ALASKA AIR GROUP, INC.
For the period ended Mar 31, 2026. Filed May 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 7, 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-Q
Period ended 2025-09-30; filed 2025-11-06.
0000766421-25-000060
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0000766421-26-000021
ITEM 2. 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 193 previous paragraphs and 94 current paragraphs.
33 unchanged; 24 reworded; 36 added; 132 removed; 4 previous and 1 current paragraphs rearranged.
Tables are not compared: 21 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 (36)
Current report
FIRST QUARTER REVIEW
Current report
First quarter results were negatively impacted by multiple external factors. Fuel prices increased dramatically as a result of ongoing geopolitical events and market disruptions. Civil unrest in Puerto Vallarta and historic rainstorms in Hawai'i reduced demand in key leisure markets ahead of the peak spring break travel period. These markets represent approximately 30% of Air Group capacity. Despite these headwinds, demand remained resilient and the company continued to execute on its Alaska Accelerate initiatives.
Current report
During the quarter, Alaska Airlines entered into a multi-year extension and expanded partnership with its co-branded credit card bank partner, Bank of America, enhancing loyalty program economics and long-term growth. The agreement drives incremental cash remuneration in 2026 and beyond. Alaska Airlines also reached an agreement with Amazon that improves the economics of cargo operations under the ATSA.
Current report
In April 2026, the Company implemented a single passenger service system, an integration milestone that consolidates reservation and customer service platforms across Alaska and Hawaiian. Also in April, Hawaiian officially joined theone world alliance, which will bring significant global travel benefits to guests and will help the company in its continued global expansion efforts.
Current report
OPERATING STATISTICS
Current report
Below are operating statistics we use to measure operating performance. We often refer to unit revenue and adjusted unit costs, which are non-GAAP measures.
Current report
OPERATING REVENUE
Current report
Total operating revenue increased $163 million, or 5%. The changes are summarized in the following table:
Current report
Passenger revenue increased $112 million, or 4%, primarily driven by higher yield from premium cabin demand and strong managed corporate travel. These increases were partially offset by temporary demand softness in Puerto Vallarta and Hawai'i during the peak spring break travel period.
Current report
Loyalty program other revenue increased by $20 million, or 10%, primarily due to the launch of the Summit Visa Infinite premium credit card and the Atmos Rewards program in August 2025. The launch drove higher commission revenue from bank card and third-party partners, supported by growth in total active members and higher consumer spend. Additionally, Alaska extended and expanded its co-branded credit card agreement with Bank of America during the quarter, which also contributed to the increase.
Current report
Cargo and other revenue increased by $31 million, or 25%, primarily driven by higher revenue under the ATSA with Amazon, as two additional A330-300F aircraft were added to the fleet since the first quarter of 2025 and an amendment to the agreement in the first quarter of 2026 resulted in improved economics. In addition, higher cargo volumes associated with services to Tokyo and Seoul contributed to the increase.
Current report
OPERATING EXPENSES
Current report
Aircraft fuel
Current report
Aircraft fuel expense consists primarily of raw fuel expense, which generally reflects the "into-plane" price paid at the airport, as well as other taxes and fees. Raw fuel prices are influenced by global crude oil prices and refining costs, which can vary by region in the U.S. We primarily purchase fuel based on U.S. West Coast and Singapore jet fuel prices.
Current report
(a) Includes taxes and other into-plane costs.
Current report
Aircraft fuel expense increased $115 million, or 17%, due to higher per gallon fuel costs driven by elevated refining margins and crude oil prices. Incremental fuel consumption resulting from additional capacity also contributed to the increase.
Current report
Future fuel cost expectations are highly sensitive to disruption in crude oil supplies and refineries, which have been significantly impacted by recent geopolitical events. We expect that fuel costs will remain elevated for some time.
Current report
Non-fuel expenses
Current report
Headcount growth of 6% drove increases across multiple wages and benefits components. Wages increased $82 million, or 10%, driven by higher wage rates across multiple labor groups. Medical and other benefits increased $24 million, or 20%, driven by higher claim volume and large value claims. Defined contribution plans increased $9 million, or 10%, consistent with wage increases.
Current report
Third-party regional carrier expense decreased by $8 million, or 13%, primarily driven by a 12% reduction in departures flown by SkyWest as compared to prior year.
Current report
Other expense
Current report
Other expense increased by $42 million, or 16%, driven by higher software and professional services costs. Additional pilot training costs, associated with the ramp up of international flying, also contributed to the increase.
Current report
In the first quarter of 2026, we recorded $35 million of operating special items compared to $91 million in the same period in 2025. Refer to Note 10 to the condensed consolidated financial statements for details.
Current report
Cash provided by operating activities was $421 million during the first three months of 2026, compared to $459 million during the first three months of 2025. The $38 million change was primarily driven by higher cash outflows used to operate the business, partially offset by increased advanced bookings reflected in air traffic liability.
