ALASKA AIR GROUP, INC.

Previous wording

•Second Quarter Review - highlights from the second quarter of 2025 outlining some of the major events that occurred during the period, as well as forward-looking statements.

Current wording

•Third Quarter Review - highlights from the third quarter of 2025 outlining some of the major events that occurred during the period, as well as forward-looking statements.

Previous wording

•Results of Operations - an in-depth analysis of our financial and operational results for the three and six months ended June 30, 2025.

Current wording

•Results of Operations - an in-depth analysis of our financial and operational results for the three and nine months ended September 30, 2025.

Previous wording

As Hawaiian Holdings, Inc. was acquired by Air Group on September 18, 2024, its financial results were not reflected in reported figures in the periods preceding the acquisition date. Due to the size of the two companies prior to the acquisition, the reported results for 2025 and 2024 are not comparable. To assist with the discussion of 2025 and 2024 results on a comparable basis and provide more meaningful discussion, certain supplemental unaudited pro forma income statement information is provided for the three and six months ended June 30, 2024. Pro forma historical results were included with the Form 8-K filed on January 22, 2025. This information does not purport to reflect what our financial and operational results would have been had the acquisition been consummated at the beginning of the periods presented.

Current wording

As Hawaiian Holdings, Inc. was acquired by Air Group on September 18, 2024, prior year figures are inclusive of Hawaiian results from September 18, 2024 onward. Due to the size of the two companies prior to the acquisition, the reported results for 2025 and 2024 are not comparable. To assist with the discussion of 2025 and 2024 results on a comparable basis and provide more meaningful discussion, certain supplemental unaudited pro forma income statement and operating statistics information is provided for the three and nine months ended September 30, 2024. Pro forma historical results were included with the Form 8-K filed on January 22, 2025. This information does not purport to reflect what our financial and operational results would have been had the acquisition been consummated at the beginning of the periods presented.

Previous wording

As previously disclosed in a Current Report on Form 8-K filed on June 27, 2025, on June 23, 2025, Hawaiian Airlines identified a cybersecurity incident affecting certain information technology systems. Upon identifying this incident, we followed our response protocols and immediately took steps to safeguard our network by disconnecting impacted Hawaiian systems and applications. Hawaiian's flights were not interrupted and continued to operate safely throughout our response. We have engaged the relevant authorities and experts to assist in our investigation and ongoing remediation efforts.

Current wording

As previously disclosed in a Current Report on Form 8-K filed on June 27, 2025, on June 23, 2025, Hawaiian Airlines identified a cybersecurity incident affecting certain information technology systems. Upon identifying this incident, we followed our response protocols and immediately took steps to safeguard our network by disconnecting impacted Hawaiian systems and applications. Access for all systems was restored. Hawaiian's flights were not interrupted and continued to operate safely throughout our response. We have engaged the relevant authorities and experts to assist in our investigation and ongoing remediation efforts.

Previous wording

Based on information currently available, we do not believe the incident had, or is expected to have, a material impact on Hawaiian's business, results of operations, or financial condition. Subsequent to quarter end, access for all systems has been restored. The investigation remains active and therefore we are unable to determine the full impact of the incident at this time.

Current wording

Based on information currently available, we do not believe the incident had, or is expected to have, a material impact on Hawaiian's business, results of operations, or financial condition. The investigation remains active and therefore we are unable to determine the full impact of the incident at this time.

Previous wording

We reported income before income tax under GAAP for the second quarter of 2025 of $238 million, compared to $316 million for the second quarter of 2024. On a pro forma basis, the pretax income for the second quarter of 2024 was $237 million. Refer below for a more detailed discussion of the items impacting these results.

Current wording

We reported income before income tax under GAAP for the third quarter of 2025 of $111 million, compared to $328 million for the third quarter of 2024. On a pro forma basis, the pretax income for the third quarter of 2024 was $255 million. Refer below for a more detailed discussion of the items impacting these results.

