation services provider that was established as a wholly-owned subsidiary of Alaska in 2016, and other subsidiaries.

Alaska, Hawaiian, and Horizon operate as separate airlines. Alaska also purchases third-party capacity for regional flying under a capacity purchase agreement (CPA). A summary of each airline's operations is presented below:

•Alaska - includes scheduled air transportation on Alaska's Boeing 737 (B737) aircraft for passengers and cargo from the western United States (U.S.) throughout North America, Mexico, Costa Rica, Belize, the Bahamas, and Guatemala.

•Hawaiian - includes scheduled air transportation on Hawaiian's Boeing 787-9 (B787-9), Boeing 717-200 (B717-200), Airbus A330-200 (A330-200), Airbus A321neo, and Airbus A330-300F (A330-300F) aircraft for passengers and cargo between the Hawaiian Islands (the Neighbor Island routes), as well as between Hawai'i and the continental U.S., parts of Asia, the South Pacific, Australia, and New Zealand.

•Horizon - includes scheduled air transportation on Horizon's Embraer 175 (E175) aircraft for passengers throughout the western region of North America. All capacity is sold to Alaska under a CPA.

Our Company is the fifth largest provider of air transportation in the United States, offering unparalleled guest service, connectivity, and schedules from our hub markets along the West Coast and in Hawai'i. With our regional partners, we fly to more than 140 destinations throughout North America, Central America, Asia, and across the Pacific. Alaska is a member of theone world® alliance. Withone world and other global partners, Alaska's guests have access to more than 900 destinations in 170 territories. We have operated in a highly competitive and often challenging industry for more than 90 years. Our airlines' top priority is ensuring the safety of our guests and employees, an area we continually invest in. Our success over many decades is attributable to the prioritization of safety as our number one value, as well as our people, business model, and commitment to sustainable growth over the long-term.

In 2024, Alaska Air Group acquired Hawaiian Holdings, Inc. Work to integrate the two companies has begun in earnest, and we anticipate reaching a single operating certificate, combining our loyalty programs, moving to a single passenger service system, and pursuing joint collective bargaining agreements for union-represented employees over the next few years.

AIR GROUP

Our airlines operate different aircraft, which serve different missions, described in more detail below. The majority of our revenue is generated by transporting passengers. We deploy aircraft in ways that we believe will best optimize our consolidated revenue and profitability.

The percentage of consolidated revenue by category is presented below:

The percentage of consolidated passenger capacity by principal geographic region (as defined by the U.S. Department of Transportation) is presented below:

ALASKA AIRLINES

Alaska Airlines offers passenger service on B737 aircraft from the western U.S. throughout North America, Mexico, Costa Rica, Belize, the Bahamas, and Guatemala. Alaska's largest concentrations of departures are from our hubs in Anchorage, Seattle, Portland, San Francisco, Los Angeles, and San Diego. Alaska carried 36 million revenue passengers in 2024, up from 35 million in 2023.

The percentage of Alaska passenger capacity by region and average stage length is presented below:

(a) Category represents flying within West Coast markets. Departures from West Coast markets to other regions are captured in other categories.

The percentage of Alaska passenger capacity by principal geographic region (as defined by the U.S. Department of Transportation) is presented below:

HAWAIIAN AIRLINES

Hawaiian Airlines offers passenger service on B787-9, A330-200, A321neo, and B717 aircraft between the Hawaiian Islands, as well as between Hawai'i and the continental U.S., parts of Asia, the South Pacific, Australia, and New Zealand. Hawaiian's largest concentration of departures is from Honolulu. Hawaiian carried 3 million revenue passengers in the post-acquisition period from September 18, 2024 through December 31, 2024, and 11 million in the full year of 2024.

The percentage of Hawaiian passenger capacity by principal geographic region (as defined by the U.S. Department of Transportation) and average stage length is presented below. Capacity flown by Hawaiian for the post-acquisition period of 2024 is shown below, with capacity for the full year of 2024, 2023, and 2022 included for comparative purposes.

(a) Represents Hawaiian's capacity covering the post-acquisition period from September 18, 2024 through December 31, 2024.

(b) Represents Hawaiian's capacity in the full year 2024, including the period prior to acquisition by Air Group on September 18, 2024.

REGIONAL

Regional operations include passenger service on E175 aircraft operated by Horizon and SkyWest under CPAs with Alaska, primarily in the states of Washington, Oregon, California, Alaska, and Idaho. Regional operations carried approximately 10 million revenue passengers in 2024, up from 9 million in 2023. Horizon is the largest regional airline in the Pacific Northwest and carried approximately 52% of Air Group's Regional passengers.

The percentage of Regional passenger capacity by region and average stage length is presented below:

CARGO AND OTHER REVENUE

The Company provides freight and mail services (cargo) using both freighter aircraft and the bellies of its passenger aircraft. The acquisition of Hawaiian in 2024 expanded Air Group's cargo service and the combined network is expected to improve schedule quality and profitability moving forward.

Alaska has five dedicated cargo aircraft that operate primarily to and within the state of Alaska. The majority of Alaska's cargo services is provided to commercial businesses and the United States Postal Service. Cargo service performance obligations are met and revenue is recognized when the shipment arrives at its final destination, or is transferred to a third-party carrier for delivery. Hawaiian provides cargo services as part of its Air Transportation Services Agreement (ATSA) with Amazon.com, Inc. (Amazon). Under the ATSA, Hawaiian supplies flight crews, performs maintenance and certain administrative functions, and procures aircraft insurance. Additionally, Hawaiian receives a fixed monthly fee per aircraft, a per flight hour fee, and a per flight cycle fee for each flight cycle operated, and is reimbursed for certain operating expenses, including fuel, certain maintenance, and insurance premiums. The ATSA provides for Hawaiian to operate up to ten A330-300F aircraft. As of December 31, 2024, Hawaiian has taken delivery of and is operating six A330-300F aircraft.

The Company also earns other revenue for lounge memberships, hotel and car commissions, travel insurance, and certain other immaterial items not intrinsically tied to providing air travel to passengers. Revenue is recognized when these services are rendered and recorded as Cargo and other revenue.

