ALASKA AIR GROUP, INC.
For the period ended Dec 31, 2025. Filed Feb 12, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 12, 2026
ALK$38.94+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-14.
0000766421-25-000009
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-12.
0000766421-26-000010
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 124 previous paragraphs and 134 current paragraphs.
50 unchanged; 31 reworded; 51 added; 43 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 14 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (51)
Current report
•Year in Review - highlights from 2025 outlining some of the major events that occurred during the period, as well as forward-looking statements.
Current report
•Liquidity and Capital Resources - an overview of our financial position, analysis of cash flows, and relevant material cash commitments.
Current report
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. As a result, 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 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 report
Cybersecurity incident
Current report
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 established 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 engaged the relevant authorities and experts to assist in our investigation and remediation efforts. Based on the results of the investigation, the incident did not have a material impact on Hawaiian's business, results of operations, or financial condition. For a discussion of our risk factors associated with cybersecurity threats, please refer to Item 1A. "Risk Factors" within this document.
Current report
We reported pretax income under GAAP of $146 million in 2025, compared to $545 million in 2024. On a pro forma basis, pretax income in 2024 was $228 million. Refer below for a more detailed discussion of the items impacting these results.
Current report
Single operating certificate
Current report
On October 29, 2025, Alaska and Hawaiian obtained a single operating certificate from the FAA, officially recognizing Alaska and Hawaiian as one airline under the Alaska certificate.
Current report
In 2025, Alaska flight attendants, represented by the Association of Flight Attendants (AFA), ratified a new three-year Collective Bargaining Agreement (CBA). Hawaiian flight attendants, represented by AFA, ratified a three-year extension to their existing CBA. Horizon technicians, represented by the Aircraft Mechanics Fraternal Association (AMFA) ratified a four-year CBA. McGee Air Services employees, represented by the International Association of Machinists and Aerospace Workers (IAM) ratified a five-year CBA.
Current report
Horizon is negotiating with its pilots represented by the International Brotherhood of Teamsters (IBT), flight attendants represented by the Association of Flight Attendants (AFA), and dispatchers represented by the Transport Workers Union of America (TWU) for updated collective bargaining agreements. A mediator from the National Mediation Board is involved in negotiations with AFA and TWU.
Current report
Loyalty program update
Current report
In August 2025, we launched Atmos Rewards, a single loyalty program combining Alaska’s Mileage Plan and Hawaiian’s HawaiianMiles. We also launched a new premium Atmos Summit co-branded credit card. These launches drove significant new card acquisitions, consumer spend, and member redemptions. In September 2025, amendments to the Atmos Rewards co-branded credit card agreement with Bank of America became effective, resulting in changes to the separately identifiable performance obligations.
Current report
Irregular operations
Current report
In 2025, we experienced multiple operational disruptions. Technology incidents in July and October, involving both internal IT systems and an external third-party cloud services provider, resulted in temporary ground stops, flight cancellations and delays, and periods of irregular operations. These outages negatively impacted pretax earnings by approximately $50 million. In addition, a government shutdown in October led to FAA‑mandated flight reductions and associated cancellations. Although operations normalized quickly after the government reopened, the disruption negatively impacted pretax earnings by approximately $30 million.
Current report
Looking ahead to 2026, we expect to continue to realize value from Alaska Accelerate initiatives and synergies from the Hawaiian integration, which remain on track or ahead of plan relative to our initial expectations. We expect capacity growth for the year of 2% to 3% compared to the prior year. Given the inherent uncertainty of the macroeconomic environment, we remain focused on disciplined cost management, strong productivity, and delivering on our initiatives.
Current report
2025 COMPARED WITH PRO FORMA 2024
Current report
PRO FORMA OPERATING STATISTICS
Current report
Below are operating statistics presented on a pro forma basis, which assumes Hawaiian is included in both 2024 and 2025.
Current report
(a) The Hawaiian column reflects results prior to the consummation of the merger, comprising the period January 1, 2024 to September 17, 2024.
Current report
PRO FORMA OPERATING REVENUE
Current report
On a pro forma basis, total operating revenue increased $460 million, or 3%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized in the following table:
Current report
On a pro forma basis, Passenger revenue increased $333 million, or 3%, as traffic increased by 1% and yield grew by 2%. Hawaiian passenger revenue improved meaningfully, driven by demand environment strength in the state of Hawai'i, as well as benefits from our integration synergies and commercial initiatives. Increased premium cabin revenues, corporate travel, 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 report
On a pro forma basis, Loyalty program other revenue increased $38 million, or 5%, due to higher commission revenue from bank card and third party partners, which was driven by increased consumer spend and incremental credit card acquisitions from the launch of the Atmos Rewards program and Summit Visa Infinite premium credit card.