Previous wording

On a pro forma basis, total operating revenue increased $75 million or 2%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized in the following table:

Current wording

On a pro forma basis, total operating revenue increased $27 million, or 1%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized in the following table:

Previous wording

On a pro forma basis, Passenger revenue increased $40 million, or 1%, on a 2% increase in traffic, partially offset by a 1% decrease in yield as a result of macroeconomic uncertainty. Hawaiian passenger revenue has improved meaningfully, driven by the combination of the Alaska and Hawaiian networks, as well as synergy and commercial initiatives announced in 2024. Increased premium revenue and loyalty program award redemptions on our airlines have also contributed to improved results.

Current wording

On a pro forma basis, Passenger revenue was flat, on a 2% increase in yield offset by a 2% decrease in traffic. Hawaiian passenger revenue has improved meaningfully, driven by demand environment strength in the state of Hawai'i and synergy and commercial initiatives announced in 2024. Increased premium revenue and a rebound in corporate travel also contributed to improved results. Decreased capacity in the third quarter was a response to softening demand.

Previous wording

On a pro forma basis, Loyalty program other revenue increased $7 million, or 3%, due to higher commission revenue from bank card and third party partners driven by increased consumer spend.

Current wording

On a pro forma basis, Loyalty program other revenue increased $3 million, or 2%, due to higher commission revenue from bank card and third party partners driven by higher consumer spend.

Previous wording

On a pro forma basis, total operating expenses increased $54 million, or 2%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized below. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:

Current wording

On a pro forma basis, total operating expenses increased $185 million, or 5%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized below. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:

Previous wording

Alaska and Hawaiian used to actively hedge fuel using crude oil call options. With call options, we are hedged against volatile crude oil price increases and, during a period of decline in crude oil prices, we only forfeit cash previously paid for hedge premiums. Alaska's fuel hedge program was suspended in 2023 and all remaining positions were settled in the first quarter of 2025. Hawaiian's fuel hedge program was suspended in the first quarter of 2025. Its open positions, based in Brent crude oil, will settle by the end of the third quarter of 2025. The open positions hedge approximately 5% of Hawaiian's expected third-quarter fuel consumption at a weighted-average crude oil price per barrel of $91, with an average premium cost per barrel of $2.

Current wording

Alaska and Hawaiian previously used crude oil call options to hedge fuel expense. Alaska's fuel hedge program was suspended in 2023 and all remaining positions were settled in the first quarter of 2025. Hawaiian's fuel hedge program was suspended in the first quarter of 2025 and all remaining positions were settled in the third quarter of 2025.

Previous wording

On a pro forma basis, aircraft fuel expense decreased $101 million, or 13%. Raw fuel expense decreased by 12%, primarily driven by lower per gallon costs on crude oil. Decreases were partially offset by higher fuel consumption consistent with increased capacity.

Current wording

On a pro forma basis, aircraft fuel expense decreased $22 million, or 3%. Raw fuel expense decreased by 2%, driven by lower per gallon costs on crude oil, partially offset by higher refining margins associated with the conversion of crude oil to jet fuel.

Previous wording

On a pro forma basis, wages and benefits increased by $123 million, or 12%, driven by increased headcount and higher wage rates across multiple labor groups since the second quarter of 2024.

Current wording

On a pro forma basis, wages and benefits increased by $127 million, or 12%, driven by increased headcount and higher wage rates across multiple labor groups since the third quarter of 2024.

Previous wording

Medical and other benefits expense increased $20 million, or 19%, driven by higher value claims and increased obligations under Alaska's pilots long-term disability plan.

Current wording

On a pro forma basis, defined contribution plans increased $10 million, or 13%, driven by higher contribution rates for pilots and flight attendants. On a pro forma basis, medical and other benefits expense increased $14 million, or 11%, driven by higher value claims and increased obligations under Alaska's pilots long-term disability plan.

Previous wording

On a pro forma basis, variable incentive pay increased $20 million, or 19%, due to the inclusion of Hawaiian employees in the Company's Performance-Based Pay program in 2025, as well as an increased wage base.

Current wording

On a pro forma basis, variable incentive pay decreased $37 million, or 34%, driven by a lower assumed payout percentage for the Company's Performance-Based Pay program compared to the prior year, partially offset by an increased wage base due to the inclusion of Hawaiian employees in the plan.