LOYALTY PROGRAMS

Alaska and Hawaiian maintain separate loyalty programs, each offering members a comprehensive suite of benefits. Air Group anticipates combining the two programs into an integrated program in 2025. Prior to combination of the programs, Air Group implemented the ability to transfer points between the two programs at a 1:1 ratio for no charge. Additionally, elite members in either program can have their status matched in the other. Alaska members are also eligible to redeem miles for travel on Hawaiian. A description of each airline's program as of December 31, 2024 is included below.

In 2024, Air Group loyalty program members redeemed miles and companion certificates for over seven million award tickets on our airlines and partner airlines, inclusive of Hawaiian loyalty program redemptions for the post-acquisition period from September 18, 2024 through December 31, 2024. Loyalty program revenue, including that in the Passenger revenue line item in the consolidated statements of operations, represented approximately 16% of Air Group's total revenue in 2024.

Alaska Airlines

Alaska Airlines Mileage Plan™ members can earn miles by flying on Alaska. Miles are awarded based on distance, not spend, which serves as a competitive advantage over other airlines' programs, as miles accumulate faster. Miles can also be earned by flying with one of Alaska's partner airlines, by using Alaska's co-branded credit card, or through other non-airline partners. Miles awarded do not expire and can accumulate until such time a member chooses to redeem. Members can redeem miles earned for flights on Alaska and partner airlines, hotel stays and vacation rentals, and car rentals.

For loyalty program members, the program offers multiple tiers of MVP status, including MVP Gold, MVP Gold 75K, and MVP Gold 100K, which can be achieved annually by earning qualifying miles. For those achieving MVP tier status, the program offers benefits, including bonus miles on flown segments, complimentary upgrades, free checked bags, and priority boarding. Members qualifying for higher tiers are offered incremental benefits. As a member ofone world, Mileage Plan members with tier status are provided reciprocal status and benefits when flying on otherone world members.

Alaska has an agreement with Bank of America N.A which offers Mileage Plan members in the U.S. the Alaska Airlines Visa Signature card (Alaska's co-branded credit card). Cardholders receive miles for spend on the card, as well as an annual companion ticket that allows members to purchase an additional ticket for $99 plus taxes, with no restrictions or black-out dates, and a free first checked bag for up to seven people traveling on the same itinerary. Alaska's co-branded credit card agreement provides the Company a material cash remuneration, and is an important source of value for Mileage Plan members.

Alaska Airlines also offers a complimentary loyalty program within Mileage Plan for residents of the state of Alaska. Club 49™ offers members two free checked bags, last-minute travel discounts, exclusive weekly fare sales, and discounts on cargo shipments to, from or within the state of Alaska.

Hawaiian Airlines

HawaiianMiles™ awards miles based on distance, providing generous earning potential on longer haul routes between the U.S. mainland and international cities and Hawai'i. Miles are also earned by flying with one of Hawaiian's partner airlines, by using Hawaiian's co-branded credit card, or through other non-airline partners. Miles awarded do not expire and can accumulate until such time a member chooses to redeem. Members can redeem miles earned for flights on Hawaiian or partner airlines, hotel stays, or for other non-airline partner benefits.

Pualani Gold and Platinum status levels recognize the airline's most loyal members with additional benefits, including priority airport experiences, Premier Club access, seat upgrades, and enhanced baggage allowances. Status can be achieved annually by earning qualifying miles or flying a certain number of segments.

Hawaiian's agreements with Barclays, Bank of Hawaii, and Mastercard are drivers of program engagement and revenue. The HawaiianMiles program utilizes the Barclays' World Elite Mastercard and the Bank of Hawaii VISA debit card. These products allow members to accumulate more miles between their trips on Hawaiian, provide material cash remuneration, and are critical engagement tools for the airline.

Hawaiian Airlines also offers a complimentary loyalty program within HawaiianMiles for residents of the state of Hawai'i. Huaka'i by Hawaiian offers kama‘āina (Hawai'i residents) members a free checked bag, discounts on Neighbor Island travel, and monthly network-wide discounts.

AGREEMENTS WITH OTHER AIRLINES

Alaska and Hawaiian have various types of marketing agreements with other airlines. These agreements fall into three categories: loyalty program, codeshare, and interline.

•Loyalty program agreements enable our members to accrue miles and/or redeem them for flights on partner airlines.

•Codeshare agreements allow one or more marketing carriers to sell seats on a single operating carrier that serves passengers under multiple flight numbers. The sale of codeshare seats can vary depending on the sale arrangement. For example, in a free-sale arrangement, the marketing carrier sells the operating carrier's inventory without any restriction; whereas in a block-space arrangement, a fixed amount of seats are sold to the marketing carrier by the operating carrier. The interchangeability of the flight code between carriers provides a greater selection of flights for customers, along with increased flexibility for mileage accrual and redemption.

•Interline agreements allow airlines to jointly offer a competitive, single-fare itinerary to customers traveling via multiple carriers to a final destination. An interline itinerary offered by one airline may not necessarily be offered by the other, and the fares collected from passengers are prorated and distributed to interline partners according to preexisting agreements between the carriers.

These agreements help increase our traffic and revenue by providing a more diverse network and schedule options to our guests.

Alaska is a member of theone world alliance. Alaska's elite Mileage Plan members receive tier status matching across other member airlines. Depending on tier status, guests can enjoy a variety of privileges, including access to more than 600 international first and business class lounges, fast track through security, priority baggage benefits, priority check-in desks, upgrades, and priority boarding.

Alliances are an important part of our strategy and enhance our revenue by:

•offering our guests more travel destinations and better mileage credit and redemption opportunities, including elite qualifying miles on U.S. and international airline partners;

•providing a consistent and seamless guest experience whether flying on Alaska or one of our partners;

•giving us access to more connecting traffic from other airlines; and

•providing members of our partners’ loyalty programs an opportunity to travel on Alaska and our regional partners while earning mileage credit in our partners’ programs.

Most of our codeshare relationships are free-sale codeshares, where the marketing carrier sells seats on the operating carrier’s flights from the operating carrier’s inventory, but takes no inventory risk. Our marketing agreements have various termination dates, and one or more may be in the process of renegotiation at any time. Our codeshare and interline agreements generated 5% of our total operating revenue for each of the years ended December 31, 2024, 2023, and 2022.