Current report
On a pro forma basis, Cargo and other revenue increased $89 million, or 19%, primarily driven by increased revenue under the ATSA with Amazon following the addition of the four remaining contracted A330-300F aircraft to our cargo fleet in 2025. Increased international cargo volumes driven by the launch of our Seattle-Seoul route also contributed to the increase.
Current report
PRO FORMA OPERATING EXPENSES
Current report
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 2025. Hawaiian's fuel hedge program was suspended in 2025, with all remaining positions settled later in the year. No hedge positions remain open as of December 31, 2025.
Current report
The table below summarizes our operating expense line items, excluding fuel and other special items, on a pro forma basis. Generally, increases to these expenses are driven by capacity increases and growth of the Company's operations. Significant or unusual changes compared to 2024 on a pro forma basis are more fully described below.
Current report
The primary components of wages and benefits, including a reconciliation of 2024 on a pro forma basis, are shown in the following table:
Current report
(a) The Hawaiian column reflects results prior to the consummation of the merger, comprising the period January 1, 2024 to September 17, 2024.
Current report
On a pro forma basis, wages and benefits increased $442 million, or 10%, driven by increased headcount and higher wage rates across multiple labor groups in 2025. Increases were partially offset by nonrecurring wages from irregular operations following the B737-9 grounding in the first quarter of 2024.
Current report
On a pro forma basis, medical and other benefits expense increased $26 million, or 5%, driven by an increase in the cost of medical services and higher costs associated with our pilots long-term disability plan. Defined contribution plan expense increased $32 million, or 10%, driven by higher contribution rates for pilots and flight attendants.
Current report
On a pro forma basis, aircraft maintenance expense increased $68 million, or 8%, primarily driven by incremental maintenance projects and material costs on cabin refresh initiatives. Also, Horizon engine maintenance increased due to additional coverage under its power-by-the-hour engine maintenance agreement during the year.
Current report
On a pro forma basis, contracted services expense increased $51 million, or 9%, driven by higher rates charged by vendors as well as increased departures and passengers throughout our combined network.
Current report
On a pro forma basis, selling expenses decreased $32 million, or 7%, primarily driven by lower marketing costs in comparison to pro forma prior year. Increased credit card vendor rebates driven by higher consumer spend also contributed to this decrease.
Current report
On a pro forma basis, food and beverage service expense increased $28 million, or 8%, primarily driven by a 5% increase in departures and higher costs for food, food service supplies, and transportation.
Current report
Other expenses
Current report
On a pro forma basis, other expense increased $24 million, or 2%, driven by higher professional services and software costs. Increases were partially offset by gains of $57 million from the sale of 12 B737-900 aircraft and certain nonrecurring passenger remuneration and crew hotel costs associated with the B737-9 grounding in 2024.
Current report
On a pro forma basis, special items decreased $113 million, or 31%, driven by decreased integration costs associated with the Hawaiian acquisition and nonrecurring costs in 2024 associated with Alaska flight attendant retroactive pay, the retirement of Alaska's Airbus and Horizon's Q400 aircraft, and certain litigation matters. Contractual changes to Alaska flight attendants' sick leave benefits in 2025 partially offset this decrease. Refer to Note 15 to the consolidated financial statements for details.
Current report
Alaska Airlines reported a pretax profit, excluding special items and other adjustments, of $526 million in 2025, compared to $744 million in 2024. The $218 million decrease was primarily driven by a $407 million increase in non-fuel operating expenses, largely attributable to higher wages and increased variable costs, net of a $136 million decrease in variable incentive pay. These impacts were partially offset by $39 million in increased revenue and $185 million in lower fuel costs due to lower per gallon costs.
Current report
Hawaiian Airlines reported a pretax loss, excluding special items and other adjustments, of $189 million in 2025, compared to a pro forma loss of $359 million in 2024. The $170 million improvement was driven by $370 million in increased revenue, the result of higher traffic and yield due to the optimization of Hawaiian assets in Air Group's combined network, demand environment strength in the state of Hawai'i, as well as continued recovery following the 2023 Maui wildfires. This amount was partially offset by increased non-fuel operating expenses of $192 million driven by increased capacity and variable costs, as well as higher variable incentive pay due to the inclusion of Hawaiian employees in the Company's Performance-Based Pay program.
Showing the first 40 of 51 passages. Open the source sections for the rest.
Removed paragraphs (43)
Previous report
(a) Certain integration costs are non deductible for tax purposes, resulting in a smaller income tax effect for current year adjustments.
Previous report
OPERATING STATISTICS SUMMARY (unaudited)
Previous report
(a)Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.
Previous report
(b)See reconciliation of this non-GAAP measure to the most directly related GAAP measure in the accompanying pages.
Previous report
(c)Excludes operations under the ATSA with Amazon.
Previous report
(d)Includes aircraft owned and leased by Alaska, Hawaiian, and Horizon as well as aircraft operated by third-party regional carriers under CPAs. Excludes all aircraft removed from operating service.