Previous wording

On a pro forma basis, aircraft maintenance increased $36 million, or 18%, driven by increased utilization of aircraft resulting in increased heavy checks and engine events since the second quarter of 2024. Higher rates on engine maintenance also contributed to the increase.

Current wording

On a pro forma basis, aircraft maintenance increased $25 million, or 12%, driven by increased utilization of aircraft resulting in increased heavy checks and engine events since the third quarter of 2024. Higher rates on engine maintenance also contributed to the increase.

Previous wording

On a pro forma basis, landing fees and other rentals increased $86 million, or 20%, driven primarily by nonrecurring favorable settlements received from certain airports in 2024. Increased terminal rents driven by higher rates and growth throughout the combined network, as well as increased volume of departures and landed weight also contributed to the increase.

Current wording

On a pro forma basis, landing fees and other rentals increased $65 million, or 27%, driven by increased terminal rents due to higher rates and growth throughout the combined network, and an increased volume of departures. Nonrecurring favorable settlements received from certain airports in 2024 also contributed to the year-over-year increase.

Previous wording

On a pro forma basis, contracted services increased $23 million, or 9%, driven by higher rates charged by vendors as well as increased passengers throughout our combined network.

Current wording

On a pro forma basis, contracted services increased $13 million, or 9%, driven by higher rates charged by vendors as well as increased departures and passengers throughout our combined network.

Previous wording

On a pro forma basis, depreciation and amortization increased $16 million, or 9%, primarily due to the addition of 19 owned aircraft to our airlines' fleets since the second quarter of 2024. Incremental depreciation on ground service and other equipment also contributed to the increase.

Current wording

On a pro forma basis, depreciation and amortization increased $16 million, or 9%, primarily due to the addition of 16 owned aircraft to our airlines' fleets since the third quarter of 2024. Incremental depreciation on ground service and other equipment also contributed to the increase.

Previous wording

On a pro forma basis, other expenses were flat. Higher professional services and software costs were offset by a gain on sale of four B737-900 aircraft.

Current wording

On a pro forma basis, other expenses were flat. Higher professional services and software costs were offset by gains from the sale of eight B737-900 aircraft.

Previous wording

On a pro forma basis, special items decreased $96 million, or 63%, driven by nonrecurring costs in 2024 associated with Alaska flight attendant retroactive pay, the retirement of Alaska's Airbus and Horizon Q400 aircraft, and certain litigation matters. Increased integration costs associated with the acquisition of Hawaiian Airlines partially offset this decrease. Refer to Note 12 to the unaudited condensed consolidated financial statements for details.

Current wording

On a pro forma basis, special items decreased $14 million, or 18%, primarily driven by decreased integration costs associated with the acquisition of Hawaiian Airlines in comparison to the prior year. Refer to Note 12 to the unaudited condensed consolidated financial statements for details.

Previous wording

Refer to Note 11 to the unaudited condensed consolidated financial statements for a detailed description of each segment and a reconciliation of segment results to consolidated Air Group results. Below is a summary of each segment's results for the second quarter of 2025.

Current wording

Refer to Note 11 to the unaudited condensed consolidated financial statements for a detailed description of each segment and a reconciliation of segment results to consolidated Air Group results. Below is a summary of each segment's results for the third quarter of 2025.

Previous wording

Alaska Airlines reported a pretax profit, excluding special items and other adjustments, of $267 million in the second quarter of 2025, compared to a profit of $394 million in the same period in 2024. The $127 million decrease was primarily driven by $154 million in increased non-fuel operating expenses, due largely to higher wages and increased variable costs, and $44 million in reduced revenue, due to a weaker yield environment. Lower fuel costs of $83 million, driven by lower per gallon costs, partially offset the decrease in profit.

Current wording

Alaska Airlines reported a pretax profit, excluding special items and other adjustments, of $187 million in the third quarter of 2025, compared to a profit of $351 million in the same period in 2024. The $164 million decrease was primarily driven by $120 million in increased non-fuel operating expenses, due largely to higher wages and increased variable costs, and $77 million in reduced revenue, due to lower traffic. Lower fuel costs of $40 million, driven by lower per gallon costs and decreased consumption, partially offset the decrease.