Alaska's marketing agreements with other airlines are as follows:

(a) These airlines do not have their own loyalty program. However, Alaska's Mileage Plan members can earn and redeem miles on these airlines' route systems.

(b) These airline partnerships are limited to earning miles. Alaska's Mileage Plan members can earn miles when purchasing these airlines' flights on www.alaskaair.com.

Hawaiian's marketing agreements with other airlines are as follows:

GENERAL

The airline industry is highly competitive and subject to potentially volatile business cycles, resulting from factors such as uncertain economic conditions, volatile fuel prices, supply chain dependencies, pandemics, a largely unionized work force, the need to finance large capital expenditures and the related availability of capital, government regulation - including taxes and fees, and potential aircraft incidents. Airlines have high fixed costs, primarily for wages, aircraft fuel, aircraft ownership, and facilities rents. Because expenses of a flight do not vary significantly based on the number of passengers carried, a relatively small change in the number of passengers or in pricing has a disproportionate effect on an airline’s operating and financial results. In other words, a minor shortfall in expected revenue levels could cause a disproportionately negative impact to our operating and financial results. Passenger demand and ticket prices are, in large measure, influenced by the general state of the economy, current global economic and political events, and total available airline seat capacity.

SAFETY

The safety and well-being of our employees and guests is the foundation of our work at Alaska Air Group. The Company's primary safety objective is to identify, monitor, and mitigate safety risks, which we do using our airlines’ Safety Management Systems (SMS). Our safety principles and safety initiatives are critical to empowering employees to pause the operation any time something appears to be unsafe. Safety goals and objectives are regularly reviewed and communicated to employees, and are continually measured to evaluate our progress. Alaska and Horizon employees are also rewarded for reporting safety concerns and meeting measurable safety targets as both our Performance Based Pay (PBP) and Operational Performance Rewards (OPR) programs include payouts for achievement to stated goals.

As of December 31, 2024, Alaska and Horizon operate under one SMS and Hawaiian operates under its own SMS. Air Group has started the process of integrating the two systems as it works towards combining Alaska and Hawaiian under a single operating certificate.

Air Group's Board of Directors has a Safety Committee that is responsible for oversight of safety-related risk and management's efforts to ensure the safety of all passengers and employees. The Committee receives regular updates from management throughout the year and provides feedback to create and maintain a strong safety culture.

FUEL

Our business and financial results are highly impacted by the price and the availability of aircraft fuel. Aircraft fuel expense includes raw fuel expense, or the price that we generally pay at the airport, including taxes and fees, plus the impact of our fuel hedge program, including the effect of mark-to-market adjustments to our portfolio as the value of that portfolio increases and decreases. In addition, management reviews economic fuel costs, which include the impact of settled fuel hedge positions but excludes mark-to-market adjustments. Management considers economic fuel costs to be the best estimate of the cash cost of fuel. The cost of aircraft fuel is volatile and outside of our control, and can have a significant and immediate impact on our operating results.

Fuel prices are impacted by changes in both the price of crude oil and refining costs, and can vary by geography. Alaska purchases its fuel primarily based on U.S. West Coast jet fuel prices, while Hawaiian purchases its fuel primarily based on Singapore jet fuel prices. The table below presents economic fuel cost per gallon for Alaska and Hawaiian.

(a) For Hawaiian, represents costs in the full year 2024, including the period prior to acquisition by Air Group on September 18, 2024.

The cost composition of our aircraft fuel expense, inclusive of Hawaiian for the post-acquisition period from September 18, 2024 through December 31, 2024, is as follows:

(a) Other includes gains and losses on settled fuel hedges, unrealized mark-to-market fuel hedge gains and losses, taxes, and other into-plane costs.

Alaska and Hawaiian each have a fuel hedge program, both of which use crude oil call options to limit exposure to material increases in fuel prices. The call options lessen the financial impact from spikes in crude oil prices, and when prices are below the call option strike prices, we only forfeit cash previously paid for hedge premiums. Alaska's program was suspended in 2023, and has open positions based in West Texas Intermediate (WTI) crude oil that will settle through the first quarter of 2025. Hawaiian's program was temporarily paused as of September 30, 2024, and has open positions based in Brent crude oil, that will settle through the third quarter of 2025.

Sustainable aviation fuel (SAF) is an important part of our long-term strategy to reduce emissions. In 2024, Alaska used limited quantities of SAF on flights departing from San Francisco International Airport and Los Angeles International Airport. SAF prices are generally higher than jet fuel prices as the SAF market is still developing. The demand for SAF within the aviation industry significantly exceeds the current available supply. We are evaluating options for obtaining the volume of SAF that we expect will be necessary to move us toward our long-term carbon-emission goals. These options include partnerships with alternative fuel companies and industry groups focused on ways to accelerate innovation in this area.

We believe that operating fuel-efficient aircraft and executing on operational best practices are the best strategies to mitigate high fuel prices. Maintaining a young, fuel-efficient fleet helps reduce our fuel consumption rate, as well as the amount of greenhouse gases and other pollutants that our aircraft emit.

COMPETITION

Competition in the airline industry can be intense and unpredictable. Our competitors consist primarily of other airlines and, to a lesser extent, other forms of transportation. Competition can be direct, in the form of another carrier flying the exact non-stop route, or indirect, where a carrier serves the same two cities non-stop from an alternative airport in that city or via an itinerary requiring a connection at another airport. Our airlines compete with other U.S. and foreign airlines on nearly all of our domestic and international routes. Our largest competitor is Delta Air Lines Inc. (Delta). Approximately 79% of our capacity to and from Seattle competes with Delta. In addition to Delta, Southwest Airlines and United Airlines are significant competitors in the state of Hawai'i and on the West Coast. Our Hawai'i, California, transcontinental, and international routes have a higher concentration of competitors when compared to our routes within the Pacific Northwest.