Current report
Cash used in investing activities was $169 million during the first three months of 2026, compared to $381 million during the first three months of 2025. The $212 million change was driven primarily by net cash inflows from marketable securities activity of $172 million in 2026 compared to net cash outflows of $134 million in 2025, partially offset by higher property and equipment expenditures related to aircraft purchase deposits and other equipment.
Current report
Cash used in financing activities was $428 million during the first three months of 2026, compared to $236 million during the first three months of 2025. The $192 million change was primarily driven by increased debt payments and share repurchases, partially offset by proceeds from new debt incurred during the quarter.
Current report
Boeing continues to experience aircraft delivery delays attributable to supplier availability, production challenges, and regulatory approval processes. These factors represent known uncertainties that may continue to affect the timing of aircraft deliveries. The table below reflects Boeing’s most recent communications and management’s current estimates.
Current report
GAAP TO NON-GAAP RECONCILIATIONS
Current report
•Pretax income (loss), net income (loss), and earnings (loss) per share are presented on an adjusted basis. Adjustments are made for special charges that are unusual or nonrecurring in nature, as well as for gains and losses on foreign debt, as these adjustments enhance comparability of our core operations to prior periods and to the rest of the airline industry.
Current report
•CASMex is a key measure used by management and the Air Group Board of Directors to evaluate cost performance. It is also commonly used by industry analysts to compare airlines. Because U.S. carriers are generally similarly affected by changes in jet fuel prices over the long run, aircraft fuel costs are excluded to focus on more controllable, company-specific cost drivers. Costs related to freighter aircraft operations, including those incurred under the ATSA with Amazon, are excluded to enhance comparability with carriers that do not operate freighter aircraft. Performance‑Based Pay (PBP) expense is excluded as it is dependent on the Company's achievement of annually established financial and operational goals. Certain special charges are excluded as they are unusual or nonrecurring in nature.
Current report
•Adjusted capital expenditures includes certain amounts that are not classified as investing cash outflows within our consolidated statements of cash flows, but are viewed by management and other stakeholders as significant long-term investments in the business. Management believes these adjustments provide a more complete view of capital expenditures during the year.
Current report
GAAP TO NON-GAAP RECONCILIATIONS
Current report
Pretax Income (Loss), Net Income (Loss), and Earnings (Loss) per Share, adjusted
Current report
CASMex Reconciliation
Current report
Adjusted Capital Expenditures Reconciliation
Current report
Adjusted net debt -long-term debt, plus operating and finance lease liabilities, less unrestricted cash and marketable securities.
Removed paragraphs (132)
Previous report
Items affecting comparability
Previous report
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 report
Cybersecurity incident
Previous 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 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 report
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 report
For a discussion of our risk factors associated with cybersecurity threats, please refer to Part I Item 1A. "Risk Factors" within our Form 10-K for the year ended December 31, 2024.
Previous report
THIRD QUARTER REVIEW
Previous report
Overview
Previous report
On July 20, 2025, Alaska Air Group experienced an IT outage that affected operations. A temporary ground stop was put in place for Alaska and Horizon and was lifted later that day. Approximately 200 flights were canceled. The irregular operations resulting from the outage negatively impacted third quarter results by approximately $20 million.
Previous report
Labor update
Previous report
In the third quarter, McGee Air Services employees, represented by the International Association of Machinists and Aerospace Workers (IAM), ratified a five-year agreement. 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 participating in negotiations with AFA and TWU.
Previous report
Alaska and Hawaiian are working towards joint collective bargaining agreements (JCBA) for workgroups represented by common unions. Alaska and Hawaiian have Transition and Process Agreements for certain workgroups which define the process for negotiating JCBAs and set forth interim agreements until a JCBA is reached.
Previous report
Loyalty program update
Previous report
In August 2025, we launched Atmos Rewards, a loyalty program combining Alaska’s Mileage Plan and Hawaiian’s HawaiianMiles. While the program's launch did not have a material impact on third quarter financial results, we continue to assess member engagement and redemption behavior to determine potential future impacts as the program progresses. In September 2025, amendments made to the Atmos Rewards co-branded credit card agreement with Bank of America took effect resulting in modifications to the separately identifiable performance obligations.
Previous report
Subsequent events
Previous report
•IT related operational disruptions -Subsequent to the end of the quarter, on October 23, 2025, Alaska Air Group experienced a failure at a primary data center resulting in an IT outage that affected operations. A temporary ground stop was put in place for Alaska and Horizon. The ground stop was lifted the same day. The disruption resulted in approximately 500 canceled flights and approximately 50,000 guests were impacted. Additionally, on October 29, 2025, a global outage impacted Microsoft's Azure platform where several Alaska and Hawaiian Airlines technologies are hosted, causing a disruption to key systems and our websites. The outage did not result in any flight cancellations, but did result in flight delays. The Company has not yet quantified the full financial impacts of these disruptions.