Previous report
(e)Data presented includes information related to flights operated by Horizon and third-party carriers.
Previous report
On September 18, 2024, we completed our acquisition of Hawaiian, combining two highly complementary networks and expanding our international reach. Results for the year include Hawaiian activity beginning September 18, 2024.
Previous report
In 2024, Air Group reported consolidated pretax income of $545 million compared to $323 million in 2023. For the period September 18, 2024 through December 31, 2024, Hawaiian produced $869 million of revenue and a loss before income tax and special items of $58 million.
Previous report
See “Results of Operations” below for further discussion of changes in revenue and operating expenses as compared to 2023. A glossary of financial terms can be found at the end of Item 1.
Previous report
In 2024, Alaska technicians, represented by AMFA, ratified a new five-year CBA that includes wage increases and quality of life improvements. Alaska pilots, represented by ALPA, ratified a two-year extension of its existing CBA. In January 2025, Alaska reached a tentative agreement with its flight attendants, represented by AFA, for an updated CBA. Voting on the tentative agreement will be completed in the first quarter of 2025. Horizon is in negotiations with certain labor groups for updated CBAs, including its pilots, represented by IBT; its flight attendants, represented by AFA; and its technicians, represented by AMFA.
Previous report
Looking ahead to 2025, we are focused on the successful integration of Hawaiian into Air Group. We expect capacity growth for the year of 2% to 3% as compared to historical Air Group and Hawaiian combined capacity in the prior year. In addition to growth in revenue and expenses due to the the impact of Hawaiian on Air Group results for the full year, 2025 results will be impacted by other factors throughout the year. We expect revenue improvements to be driven by continued strength in leisure and corporate demand, and by network and loyalty synergies as integration work continues. Wage rate increases stemming from new labor agreements and rising costs at airports in which we operate will drive cost pressures during the year, but we anticipate some benefit from synergy capture in the second half of the year.
Previous report
Results for 2024 are inclusive of Hawaiian's operations from the acquisition date of September 18, 2024 through December 31, 2024, while the prior period does not include combined results. Consolidated revenue and expenses increased compared to the prior period due to the incorporation of Hawaiian's operations into Air Group. The below discussion of changes to our revenue and expenses compared to the prior year largely focus on material factors independent of the acquisition.
Previous report
2024 COMPARED WITH 2023
Previous report
Operating Revenue
Previous report
Total operating revenue increased $1.3 billion, or 13%, of which $869 million was attributable to Hawaiian. The changes are summarized in the following table:
Previous report
On a consolidated basis, Passenger revenue increased $1.1 billion, or 12%, of which $757 million was attributable to Hawaiian. The remaining $371 million increase was driven by increased traffic due to increased gauge and departures throughout the network. Strength in premium class products and increased redemptions by Mileage Plan members on both Alaska and partner airlines also contributed to this increase. These improvements were partially offset by approximately $200 million of lost revenue from the B737-9 grounding.
Previous report
On a consolidated basis, Loyalty program other revenue increased $85 million, or 13%, of which $53 million was attributable to Hawaiian. The remaining $32 million increase was primarily driven by higher commissions from bank card and third party partners.
Previous report
On a consolidated basis, Cargo and other revenue increased $96 million, or 38%, of which $59 million was attributable to Hawaiian. The remaining $37 million increase was driven by two additional B737-800 freighters in Alaska's cargo fleet for the full year and increases to other ancillary revenue.
Previous report
Operating Expenses
Previous report
Aircraft fuel expense decreased $135 million, or 5%. The elements of the change are illustrated in the following table:
Previous report
Alaska's fuel hedge program was suspended in 2023. Hawaiian's program was temporarily paused as of September 30, 2024. A summary of Alaska's WTI positions and Hawaiian's Brent crude positions is provided below:
Previous report
Wages and benefits expense increased $547 million, or 18%, of which $299 million was attributable to Hawaiian. The primary components of wages and benefits are shown in the following table:
Previous report
Wages increased $368 million, or 16%, of which $229 million was attributable to Hawaiian. The remaining $139 million increase was driven by increased wage rates across multiple labor groups since the prior year, as well as additional impact from irregular operations following the the B737-9 grounding in the first quarter of 2024. Increased expense for payroll taxes is consistent with the change in wages.
Previous report
The change in medical and other benefits was primarily driven by an increase in the cost of medical services compared to the prior year, as well as higher expenses associated with Alaska's long-term disability plan for its pilots. Increased expense for defined contribution plans was driven by higher wages as well as higher matching contributions for Alaska technicians.
Previous report
Aircraft maintenance expense increased $132 million, or 27%, of which $82 million was attributable to Hawaiian. The remaining $50 million increase was primarily driven by higher rates for outside maintenance work and additional maintenance projects.