We believe that the following competitive factors matter to guests when making an air travel purchase decision:

•Fares and ancillary services

Ticket and other fee pricing is a significant competitive factor in the airline industry. Travelers are able to easily compare fares and identify competitor promotions and discounts. Pricing is driven by a variety of factors including, but not limited to, market-specific capacity, market share per route/geographic area, cost structure, fare vs. ancillary revenue strategies, and demand.

Airlines often discount fares to drive traffic in new markets or to stimulate traffic when necessary to improve load factors. Historically, markets that faced competition from low-cost and ultra-low-cost carriers were subject to disruptive ticket and fee pricing as the carriers' low cost per available seat mile allowed them to serve markets at very low fares. Legacy carriers with expansive networks and diversified product offerings have experienced greater success attracting more price-conscious customers with their basic economy offerings. These factors can reduce our pricing power and that of the airline industry as a whole.

Domestic airline capacity is dominated by four large carriers, representing 78% of total seats. Given the large concentration of industry capacity, some carriers in our markets may discount their fares substantially to develop or increase market share. Fares that are substantially below our cost to operate can be harmful if sustained over a long period of time. We will defend our position in our core markets and, if necessary, adjust capacity to better match supply with demand. Our cost discipline and high productivity have historically enabled us to maintain competitive fares.

•Routes served, flight schedules, codesharing and interline agreements, and alliances

We compete with other airlines based on markets served and the frequency of service to those markets. Some airlines have more extensive route structures than we do, and they offer significantly more international routes. In order to expand opportunities for our guests, we enter into codeshare and interline agreements with other airlines. These agreements allow us to offer our guests access to more destinations than we can on our own and to gain exposure in markets we do not serve. The agreements also make it more convenient for guests to purchase flights to their final destinations through our airlines' distribution channels.

Alaska's membership in theone world alliance provides its guests increased global network utility, and positions the airline to capture an incremental share of global travelers and corporate accounts. Throughone world, guests can travel to more than 900 destinations in 170 territories.

•Loyalty programs

We compete with other airlines for customer loyalty in order to build long-term relationships with our guests. Our Mileage Plan and HawaiianMiles programs offer some of the most valuable benefits in the industry, giving our members the ability to earn and redeem miles when flying with us or our partner carriers. Awarding miles for flights based on distance traveled serves as a competitive advantage when compared to other airlines that award miles based on fares, as customers can accumulate miles faster. The programs have multiple tiers of status that offer a variety of benefits including bonus miles, complimentary upgrades, free checked bags, and priority boarding. Our loyalty programs also offer exclusive benefits to residents in the states of Alaska and Hawai'i through our Club 49 and Huaka'i programs, which show our gratitude for major communities we serve. Members of our loyalty programs also have access to co-branded credit cards as an additional way to accumulate miles and take advantage of additional benefits. Additionally, Alaska's Mileage Plan gives guests the ability to enjoy privileges on otherone world airlines by granting reciprocal status and benefits, which include upgrades, lounge access, and priority boarding.

•Product and customer service

We compete with other airlines in areas of customer service such as on-time performance and guest amenities - including first class and other premium seating, quality of on-board products, aircraft type and comfort. We have increased the number of premium seats on Alaska and Horizon aircraft, and intend to make significant investments in cabin retrofits and increased premium seat mix in coming years. The acquisition of Hawaiian introduced lie-flat seats to the Air Group fleet, providing guests the option for added comfort on long haul flights. The Company is also in the process of implementing improvements to our airport facilities that provide an enhanced guest experience, including lobby updates and lounge expansions.

Our employees are a critical element of our reputation. We have a highly engaged workforce that strives to provide genuine and caring service to our guests, both at the airport and onboard. We heavily emphasize our service standards with our employees through training and education programs, and monetary incentives related to operational performance and guest satisfaction.

Besides competing with other airlines, we compete with ground transportation in our short-haul markets. Our airlines also compete with technology, such as video conferencing and internet-based meeting tools. We expect that the advancement and increased utilization of these tools will eliminate the need for some business-related travel.

TICKET DISTRIBUTION

Our tickets are distributed through multiple channels:

•Direct to customer: Alaska sells direct at www.alaskaair.com and through the Alaska Airlines app. Hawaiian sells direct at www.hawaiianairlines.com and through the Hawaiian Airlines app. Selling direct is our most cost efficient sales channel. We also believe direct sales are preferable from a branding and customer relationship standpoint because we can establish ongoing communication with the guest and tailor offers accordingly. As a result, we prioritize efforts that drive more business to our websites. We also have reservation call centers where guests can book reservations.

As of December 31, 2024, Alaska and Hawaiian sell tickets through separate Passenger Service Systems (PSS). The airlines are expected to transition to a single PSS in 2026.

•Traditional and online travel agencies: Alaska and Hawaiian use travel agencies to sell to guests. Both traditional and online travel agencies typically use Global Distribution Systems to obtain their fare and inventory data from airlines. Bookings made through these agencies result in a fee that is charged to our airlines. Many large corporate customers require use of these agencies. Some of our competitors rely on this distribution channel to a lesser extent than we do, and, as a result, may have lower ticket distribution costs.

In 2024, 73% of our total sales were conducted direct to customer with the remaining 27% through traditional and online travel agencies.

SEASONALITY AND OTHER FACTORS

Our results of operations for any interim period are not necessarily indicative of those for the entire year because our business is subject to seasonal fluctuations. In typical years, our profitability is generally lowest during the first and fourth quarters due principally to fewer departures and passengers. Profitability typically increases in the second and third quarters as a result of vacation travel. Some of the negative impacts of seasonality are offset by travel from the West Coast to leisure destinations and expansion to leisure and business destinations in the mid-continental and eastern U.S. Seasonality and operating fluctuations may have a significant impact on operating results in an interim or annual period, and are not necessarily indicative of future operating results.

In a typical year, in addition to passenger loads, factors that could cause our operating results to vary include:

•pricing initiatives by us or our competitors;

• changes in fuel costs;

•increases in competition at our primary airports;

•general economic conditions, in both the U.S. and other countries, and resulting changes in both leisure and business passenger demand;

•increases or decreases in passenger and volume-driven variable costs; and

•air space and Air Traffic Control delays, particularly in Seattle and San Francisco.