Previous report
•Single operating certificate -Subsequent to the end of the quarter, on October 29, 2025, Alaska and Hawaiian obtained a single operating certificate from the FAA, our most significant integration milestone to date. This will ease our transition to a single passenger service system in spring of 2026.
Previous report
Outlook
Previous report
We anticipate fourth quarter unit revenue to increase low single digits year-over-year, building on last year’s solid performance. Unit costs for the fourth quarter are expected to increase low single-digits year-over-year and reflect significant cost synergies, with fourth quarter capacity growth expected to be 2% to 3% year-over-year. Economic fuel price per gallon is expected to remain a headwind due to ongoing volatility. This outlook does not include the financial impact of the IT outage that occurred on October 23, 2025 or the financial impact of the October 29, 2025 Microsoft Azure outage impacting Alaska Air Group services as we continue to evaluate the incidents. We intend to update our outlook later in the fourth quarter, once the full financial impact of the IT disruptions is understood.
Previous report
PRO FORMA OPERATING STATISTICS
Previous report
Below are operating statistics presented on a pro forma basis, which assumes Hawaiian is included in both 2024 and 2025.
Previous report
(a) For the three months ended September 30, 2024, the Hawaiian column reflects results prior to the consummation of the merger, comprising the period of July 1, 2024 to September 17, 2024.
Previous report
PRO FORMA OPERATING REVENUE
Previous report
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 report
(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.
Previous report
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 report
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 report
On a pro forma basis, Cargo and other revenue increased $24 million, or 20%, driven by six additional A330-300F aircraft in Hawaiian's cargo fleet under the ATSA with Amazon. Increased international cargo volumes driven by the launch of our Seattle-Seoul route also contributed to the increase.
Previous report
PRO FORMA OPERATING EXPENSES
Previous report
(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments and the impact of purchase accounting.
Previous report
Fuel expense
Previous report
Aircraft fuel expense includes raw fuel expense plus the effect of mark-to-market adjustments to our fuel hedge portfolio as the value of that portfolio increases and decreases. Our aircraft fuel expense can be volatile because it includes these gains or losses in the value of the underlying instrument as crude oil prices increase or decrease. Raw fuel expense is defined as the price that we generally pay at the airport, or the “into-plane” price, including taxes and fees. Raw fuel prices are impacted by world oil prices and refining costs, which can vary by region in the U.S. Raw fuel expense approximates cash paid to suppliers and does not reflect the effect of our fuel hedges.
Previous 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 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 report
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 report
Non-fuel expense
Previous report
(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.
Previous report
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 report
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 report
Aircraft maintenance
Previous report
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.
Showing the first 40 of 132 passages. Open the source sections for the rest.
Reworded paragraphs (24)
Previous 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.
Current wording
•First Quarter Review - highlights from the first quarter of 2026 outlining some of the major events that occurred during the period.
Previous wording
•Results of Operations - an in-depth analysis of our financial and operational results for the three and nine months ended September 30, 2025.
Current wording
•Results of Operations - an in-depth analysis of our financial and operational results for the three months ended March 31, 2026.
Previous 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.
Current wording
•GAAP to Non-GAAP Reconciliations - reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis.
Previous 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.
Current wording
We reported a loss before income tax under GAAP for the first quarter of 2026 of $317 million, compared to $233 million for the first quarter of 2025. Refer below for a more detailed discussion of the items impacting these results.
Previous wording
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2025 TO PRO FORMA THREE MONTHS ENDED SEPTEMBER 30, 2024
Current wording
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2026 TO THREE MONTHS ENDED MARCH 31, 2025
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 three months ended September 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 for the three months ended March 31, 2026.
Previous 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:
Current wording
Total operating expenses increased $245 million, or 7%. 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
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 wording
The table below summarizes our operating expense line items, excluding fuel and other special items. Generally, we expect these expenses to increase in line with capacity, fleet size, and growth of the Company's operations. Significant or unusual changes compared to 2025 are more fully described below.
Previous wording
The primary components of wages and benefits, including a reconciliation of 2024 on a pro forma basis, are shown in the following table:
Current wording
Wages and benefits increased by $115 million, or 10%. The primary components of Wages and benefits are shown in the following table:
Previous 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.
Current wording
Variable incentive pay decreased by $32 million, or 52%, 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.
Previous 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.
Current wording
Landing fees and other rentals increased by $49 million, or 20%, primarily driven by higher terminal rents resulting from rate increases and growth across the network. Landing fees increased primarily due to higher landed weights. Non-recurring favorable settlements received from certain airports in 2025 also contributed to the year-over-year increase.
Previous wording
As of September 30, 2025, we had cash and marketable securities of $2.3 billion. Our airlines have 112 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.