Previous report
Aircraft rent
Previous report
Aircraft rent expense was flat compared to 2023. An increase of $18 million attributable to Hawaiian's leased aircraft was offset by a decrease of $19 million, primarily due to the retirement of ten leased A321neo aircraft from Alaska's fleet in 2023.
Previous report
Contracted services expense increased $55 million, or 14%, of which $39 million was attributable to Hawaiian. The remaining $16 million increase was primarily driven by higher rates charged by vendors for services as well as increased passengers throughout our network.
Previous report
Selling expenses increased by $46 million, or 15%, of which $40 million was attributable to Hawaiian. The remaining $6 million increase was driven by incremental credit card commissions and additional marketing costs.
Previous report
Food and beverage service expense increased $46 million, or 19%, of which $28 million was attributable to Hawaiian. The remaining $18 million increase was driven by growth in revenue passengers, as well as higher costs for food, food service supplies, and transportation.
Previous report
Other expense
Previous report
Other expense increased $125 million, or 17%, of which $66 million was attributable to Hawaiian. The remaining $59 million increase was primarily driven by crew hotel costs, passenger remuneration due to the B737-9 grounding, software costs, and other miscellaneous services.
Previous report
In 2024, we recognized $345 million of special operating expenses, compared to $443 million in 2023. Refer to Note 16 to the consolidated financial statements for details.
Previous report
Alaska Airlines reported a pretax profit, excluding special items and other adjustments, of $703 million in 2024, compared to $733 million in 2023. The $30 million decrease was driven by a combination of factors, including lost revenue from the B737-9 grounding, higher non-fuel operating expenses, including increased wages and higher variable incentive pay, and higher variable costs associated with overall network growth. This decrease was partially offset by a lower economic fuel cost per gallon.
Previous report
Hawaiian Airlines reported a pretax loss, excluding special items and other adjustments, of $58 million in 2024, representing its operations as a part of Air Group for the period from September 18, 2024 through December 31, 2024.
Previous report
Regional reported a pretax profit, excluding special items and other adjustments, of $152 million in 2024, compared to a profit of $65 million in 2023. The $87 million improvement was driven by higher passenger revenue consistent with the increase in traffic, partially offset by higher operating expenses driven by increased capacity.
Previous report
In 2024, cash provided by operating activities was $1.5 billion, compared to $1.1 billion in 2023. The increase in our operating cash flows was primarily due to increased cash provided from ticket sales, higher cash remuneration from our co-branded credit card partners, and other changes in various working capital account balances. As Hawaiian's operations are producing losses, the business contributed negative operating cash flow following the acquisition.
Previous report
Cash provided by financing activities was $119 million in 2024, compared to cash used in financing activities of $147 million in 2023. The Company had $2.3 billion in proceeds from new financing, including $2 billion backed by Alaska's Mileage Plan program. Debt payments were $1.9 billion, including $1.6 billion which was used to retire certain debt acquired from Hawaiian Airlines. The Company also increased its share repurchases, spending $312 million, compared to $137 million in 2023.
Previous report
Recognition of Goodwill and Acquired Assets and Liabilities
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Reworded paragraphs (31)
Previous wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our company and the present business environment. MD&A is provided as a supplement to – and should be read in conjunction with – our consolidated financial statements and the accompanying notes. All statements in the following discussion that are not statements of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the risks referred to in this report’s introductory cautionary note and the risks mentioned in Item 1A. "Risk Factors" within this document.
Current wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our company and the present business environment. MD&A is provided as a supplement to – and should be read in conjunction with – our consolidated financial statements and the accompanying notes. All statements in the following discussion that are not statements of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the risks referred to in this report’s introductory cautionary note and the risks mentioned in Item 1A. "Risk Factors" within this document. This overview summarizes the MD&A, which includes the following sections:
Previous wording
Below are operating statistics we use to measure performance.
Current wording
•GAAP to Non-GAAP Reconciliations and Operating Statistics - reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis, as well as operating statistics we use to measure operating performance.
Previous wording
This section of the Form 10-K covers discussion of 2024 and 2023 results, and comparisons between those years. For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
This section of the Form 10-K covers discussion of 2025 and 2024 pro forma results, and comparisons between those years. For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024.
Previous wording
Alaska and Hawaiian are working towards JCBAs for workgroups represented by the same unions. At December 31, 2024, Transition and Process Agreements have been negotiated for certain workgroups which define the process for negotiating JCBAs and set forth interim agreements until a JCBA is reached.
Current wording
With one exception discussed below, Alaska has begun negotiations for joint collective bargaining agreements (JCBAs) covering each represented Alaska and Hawaiian workgroup. The process for determining which union will represent the combined technicians and related workgroup remains ongoing and, as a result, JCBA negotiations have not begun concerning that workgroup. Alaska intends to initiate those negotiations after the representation issue has been resolved. At December 31, 2025, Transition and Process Agreements have been negotiated for certain workgroups which define the process for negotiating JCBAs and set forth interim agreements until a JCBA is reached.