Many of the markets we serve experience inclement weather conditions in the winter, causing increased costs associated with deicing aircraft, flight cancellations, and accommodating displaced passengers. In certain geographies such as the Pacific Northwest, Alaska and Hawai'i, we may be more susceptible to adverse weather conditions than some of our competitors who have different network exposures.

No material part of Alaska Air Group's or its subsidiaries' business is dependent upon a single customer, or upon a few high-volume customers.

ENVIRONMENTAL INITIATIVES

We have both short and long-term goals to reduce fuel consumption, with the long-term aim to reach net zero carbon emissions by 2040. Our roadmap for achieving this goal includes the following focus areas:

•Increasing operational efficiency: We take pride in consistently delivering top-of-industry operational performance. By having a consistent, top-of-industry operational performance, we are also able to optimize our fuel efficiency. Alaska and Horizon use Flyways AI, a technology which leverages artificial intelligence to enable more fuel-efficient flight paths. Other initiatives include reducing auxiliary power unit usage and connecting to ground power, taxiing with just one engine where conditions allow, and implementing a new engine wash program.

Reducing emissions from our ground service equipment through the acquisition and use of electrified and other lower-emissions equipment is another aspect of improving operational efficiency. Currently, not all airports have the necessary infrastructure in place to support charging and use of these units to enable their full operational reliability, and we are actively working with our airport partners to make these improvements.

•Renewing our fleet with more efficient airplanes: Alaska and Hawaiian have purchase commitments for B737 and B787-9 aircraft. Due to their designs, up-gauged capacity, and engines, the new aircraft are between 20% to 25% more efficient on a seat-by-seat basis than the aircraft they replace.

•Using SAF: Among available technologies, SAF has the greatest potential for enabling near-term progress towards our net zero emissions goal, as it can be used alongside traditional jet fuel as a drop-in fuel while producing up to 80% lower carbon emissions on a lifecycle basis. Currently, there are supply constraints in the SAF market, including scope, scale, and cost, which we are dependent on in order to expand our use of SAF at the quantities necessary to reach our net zero carbon emissions ambition. We are working with others in the aviation community, companies in the private sector, and governments at the federal and state levels towards advancing the scalability of SAF production and reducing its cost.

We currently offtake SAF from Neste at San Francisco International Airport and from Shell Aviation at Los Angeles International Airport. Alaska and Hawaiian have additional agreements to purchase SAF to be delivered in the coming years. Alaska's Fueled Up for the Future program enables collaboration with business travel customers to address their business travel emissions while supporting the development of the SAF market. In addition to corporate customers purchasing Scope 3 SAF credits to support the cost of these fuels, Alaska offers an opportunity within the booking path for individual guests to understand their travel-related emissions and to support SAF.

•Investing in new technologies: Our net zero ambitions require technologies not yet fully developed or available at the scale required to decarbonize our industry. In these areas, we are focused on doing our part to aid in their development and growth as well as galvanizing support from both public and private sectors through public policy and capital investment. To enable these technologies and accelerate our path to net zero carbon emissions, among other business needs, we established an investment arm in 2021, called Alaska Star Ventures (ASV). Through ASV, we have partnered with companies focused on new aircraft technologies. These include ZeroAvia, a company developing hydrogen-electric powertrain technology for regional aircraft, and JetZero, a company developing a blended wing body using existing engine technology while delivering up to 50% better fuel efficiency. ASV has also invested in Twelve, a power-to-liquid SAF provider utilizing recaptured carbon dioxide as feedstock to bring its E-Jet®, a low carbon jet fuel produced from recaptured carbon dioxide, water, and renewable energy, into commercial use.

•Harnessing credible carbon offset and carbon removal technologies: While our preference is for in-sector carbon reductions, the timeline for development and maturation of SAF markets and emerging aircraft technologies is difficult to predict, and we expect it is likely that both nature-based and engineered carbon removals will play some role in meeting our net zero ambition. We have partnered with industry experts to develop criteria for assessing credible, high-quality carbon offsets and carbon removal technologies. The Company does not have material investments in any carbon offsets or carbon removal technology. We will continue to evaluate various strategies, including these technologies, as we refine our plans to achieving net zero.

Since 2020, we have included a fuel efficiency metric in our Performance-Based Pay program for Alaska and Horizon employees, as we believe it is important to embed these critical targets into the incentives that align all of our employees.

CORPORATE RESPONSIBILITY GOVERNANCE

The Governance, Nominating, and Corporate Responsibility Committee of the Board of Directors regularly reviews performance on publicly reported fuel efficiency goals and climate-related issues. The Board has a dedicated Climate Working Group to oversee management’s climate strategy and path to net zero. This working group comprises three members from the board who bring deep expertise in energy, aviation, finance, and governance. The Audit Committee of the Board of Directors oversees Air Group's financial reporting process, including disclosures on corporate responsibility matters within the Company's financial statements. The Company's Executive Committee is responsible for overseeing the progress toward our climate goals and providing input on Air Group's climate strategy.

HUMAN CAPITAL

OUR PEOPLE

Our business is labor intensive. As of December 31, 2024, we employed 33,941 active employees (20,269 at Alaska, 7,362 at Hawaiian, 3,400 at Horizon, and 2,910 at McGee Air Services). Of those employees, 89% are full-time and 11% are part-time. Wages and benefits, including variable incentive pay, represented approximately 46% of our total non-fuel operating expenses in 2024 and 44% in 2023.

In 2024, we hired over 2,800 employees to support our growth and operations. Aligning our employees' goals with the Company's goals is critical in achieving success. During the year, Alaska and Horizon employees participated in the PBP and OPR programs, which reward employees across all work groups based on metrics related to profitability, safety, sustainability, guest satisfaction, completion rate, and on-time rate. Hawaiian employees also participate in a profit sharing and bonus program, which rewards employees based on metrics related to profitability, unit costs, guest satisfaction, employee sentiment, and operational performance. Alaska and Horizon employees earned $325 million under these incentive programs during the year.