Previous wording

Hawaiian Airlines reported a pretax profit, excluding special items and other adjustments, of $1 million in the second quarter of 2025, compared to a loss on a pro forma basis of $83 million in the same period in 2024. The $84 million increase was primarily driven by $125 million in increased revenue, driven by higher traffic and yield due to the optimization of Hawaiian assets in Air Group's combined network, as well as continued recovery following the 2023 Maui wildfires. Lower fuel costs of $15 million, driven by lower per gallon costs, also contributed to the improvement. These amounts were partially offset by increased non-fuel operating expenses of $50 million associated with increased capacity.

Current wording

Hawaiian Airlines reported a pretax loss, excluding special items and other adjustments, of $42 million in the third quarter of 2025, compared to a loss on a pro forma basis of $56 million in the same period in 2024. The $14 million improvement was primarily driven by $190 million in increased revenue, driven by higher traffic and yield due to demand environment strength in the state of Hawai'i. Higher fuel costs of $29 million driven by increased consumption and increased non-fuel expenses of $147 million associated with increased capacity partially offset the increase.

Previous wording

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2025 TO PRO FORMA SIX MONTHS ENDED JUNE 30, 2024

Current wording

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2025 TO PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 2024

Previous wording

On a pro forma basis, total operating revenue increased $335 million or 5%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized in the following table:

Current wording

On a pro forma basis, total operating revenue increased $362 million, or 4%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized in the following table:

Previous wording

The table below presents total operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) and the percentage of change of certain operational results on a pro forma basis for the six months ended June 30, 2025.

Current wording

The table below presents total operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) and the percentage of change of certain operational results on a pro forma basis for the nine months ended September 30, 2025.

Previous wording

On a pro forma basis, Passenger revenue increased $263 million, or 4%, as traffic increased by 3% and yield grew by 2%. Hawaiian passenger revenue has improved meaningfully, driven by the combination of the Alaska and Hawaiian networks, as well as synergy and commercial initiatives announced in 2024. Increased premium revenue and loyalty program award redemption on our airlines contributed to higher yield. Additionally, prior year results were negatively impacted by $150 million due to the B737-9 grounding in the first quarter of 2024.

Current wording

On a pro forma basis, Passenger revenue increased $263 million, or 3%, as traffic increased by 1% and yield grew by 2%. Hawaiian passenger revenue has improved meaningfully, driven by the combination of the Alaska and Hawaiian networks, as well as synergy and commercial initiatives announced in 2024. Increased premium revenue and loyalty program award redemption on our airlines contributed to higher yield. Additionally, prior year results were negatively impacted by $150 million due to the B737-9 grounding in the first quarter of 2024.

Previous wording

On a pro forma basis, Loyalty program other revenue increased $21 million, or 5%, due to higher commission revenue from bank card and third party partners driven by increased consumer spend. Incremental credit card acquisitions of the Alaska Airlines Visa Signature and Hawaiian Airlines World Elite Mastercard co-branded credit cards also contributed to the increase.

Current wording

On a pro forma basis, Loyalty program other revenue increased $24 million, or 4%, due to higher commission revenue from bank card and third party partners driven by increased consumer spend. Incremental credit card acquisitions, as well as the launch of our Summit Visa Infinite premium credit card, also contributed to the increase.

Previous wording

On a pro forma basis, total operating expenses increased $186 million, or 3%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized below. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:

Current wording

On a pro forma basis, total operating expenses increased $371 million, or 4%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized below. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:

Previous wording

On a pro forma basis, aircraft fuel expense decreased $179 million, or 11%. Raw fuel expense decreased by 11%, driven by lower per gallon costs on crude oil and lower refining margins associated with the conversion of crude oil to jet fuel. Decreases were partially offset by higher fuel consumption consistent with increased capacity.

Current wording

On a pro forma basis, aircraft fuel expense decreased $201 million, or 9%. Raw fuel expense decreased by 8%, driven by lower per gallon costs on crude oil. Decreases were partially offset by higher fuel consumption consistent with increased capacity and higher refining margins associated with the conversion of crude oil to jet fuel.