Previous wording
The table below presents operating revenue details by principal geographic region (as defined by the U.S. Department of Transportation), inclusive of Hawaiian Airlines for the period from September 18, 2024 through December 31, 2024.
Current wording
The table below presents operating revenue details by principal geographic region (as defined by the U.S. Department of Transportation), and the percentage change of certain operational results on a pro forma basis for the twelve months ended December 31, 2025.
Previous wording
Total operating expenses increased $1.1 billion, or 11%. 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 $467 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:
Previous wording
We evaluate economic fuel expense, which we define as raw fuel expense adjusted for the cash we receive from counterparties for hedges that settle during the period and for the premium expense that we paid for those contracts. A key difference between aircraft fuel expense and economic fuel expense is the timing of gain or loss recognition on our hedge portfolio. Economic fuel expense includes gains and losses only when they are realized for those contracts that were settled during the period based on their original contract terms. We believe this is the best measure of the effect that fuel prices are currently having on our business as it most closely approximates the net cash outflow associated with purchasing fuel for our operations. Accordingly, many industry analysts evaluate our results using this measure, and it is the basis for most internal management reporting and our incentive pay plan.
Current wording
We evaluate economic fuel expense, which we define as raw fuel expense adjusted for the cash we receive from counterparties for hedges that settle during the period and for the premium expense that we paid for those contracts. Management considers economic fuel costs to be the best estimate of the cash cost of fuel.
Previous wording
Raw fuel expense decreased 3% compared to 2023. The decrease was driven primarily by lower refining margins associated with the conversion of crude oil to jet fuel, as well as lower per gallon costs on crude oil. It was partially offset by higher fuel consumption consistent with increased capacity and the inclusion of $193 million of raw fuel expense attributable to Hawaiian.
Current wording
On a pro forma basis, aircraft fuel expense decreased by $166 million, or 5%. Raw fuel expense decreased 5% compared to pro forma 2024, primarily 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 year were $38 million in 2024, compared to losses of $64 million in 2023. 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 year were $4 million in 2025, compared to losses of $44 million in pro forma 2024. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement.
Previous wording
Variable incentive pay expense increased $158 million, or 79%, compared to 2023. The increase was driven by a higher payout percentage for Alaska's and Horizon's Performance-Based Pay program compared to the prior year on an increased wage base.
Current wording
On a pro forma basis, variable incentive pay expense decreased $104 million, or 28%, driven by a lower payout percentage for the Company's Performance-Based Pay program compared to the prior year, partially offset by an increased wage base and inclusion of Hawaiian employees in the plan.
Previous wording
Landing fees and other rental expense increased $101 million, or 15%, of which $61 million was attributable to Hawaiian. The remaining $40 million increase was primarily driven by increased volume of Regional departures and landed weight. Increases to terminal rents were primarily driven by growth throughout the network, partially offset by favorable settlements received from certain airports in 2024.
Current wording
On a pro forma basis, landing fees and other rental expense increased $186 million, or 20%, primarily driven by increased terminal rents due to 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
Depreciation and amortization increased $132 million, or 29%, of which $44 million was attributable to Hawaiian. An additional $20 million of the increase was due to the amortization of acquired intangible assets and the change in fair value of certain acquired tangible assets. The remaining $68 million increase was primarily due to the addition of 12 owned B737 aircraft and three owned E175 aircraft during the year. Incremental depreciation on ground service and other equipment also contributed to the increase.
Current wording
On a pro forma basis, depreciation and amortization increased $56 million, or 8%, primarily due to the addition of 23 owned aircraft to our fleet during the year. 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 $25 million, or 11% driven by incremental departures and block hours operated by SkyWest.
Current wording
On a pro forma basis, third-party regional carrier expense, which represents payments made to SkyWest under the CPA with Alaska, increased $29 million, or 12%, driven by incremental departures and block hours operated by SkyWest.
Previous wording
As of December 31, 2024, we had cash and marketable securities of $2.5 billion. We also had 104 unencumbered aircraft, which can be financed if necessary, and an $850 million bank line-of-credit facility with no outstanding borrowings. We expect our current cash and marketable securities balance, combined with our available sources of liquidity, are sufficient to fund our liquidity needs for the next 12 months. We expect to meet our liquidity needs for the foreseeable future using cash flows from our operations, our available sources of liquidity, and future financing arrangements. We discuss our sources and uses of cash in more detail below.