COLLECTIVE BARGAINING

Most major airlines, including Alaska, Hawaiian, and Horizon, have employee groups that are covered by collective bargaining agreements (CBA). Airlines with unionized workforces generally have higher labor costs than carriers without unionized workforces. Those with unionized workforces may not have the ability to adjust labor costs downward quickly in response to new competition or slowing demand. At December 31, 2024, labor unions represented 85% of Alaska’s, 82% of Hawaiian's, 42% of Horizon’s, and 87% of McGee Air Services' employees.

Alaska and Hawaiian are working towards joint collective bargaining agreements (JCBA) for workgroups represented by the same unions. At December 31, 2024, Transition and Process Agreements are in place for certain workgroups, which define the process for negotiating JCBAs and set forth interim agreements until a JCBA is reached.

Our relations with U.S. labor organizations representing Alaska, Hawaiian, and Horizon employees are governed by the Railway Labor Act (RLA). Under the RLA, collective bargaining agreements do not expire, but instead become amendable as of a stated date. If either party wishes to modify the terms of any such agreement, it must notify the other party in the manner prescribed by the RLA and/or described in the agreement. After receipt of such notice, the parties must meet for direct negotiations, and if no agreement is reached, either party may request the National Mediation Board to initiate a process including mediation, arbitration, and a potential “cooling off” period that must be followed before either party may engage in self-help. Certain employees located outside the U.S. are also represented by unions or local representative groups.

Alaska’s union contracts at December 31, 2024 were as follows:

(a) In January 2025, Alaska reached a tentative agreement with its flight attendants, represented by the AFA, for an updated collective bargaining agreement. Voting on the tentative agreement will be completed in the first quarter of 2025.

Hawaiian’s union contracts at December 31, 2024 were as follows:

Horizon’s union contracts at December 31, 2024 were as follows:

(a) Negotiations with IBT, AFA, and AMFA for updated collective bargaining agreements are ongoing as of the date of this filing.

McGee Air Services union contract at December 31, 2024 was as follows:

CARE AND BELONGING

We remain steadfast in our commitment to recruit, retain, and promote the best talent. This is part of our commitment to Do the Right Thing by our guests, employees, and communities, and to create a culture in which employees can do their best work, and best serve the breadth of our customer base. We believe that all who depend on Alaska Air Group deserve respect regardless of race, ethnicity, ability, age, gender, sexual orientation, or gender identity. We are committed to treating every person equally – on and off our aircraft. We will continue to foster a workplace where our employees feel safe, cared for, and trust that they belong.

EMPLOYEE TRAINING

The Alaska Air Group companies invest in employee programs and training that aid advancement throughout the enterprise. Our Pathways Program provides a clear and direct path for Horizon pilots, flight attendants, technicians, and dispatchers to progress to Alaska. Our Leader Academy, which launched in 2022, helps supervisors and managers further develop their leadership and communication skills. Providing meaningful advancement opportunities to employees throughout Air Group is important, and we continue to evaluate new programs which support our people and advance our long-term strategic goals.

COMMUNITY INVOLVEMENT

We are dedicated to actively supporting the communities we serve. In 2024, Air Group companies donated $15 million in cash and in-kind travel to approximately 1,300 charitable organizations, and our employees volunteered more than 45,000 hours of community service related to youth and education, medical research, and transportation. Air Group also encourages its guests to play a role in supporting these communities. During the year, Alaska Mileage Plan members donated more than 50 million miles through Alaska's Care Miles program.

The Alaska Airlines Foundation provides grants to nonprofits that offer educational and career-development programs to young people. Organizations are invited to apply bi-annually for grants ranging from $5,000 to $20,000, with preference given to organizations that can demonstrate partnership and long-term program sustainability. Since inception in 1999, the Foundation has donated more than $4 million in grants, including more than $500,000 in 2024.

Hawaiian supports various nonprofit partners and relief efforts by facilitating travel, carrying critical cargo, and making both cash and mileage donations. Hawaiian also seeks to broaden opportunities for students to consider Hawaiian as an employer by forming educational partnerships with schools, establishing scholarship programs, and hosting Aviation Exposure onsite events with the Department of Education.

EXECUTIVE OFFICERS

The executive officers of Alaska Air Group, Inc. and its airline subsidiaries who have significant decision-making responsibilities, their positions, and their respective ages are as follows:

Mr. Minicucci was elected President and Chief Executive Officer (CEO) of Alaska Air Group, Inc. in March 2021 and President of Alaska Airlines, Inc. in May 2016. He leads Air Group's Management Executive Committee, and was elected to the Alaska Air Group, Inc. Board of Directors in May 2020. He joined Alaska Airlines, Inc. in May 2004 and has served in several roles including Executive Vice President Operations from December 2008 to May 2016 and Chief Operating Officer from December 2008 to November 2019. He was Chief Executive Officer of Virgin America, Inc. from December 2016 to July 2018, when Virgin America, Inc. was merged into Alaska Airlines, Inc.

Mr. Tackettwas elected Executive Vice President Finance and Chief Financial Officer of Alaska Air Group, Inc. and Alaska Airlines, Inc. in March 2020, and is a member of Air Group’s Management Executive Committee. He joined Alaska Airlines, Inc. in December 2000 and has served in several roles including Managing Director Financial Planning and Analysis from December 2008 to August 2011, Vice President Labor Relations from August 2011 to February 2015, Vice President Revenue Management from February 2015 to August 2017, Senior Vice President Revenue and E-commerce from August 2017 to September 2018, and Executive Vice President Planning and Strategy from September 2018 to March 2020.

Mr. Levine was elected Senior Vice President Legal in January 2020, General Counsel and Corporate Secretary of Alaska Air Group, Inc. and Alaska Airlines, Inc. in August 2017 and Horizon Air Industries, Inc. in January 2020, and Chief Ethics and Compliance Officer in January 2016. He is a member of Air Group’s Management Executive Committee. He joined Alaska Airlines, Inc. in February 2006 and has served in several roles including Senior Attorney from February 2006 to July 2009, Associate General Counsel and Managing Director Commercial Law and General Litigation from July 2009 to February 2011,

Deputy General Counsel and Managing Director Legal from February 2011 to January 2016, Vice President Legal from January 2016 to January 2020.