Previous wording

Losses recognized for hedges that settled during the six months ended were $4 million in 2025, compared to losses of $27 million in 2024. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement.

Current wording

Losses recognized for hedges that settled during the nine months ended were $4 million in 2025, compared to losses of $37 million in 2024. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement.

Previous wording

On a pro forma basis, wages and benefits increased by $189 million, or 9%, driven by increased headcount and higher wage rates across multiple labor groups since the second quarter of 2024. Increases were partially offset by nonrecurring wages from irregular operations following the B737-9 grounding in the first quarter of 2024.

Current wording

On a pro forma basis, wages and benefits increased by $316 million, or 10%, driven by increased headcount and higher wage rates across multiple labor groups since the third quarter of 2024. Increases were partially offset by nonrecurring wages from irregular operations following the B737-9 grounding in the first quarter of 2024.

Previous wording

Medical and other benefits expense increased $27 million, or 12%, driven by an increase in the cost of medical services and higher obligations under our pilots long-term disability plan.

Current wording

Medical and other benefits expense increased $41 million, or 12%, driven by an increase in the cost of medical services and higher obligations under our pilots long-term disability plan.

Previous wording

On a pro forma basis, aircraft maintenance increased $58 million, or 14%, driven by increased utilization of aircraft resulting in increased heavy checks and engine events since the second quarter of 2024. Higher rates on engine maintenance and additional materials on cabin refresh projects also contributed to the increase.

Current wording

On a pro forma basis, aircraft maintenance increased $83 million, or 13%, driven by increased utilization of aircraft resulting in increased heavy checks and engine events since the third quarter of 2024. Higher rates on engine maintenance and additional materials on cabin refresh projects also contributed to the increase.

Previous wording

On a pro forma basis, landing fees and other rentals increased $56 million, or 25%, driven primarily by nonrecurring favorable settlements received from certain airports in 2024. Increased terminal rents driven by higher rates and growth throughout the combined network, as well as increased volume of departures and landed weight also contributed to the increase.

Current wording

On a pro forma basis, landing fees and other rentals increased $151 million, or 22%, primarily driven by increased terminal rents driven by higher rates and growth throughout the combined network. Increased volume of departures and landed weight, as well as nonrecurring favorable settlements received from certain airports in 2024 also contributed to the year-over-year increase.

Previous wording

On a pro forma basis, selling expenses decreased $10 million, or 9%, primarily driven by improved rates on credit card vendor rebates. Lower marketing costs also contributed to this decrease.

Current wording

On a pro forma basis, selling expenses decreased $21 million, or 6%, primarily driven by lower marketing costs in comparison to prior year. Improved rates on credit card vendor rebates also contributed to this decrease.

Previous wording

On a pro forma basis, depreciation and amortization increased $31 million, or 9%, primarily due to the addition of 19 owned aircraft to our airlines' fleets since the second quarter of 2024. Incremental depreciation on ground service and other equipment also contributed to the increase.

Current wording

On a pro forma basis, depreciation and amortization increased $47 million, or 9%, primarily due to the addition of 16 owned aircraft to our airlines' fleets since the third quarter of 2024. Incremental depreciation on ground service and other equipment also contributed to the increase.

Previous wording

Third-party regional carrier expense, which represents payments made to SkyWest under the CPA with Alaska, increased $15 million, or 13%, driven by incremental departures and block hours operated by SkyWest.

Current wording

Third-party regional carrier expense, which represents payments made to SkyWest under the CPA with Alaska, increased $24 million, or 13%, driven by incremental departures and block hours operated by SkyWest.

Previous wording

On a pro forma basis, other expense decreased $8 million, or 2%, primarily due to the gain on sale of four B737-900 aircraft in the second quarter of 2025, as well as nonrecurring passenger remuneration and crew hotel costs due to the B737-9 grounding in the first quarter of 2024. Higher professional services and software costs partially offset this decrease.

Current wording

On a pro forma basis, other expense decreased $9 million, or 1%. Gains from the sale of twelve B737-900 aircraft were partially offset by higher professional services and software costs. Certain nonrecurring passenger remuneration and crew hotel costs associated with the B737-9 grounding in 2024 also contributed to the decrease.