Current wording
As of December 31, 2025, we had cash and marketable securities of $2.1 billion, excluding restricted cash. We also had 103 unencumbered aircraft, which can be financed if necessary, and an $850 million bank line-of-credit facility with no outstanding borrowings. We expect our current cash and marketable securities balance, combined with our available sources of liquidity, to be sufficient to fund our liquidity needs for the next 12 months. We expect to meet our liquidity needs for the foreseeable future using cash flows from our operations, our available sources of liquidity, and future financing arrangements. We discuss our sources and uses of cash in more detail below.
Previous wording
Capital expenditures to acquire aircraft, flight equipment, and other property and equipment is the primary use of investing cash flow. Total capital expenditures in 2024 were $1.3 billion, excluding the acquisition of Hawaiian. We discuss our aircraft-related commitments in more detail below.
Current wording
Capital expenditures to acquire aircraft, flight equipment, and other property and equipment is the primary use of investing cash flow. Total capital expenditures in 2025 were $1.6 billion, compared to $1.3 billion in 2024, excluding the acquisition of Hawaiian. We discuss our aircraft-related commitments in more detail below.
Previous wording
Cash used in investing activities was $634 million in 2024, compared to cash used in investing activities of $1 billion in 2023. The change was due to a combination of factors. In the first quarter, we received $162 million in compensation from Boeing related to the B737-9 grounding. In the third quarter, we paid $659 million to acquire Hawaiian Airlines, net of Hawaiian's cash balances. Total property and equipment expenditures decreased $213 million, primarily driven by fewer deliveries of Alaska-owned B737 aircraft in 2024 compared to 2023. Net sales of marketable securities increased $313 million, driven by the liquidation of Hawaiian's investment portfolio following completion of the acquisition. We also received $177 million for the sale of certain Alaska and Horizon-owned aircraft and equipment during 2024.
Current wording
Cash used in investing activities was $1.6 billion in 2025, compared to $634 million in 2024. In 2025, property and equipment expenditures were $1.6 billion, driven by the addition of new aircraft as well as other equipment purchases. Net purchases of marketable securities were $190 million in 2025. These amounts were partially offset by other investing cash inflows of $155 million, including proceeds from the sale of 12 B737-900 aircraft. The difference compared to the prior year was due to a combination of factors. In 2024, we paid $659 million to acquire Hawaiian Airlines, net of Hawaiian's cash balances. We received $162 million in compensation from Boeing related to the B737-9 grounding. We also had $929 million in net sales of marketable securities, driven by the liquidation of Hawaiian's investment portfolio.
Previous wording
(a) Excludes restricted cash balance of $29 million as of December 31, 2024.
Current wording
(a) Excludes restricted cash of $28 million as of December 31, 2025 and $29 million as of December 31, 2024.
Previous wording
We have various contractual obligations that require material future outlays of cash. These obligations include the purchase of aircraft and other flight equipment, payments for our CPA with SkyWest, debt service payments, lease payments for aircraft and other property and equipment, costs for aircraft and engine maintenance, sponsorship and license agreements, and other miscellaneous agreements for services associated with operating and marketing our airlines. We also anticipate we may have material cash outlays to meet our fuel efficiency targets. Currently, Alaska and Hawaiian have agreements to purchase SAF to be delivered in the coming years. These agreements are dependent on suppliers' ability to obtain all required governmental and regulatory approvals, achieve commercial operation, and produce sufficient quantities of SAF.
Current wording
We have various contractual obligations that require material future outlays of cash. These obligations include the purchase of aircraft and other flight equipment, payments for Alaska's CPA with SkyWest, debt service payments, lease payments for aircraft and other property and equipment, costs for aircraft and engine maintenance, sponsorship and license agreements, and other miscellaneous agreements for services associated with operating and marketing our airlines. We also anticipate we may have material cash outlays associated with new technologies for the future of the business. Currently, Alaska has agreements to purchase sustainable aviation fuel (SAF) to be delivered in the coming years. These agreements are dependent on suppliers' ability to obtain all required governmental and regulatory approvals, achieve commercial operation, and produce sufficient quantities of SAF. We expect to satisfy these obligations using cash flows from our operations, our available sources of liquidity, and future financing arrangements.
Previous wording
We expect to satisfy these obligations using cash flows from our operations, our available sources of liquidity, and future financing arrangements. Within the notes accompanying our consolidated financial statements, refer to Note 6 for discussion of scheduled debt obligations, Note 7 for discussion of future minimum payments for operating and finance leases, and Note 10 for discussion of aircraft-related purchase commitments and CPA obligations. We are also obligated to make periodic interest payments at fixed and variable rates, depending on the terms of our debt agreements. As of December 31, 2024, these interest obligations are expected to be $243 million in 2025, $228 million in 2026, $229 million in 2027, $196 million in 2028, $179 million in 2029, and $240 million thereafter.