Mr. Berrywas elected Executive Vice President Cargo of Alaska Air Group, Inc. in September 2024, and has been President of Horizon Air Industries, Inc. since November 2023. He is a member of Air Group’s Management Executive Committee. He joined Alaska Airlines, Inc. in June 2013 and has served in several roles including Director Cargo Operations and Compliance from June 2013 to September 2015, Managing Director Cargo from September 2015 to June 2019, and President of Alaska Airlines, Inc.'s wholly owned subsidiary McGee Air Services from January 2019 to December 2020. He was Vice President Cargo of Air Canada from January 2021 to February 2023 and returned to Alaska Air Group, Inc. as Senior Vice President Operations of Horizon Air Industries, Inc. from February 2023 to October 2023.

Mr. Spraguewas elected President and Chief Executive Officer of Hawaiian Airlines, Inc. and Hawaiian Holdings, Inc. in September 2024, and Executive Vice President Hawai'i Pacific of Alaska Airlines, Inc. in December 2024. He is a member of Air Group’s Management Executive Committee. He has served in several roles, including Vice President of Alaska Air Cargo from April 2008 to March 2010, Vice President Marketing of Alaska Airlines, Inc. from March 2010 to April 2014, Senior Vice President External Relations of Alaska Airlines, Inc. from May 2014 to September 2017, President of Horizon Air Industries, Inc. from November 2019 to October 2023, Sr. Advisor to the CEO of Alaska Airlines, Inc. from November 2023 to December 2023, and Regional President Hawai'i and Pacific of Alaska Airlines, Inc. from December 2023 to December 2024.

Mr. Harrison was elected Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc. in August 2015 and is a member of Air Group's Management Executive Committee. He joined Alaska Airlines, Inc. in November 2003 and has served in several roles including Managing Director Internal Audit from November 2003 to February 2006, Managing Director Finance Planning and Analysis from February 2006 to February 2007, Managing Director Network Planning and Financial Planning and Analysis from February 2007 to March 2008, Managing Director Planning from March 2008 to December 2008, Vice President of Planning and Revenue Management from December 2008 to May 2014, Senior Vice President of Planning and Revenue Management from May 2014 to February 2015, and Executive Vice President and Chief Revenue Officer from February 2015 to August 2015.

Ms. von Muehlen was elected Executive Vice President and Chief Operating Officer of Alaska Airlines, Inc. in April 2021 and is a member of Air Group’s Management Executive Committee. She joined Alaska Airlines, Inc. in July 2011 and has served in several roles including Managing Director Airframe, Engine, Components Maintenance Repair and Overhaul of Alaska Airlines, Inc. from December 2012 to January 2018, Chief Operating Officer of Horizon Air Industries, Inc. from January 2018 to January 2019, and Senior Vice President Maintenance and Engineering of Alaska Airlines, Inc. from January 2019 to April 2021.

Ms. Schneiderwas elected Senior Vice President People at Alaska Airlines, Inc. in June 2019 and is a member of Air Group’s Management Executive Committee. She joined Alaska Airlines, Inc. in March 1989 and has served in several roles including Senior Vice President Inflight Services and Station Operations from September 1998 to July 2003, Senior Vice President Customer Service of Horizon Air Industries, Inc. from July 2003 to March 2009, Senior Vice President People and Customer Service of Horizon Air Industries, Inc. from March 2009 to August 2011, Vice President of Inflight Services from August 2011 to January 2017, Vice President Inflight Services and Call Center Services from January 2017 to August 2017, and Vice President of People from August 2017 to June 2019.

Ms. Birkett Rakow was elected Senior Vice President Public Affairs and Sustainability of Alaska Airlines, Inc. in November 2021 and is a member of Air Group's Executive Management Executive Committee. She joined Alaska Airlines, Inc. in September 2017 and has served as Vice President External Relations from September 2017 to February 2021 and Vice President Public Affairs and Sustainability from February 2021 to November 2021.

REGULATION

GENERAL

The airline industry is highly regulated, most notably by the federal government. The Department of Transportation (DOT), the Transportation Security Administration (TSA), and the FAA exercise significant regulatory authority over air carriers.

•DOT: A U.S. airline is required to hold a certificate of public convenience and necessity issued by the DOT in order to provide passenger and cargo air transportation in the country. Subject to certain individual airport capacity, noise and other restrictions, this certificate permits an air carrier to operate between any two points in the U.S. Certificates do not expire, but may be revoked for failure to comply with federal aviation statutes, regulations, orders or the terms of the certificates.

While airlines are permitted to establish their own fares without government regulation, the DOT has jurisdiction over the approval of international codeshare agreements, marketing alliance agreements between major U.S. carriers, international and some domestic route authorities, Essential Air Service market subsidies, carrier liability for personal or property damage, and certain airport rates and charges disputes. International treaties may also contain restrictions or requirements for flying outside of the U.S. and impose different carrier liability limits than those applicable to domestic flights. The DOT has been active in reviewing airlines' operational performance and in implementing a variety of consumer protection regulations and directives, covering subjects such as advertising, passenger communications, denied boarding compensation, tarmac delay response, ticket refunds, family seating requirements, fee disclosures for ancillary services, and accommodations for passengers with disabilities. In 2024, the DOT issued a final rule mandating refunds to passengers in certain situations and a final rule requiring disclosure of certain ancillary fees. However, in August 2024, the U.S. Court of Appeals for the Fifth Circuit granted a motion for a stay of the ancillary fee rule. Airlines are subject to enforcement actions that are brought by the DOT for alleged violations of consumer protection and other economic regulations. We are not aware of any regulatory investigations or enforcement proceedings that could either materially affect our financial position or impact our authority to operate.

•FAA: The FAA, through Federal Aviation Regulations (FARs), generally regulates all aspects of airline operations, including establishing personnel, maintenance and flight operation standards. U.S. airlines are required to hold a valid air carrier operating certificate issued by the FAA. Pursuant to these regulations, we have established, and the FAA has approved, our operations specifications and a maintenance program for each type of aircraft we operate. Each maintenance program provides for the ongoing maintenance of the relevant aircraft type, ranging from frequent routine inspections to major overhauls. Periodically, the FAA issues Airworthiness Directives (ADs) that must be incorporated into our aircraft maintenance program and operations. All airlines are subject to enforcement actions that are brought by the FAA from time to time for alleged violations of FARs or ADs. At this time, we are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate.

•TSA: Airlines serving the U.S. must operate a TSA-approved Aircraft Operator Standard Security Program (AOSSP), and comply with TSA Security Directives (SDs) and regulations. Under TSA authority, we are required to collect a September 11 Security Fee of $5.60 per one-way trip from passengers and remit that sum to the government to fund aviation security measures. Airlines are subject to enforcement actions that are brought by the TSA for alleged violations of the AOSSP, SDs or security regulations. We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate.

The Department of Justice (DOJ) and DOT have jurisdiction over airline competition matters. The U.S. Postal Service has jurisdiction over certain aspects of mail transportation services. Labor relations are regulated under the RLA. To the extent we continue to fly to foreign countries and pursue alliances with international carriers, we may be subject to certain regulations of foreign agencies and international treaties.

We are also subject to the oversight of the Occupational Safety and Health Administration (OSHA) concerning employee safety and health matters. The OSHA and other federal agencies have been authorized to create and enforce regulations that have an impact on our operations. In addition to these federal activities, various states have been delegated certain authorities under these federal statutes. Many state and local governments have adopted employee safety and health laws and regulations. We maintain our safety and health programs in order to meet or exceed these requirements.

ENVIRONMENTAL

We are also subject to various laws and government regulations concerning environmental matters, both domestically and internationally. Domestic regulations that have an impact to our operations include the Airport Noise and Capacity Act of 1990, the Clean Air Act, Resource Conservation and Recovery Act, Clean Water Act, Safe Drinking Water Act, the Comprehensive Environmental Response and Compensation Liability Act, the National Environmental Policy Act (including Environmental Justice), Emergency Planning and Community Right-to-Know Act and the Toxic Substances Control Act. Many state and local environmental regulations exceed these federal regulations.

The Airport Noise and Capacity Act recognizes the rights of airport operators with noise problems to implement local noise abatement programs so long as they do not interfere unreasonably with interstate or foreign commerce or the national air transportation system. Authorities in several cities have established aircraft noise reduction programs, including the imposition of nighttime curfews. We believe we have sufficient scheduling flexibility to accommodate local noise restrictions.

The domestic U.S. airline industry committed to carbon neutral growth starting in 2020 for both domestic and international growth. The mechanism to comply with this commitment internationally is through the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which is a global, market-based measure that allows for eligible emissions offsets or the use of CORSIA-eligible sustainable aviation fuel to mitigate the growth emissions. The program is regulated by the FAA who then affirms compliance to the International Civil Aviation Organization. The FAA has approved both Alaska, Hawaiian, and Horizon's monitoring, verification, and reporting plans.

As a result of the COVID-19 pandemic, the CORSIA growth baseline year was modified and set to 85% of 2019 carbon dioxide emissions. This does not have a direct impact on domestic flights, however the U.S. Environmental Protection Agency (EPA) finalized a rule in 2020 on aircraft emission standards which aligns with the international agreements. Additional emissions reporting requirements and potential requirements to decarbonize both aircraft and ground equipment could have a significant impact on our industry.

The state of California has enacted rules that will expand required disclosures discussing the impact of environmental change; agencies within the federal government have proposed similar rules that are not yet finalized. Costs associated with compliance could be significant. Except for these rules, we do not currently anticipate adverse financial impacts from specific existing or pending environmental regulation or reporting requirements, new regulations, related to our existing or past operations, or compliance issues that could harm our financial condition, results of operations, or cash flows in future periods.

INSURANCE

We carry insurance of types customary in the airline industry and in amounts deemed adequate to protect our interests and property and to comply both with federal regulations and certain credit and lease agreements. The insurance policies principally provide coverage for airline hull, spares and comprehensive legal liability, war and allied perils, and workers’ compensation. In addition, we currently carry a cyber insurance policy in the event of security breaches from malicious parties.

We believe that our emphasis on safety and our state-of-the-art flight deck technology help control the cost of our insurance.

WHERE YOU CAN FIND MORE INFORMATION

Our filings with the Securities and Exchange 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 our website atwww.alaskaair.com, free of charge, as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC. The information contained on our website is not a part of this annual report on Form 10-K.

GLOSSARY OF TERMS

Aircraft Utilization- block hours per day; this represents the average number of hours per day our aircraft are in transit

Aircraft Stage Length - represents the average miles flown per aircraft departure

ASMs - available seat miles, or “capacity”; represents total seats available across the fleet multiplied by the number of miles flown

CASM- operating costs per ASM; represents all operating expenses including fuel, freighter costs, and special items

CASMex - operating costs excluding fuel, freighter costs, and special items per ASM, or “unit cost”

Debt-to-capitalization ratio - represents adjusted debt (long-term debt plus capitalized operating and finance lease liabilities) divided by total equity plus adjusted debt

Diluted Earnings per Share- represents earnings per share (EPS) using fully diluted shares outstanding

Diluted Shares- represents the total number of shares that would be outstanding if all possible sources of conversion, such as stock options, were exercised

Economic Fuel- best estimate of the cash cost of fuel, net of the impact of our fuel-hedging program and excluding operations under the Air Transportation Service Agreement (ATSA) with Amazon

Freighter Costs- operating expenses directly attributable to the operation of Alaska's B737 freighter aircraft and Hawaiian's A330-300 freighter aircraft exclusively performing cargo missions

Load Factor- RPMs as a percentage of ASMs; represents the number of available seats that were filled with revenue passengers

PRASM - passenger revenue per ASM, or “passenger unit revenue”

RASM- operating revenue per ASMs, or “unit revenue”; operating revenue includes all passenger revenue, freight & mail, loyalty program revenue, and other ancillary revenue; represents the average total revenue for flying one seat one mile

RPMs - revenue passenger miles, or “traffic”; represents the number of seats that were filled with revenue passengers; one passenger traveling one mile is one RPM

Yield - passenger revenue per RPM; represents the average passenger revenue for flying one passenger one mile