Current wording
Within the notes accompanying our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, refer to Note 5 for discussion of scheduled debt obligations, Note 6 for discussion of future minimum payments for operating and finance leases, and Note 9 for discussion of aircraft-related purchase commitments and CPA obligations. We are also obligated to make periodic interest payments at fixed and variable rates, depending on the terms of our debt agreements. As of December 31, 2025, these interest obligations are expected to be $254 million in 2026, $266 million in 2027, $230 million in 2028, $211 million in 2029, $162 million in 2030, and $217 million thereafter.
Previous wording
As of December 31, 2024, Alaska had firm orders to purchase 74 B737 aircraft with deliveries expected between 2025 and 2029. Alaska also had rights for 100 additional B737 aircraft through 2030. Hawaiian had firm orders to purchase 10 B787-9 aircraft with deliveries expected between 2025 and 2028. Horizon had firm orders to purchase six E175 aircraft with deliveries between 2025 and 2026.
Current wording
As of December 31, 2025, Alaska had firm orders to purchase 174 B737 aircraft, with deliveries expected between 2026 and 2035, and firm orders to purchase 12 B787 aircraft with deliveries expected between 2026 and 2032. Alaska also had rights for 71 additional B737 aircraft through 2035. Horizon had firm orders to purchase three E175 aircraft with deliveries in 2026. Alaska also has an agreement with SkyWest Airlines to expand our long-term capacity purchase agreement by one aircraft in 2026.
Previous wording
Boeing has communicated that certain B737 and B787-9 aircraft are expected to be delivered later than the contracted delivery timing. For Alaska, this includes B737-9 aircraft contracted for delivery in 2024 that have been moved to 2025, certain B737-8 aircraft contracted for delivery in 2024 and 2025 that have been moved later in the contracted year or into the year following the contracted delivery, and certain B737-10 aircraft contracted for delivery in 2025 and 2026 that have been moved to 2026 or 2027, pending certification of the aircraft type. For Hawaiian, this includes B787-9 aircraft contracted for delivery between 2024 and 2026 that have been moved later into the contracted year or into the year following the contracted delivery. Management expects that other Boeing aircraft deliveries could be delayed beyond the contractual delivery. The table below summarizes our fleet plan, reflecting Boeing's communications and management's internal expectations.
Current wording
Boeing has communicated that certain B737 and B787 aircraft are expected to be delivered later than the contracted delivery timing. This includes certain B737-8 aircraft contracted for delivery in 2025 and 2026 that have moved into 2026 and 2027, and certain B787 aircraft contracted for delivery in 2025 that have moved into 2026. B737-10 aircraft contracted for delivery between 2027 and 2035 may be delayed pending certification of the aircraft type. Management expects that other Boeing aircraft deliveries could be delayed beyond the contractual delivery. The table below reflects Boeing's communications.
Previous wording
(a) A330-300 freighter aircraft to be utilized under the ATSA with Amazon. The ATSA provides for the operation of ten aircraft with customer options to expand the fleet.
Current wording
(a) A330-300 freighter aircraft utilized under the ATSA with Amazon.
Previous wording
The discussion and analysis of our financial position and results of operations in this MD&A are based upon our consolidated financial statements. The preparation of these financial statements requires us to make estimates and judgments that affect our financial position and results of operations. See Note 1 to the consolidated financial statements for a description of our significant accounting policies.
Current wording
The discussion and analysis of our financial position and results of operations in this MD&A are based upon our consolidated financial statements. The preparation of these financial statements requires us to make estimates and judgments that affect our financial position and results of operations. See Note 1 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a description of our significant accounting policies.
Previous wording
Alaska's Mileage Plan program awards mileage credits, referred to as miles, to members who fly on our airlines and our airline partners. We also sell services, including miles for transportation, Companion Fare™ certificates, priority boarding, bag fee waivers, and access to our brand and customer lists to major banks that offer Alaska co-branded credit cards. To a lesser extent, miles for transportation are also sold to other non-airline partners, such as hotels, and car rental agencies. Outstanding miles may be redeemed for travel on our airlines or eligible airline partners, and for non-airline products such as hotels. The existence of outstanding miles held by Mileage Plan members represents an obligation to provide future travel.
Current wording
Atmos Rewards awards points to members who fly on our airlines and our airline partners. We also provide other benefits, including Companion Fare™ certificates, priority boarding, bag fee waivers, and access to our brand and customer lists to major banks that offer our co-branded credit cards. To a lesser extent, points are also sold to other non-airline partners, such as hotels, and car rental agencies. Points can be redeemed for travel on our airlines or eligible airline partners, and for non-airline products such as hotels. Outstanding points held by Atmos Rewards members represent an obligation to provide future travel.
Previous wording
Mileage credits and the various other services we sell under Mileage Plan represent performance obligations that are part of a multiple deliverable revenue arrangement. Accounting guidance requires that we use a relative standalone selling price model to allocate consideration received to the material performance obligations in these contracts. Our relative standalone selling price models are refreshed when contracts originate or are materially modified.
Current wording
Points and the various other services we provide under Atmos Rewards represent performance obligations that are part of a multiple deliverable revenue arrangement. Accounting guidance requires that we use a relative standalone selling price model to allocate consideration received to the material performance obligations in these contracts. Our relative standalone selling price models are refreshed when contracts originate or are materially modified.
Previous wording
At December 31, 2024, Alaska's Mileage Plan program had 360 billion miles outstanding, resulting in a deferred revenue balance of $2.7 billion. For the year ended December 31, 2024, Mileage Plan revenue recognized from deferred revenue and recorded in passenger revenue was $1.1 billion. The deferred revenue resulting from our relative selling price allocations requires significant management judgment. There are uncertainties inherent in these estimates. Therefore, different assumptions could affect the amount and/or timing of revenue recognition or expenses. The most significant assumptions are described below.
Current wording
At December 31, 2025, Atmos Rewards program had approximately 480 billion points outstanding, resulting in a deferred revenue balance of $2.9 billion. For the year ended December 31, 2025, Loyalty program revenue recognized from deferred revenue and recorded in passenger revenue was $1.3 billion. Determination of our relative selling price allocations require significant management judgment, impacting revenue recognition and liabilities that we carry on our balance sheet. There are uncertainties inherent in these estimates. Therefore, different assumptions could affect the amount and/or timing of revenue recognition or expenses. The most significant assumptions are described below.
Previous wording
We estimate the standalone selling price for each performance obligation, including mileage credits, by considering multiple inputs and methods, including but not limited to, the estimated selling price of comparable travel, discounted cash flows, brand value, published selling prices, number of miles awarded, and the number of miles redeemed. We estimate the selling prices and volumes over the terms of the agreements in order to determine the allocation of proceeds to each of the multiple deliverables.
Current wording
We estimate the standalone selling price for each performance obligation, including points, by considering multiple inputs and methods, including but not limited to, the estimated selling price of comparable travel, discounted cash flows, brand value, published selling prices, number of points awarded, and the number of points redeemed. We estimate the selling prices and volumes over the terms of the agreements in order to determine the allocation of proceeds to each of the multiple deliverables.
Previous wording
The number of miles that will not be redeemed for travel (breakage):
Current wording
The number of points that will not be redeemed for travel (breakage):
Previous wording
We estimate how many miles will be used per award by employing a relative selling price method to allocate revenue from passenger ticket sales between air transportation and earned mileage credits. The portion attributed to mileage credits is deferred initially and recognized in passenger revenue upon redemption. We determine the estimated value of mileage credits using an equivalent ticket approach, considering historical data on award redemption patterns.
Current wording
We estimate how many points will be used per award by employing a relative selling price method to allocate revenue from passenger ticket sales between air transportation and earned loyalty points. The portion attributed to points is deferred initially and recognized in passenger revenue upon redemption. We determine the estimated value of points using an equivalent ticket approach, considering historical data on award redemption patterns.
Previous wording
Our estimates are based on the current requirements in our Mileage Plan program and historical and future award redemption patterns.
Current wording
Our estimates are based on the current requirements in our Atmos Rewards program and historical and future award redemption patterns.
Previous wording
We review significant Mileage Plan assumptions on an annual basis, or more frequently should circumstances indicate a need, and change our assumptions if facts and circumstances indicate that a change is necessary. We regularly update our breakage estimates for the portion of Mileage Plan mileage credits not expected to be redeemed. These estimates are based upon statistical analyses of historical data. A hypothetical 1% change in the amount of outstanding miles estimated to be redeemed would result in an approximately $12 million impact on annual revenue recognized.
Current wording
We review significant Atmos Rewards assumptions on an annual basis, or more frequently should circumstances indicate a need, and change our assumptions if facts and circumstances indicate that a change is necessary. We regularly update our breakage estimates for the portion of Atmos Rewards points not expected to be redeemed. These estimates are based upon statistical analyses of historical data. A hypothetical 1% change in the amount of outstanding points estimated to be redeemed would result in an approximately $17 million impact on annual revenue recognized.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Dollar amounts in the MD&A are generally rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to our actual figures represented in the tables below.
Current report — wording carried from elsewhere
In 2025, cash provided by operating activities was $1.2 billion, compared to $1.5 billion in 2024. Advance ticket sales and our co-branded credit card agreements are the primary sources of our operating cash flow. Our primary use of operating cash flow is for operating expenses, including payments for employee wages and benefits, aircraft fuel, payments to suppliers for goods and services, payments to lessors and airport authorities for leased aircraft, rents, and landing fees, and interest expense for our debt obligations. In 2025, this includes more than $300 million paid to employees in recognition of their 2024 Performance-Based Pay program achievements. It also includes $98 million paid to Starlink associated with an agreement to provide in-flight connectivity on Alaska's fleet.