Current wording
As of March 31, 2026, we held $2.6 billion in available liquidity, including unrestricted cash, marketable securities, and undrawn credit facilities. Subsequent to quarter end, the Company exercised the accordion feature under its revolving credit facility, increasing our total available liquidity to $2.9 billion. We also had approximately $20 billion of unencumbered assets, including 124 aircraft and the unencumbered portion of our loyalty program assets. We expect our current unrestricted 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
Cash provided by operating activities was $1.1 billion during the first nine months of 2025. 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. During the first nine months of 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.
Current wording
Cash provided by ticket sales and from 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. Operating cash flow also includes payments to, or refunds from, federal, state, and local taxing authorities.
Previous wording
Capital expenditures to acquire aircraft, flight equipment, and other property and equipment are the primary purpose of our investing cash flow. We plan to incur approximately $1.4 billion to $1.6 billion in capital expenditures for 2025. We discuss our aircraft-related commitments in more detail below.
Current wording
Capital expenditures to acquire aircraft, flight equipment, and other property and equipment are the primary use of our investing cash flow. In 2026, we plan to incur approximately $1.4 billion to $1.5 billion in capital expenditures. We discuss our aircraft-related commitments in more detail below.
Previous wording
Cash provided by new financing arrangements is the primary source of our financing cash flow. Our primary uses of financing cash flow are payments of our debt and finance lease obligations, as well as share repurchases. Refer to Note 5 to the unaudited condensed consolidated financial statements for a detailed discussion of our debt balances, including a schedule outlining the time period of future payments.
Current wording
Cash provided by new financing arrangements is the primary source of our financing cash flow. Our primary uses of financing cash flow are payments of our debt and finance lease obligations, as well as share repurchases. Refer to Note 4 to the condensed consolidated financial statements for a detailed discussion of our debt balances, including a schedule outlining future payments.
Previous wording
The Company's liquidity target is between 15% and 25% of the trailing twelve months' revenue. This percentage was elevated as of December 31, 2024 as it did not include a full year of Hawaiian revenue, but has returned to normal levels as of September 30, 2025.
Current wording
The Company's liquidity target is between 15% and 25% of the trailing twelve months' revenue and its debt-to-capitalization target range is between 40% and 50%.
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 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 and Hawaiian have 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.
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
Within the notes accompanying our unaudited condensed consolidated financial statements, refer to Note 5 for discussion of scheduled debt obligations and Note 7 for discussion of aircraft purchase commitments and CPA obligations.
Current wording
Within the notes accompanying our condensed consolidated financial statements, refer to Note 4 for discussion of scheduled debt obligations and Note 6 for discussion of aircraft purchase commitments and CPA obligations.
Previous wording
As of September 30, 2025, Alaska had firm orders to purchase 75 B737 aircraft with deliveries expected between 2025 and 2029. Hawaiian had firm orders to purchase 8 B787 aircraft with deliveries expected between 2025 and 2029. Horizon had firm orders to purchase 3 E175 aircraft with deliveries expected in 2026. Alaska also has an agreement with SkyWest Airlines to add one E175 aircraft under the existing CPA in 2026.
Current wording
As of March 31, 2026, 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 its long-term capacity purchase agreement by one E175 aircraft in 2026.
Previous wording
We are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. We believe that consideration of these non-GAAP financial measures may be important to investors for the following reasons:
Current wording
Reconciliations of certain reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis are provided below. Consideration of these non-GAAP financial measures may be important to users of the financial statements. Although these non-GAAP figures are presented below, they should not be considered a substitute for or superior to GAAP figures.
Previous wording
There have been no material changes to our critical accounting estimates during the three and nine months ended September 30, 2025. For information regarding our critical accounting estimates, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2024.
Current wording
There have been no material changes to our critical accounting estimates during the three months ended March 31, 2026. For information regarding our critical accounting estimates, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2025.
Previous wording
Debt-to-capitalization ratio - represents adjusted debt (long-term debt plus capitalized operating and finance lease liabilities) divided by total equity plus adjusted debt
Current wording
Adjusted debt - long-term debt, plus operating and finance lease liabilities.
Previous wording
CASMex - operating costs excluding fuel, freighter costs, and special items per ASM, or "unit cost"
Current wording
CASMex - operating costs excluding fuel, freighter costs, Performance-Based Pay (PBP), and special items per ASM, or "unit cost."
Previous wording
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
Current wording
Freighter Costs -operating expenses directly attributable to the operation of B737 freighter aircraft and A330-300 freighter aircraft exclusively performing cargo missions.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Debt-to-capitalization ratio - represents adjusted debt, net of current portion, divided by total equity plus adjusted debt, net of current portion.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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.
Previous report — wording carried elsewhere
On a pro forma basis, variable incentive pay decreased $17 million, or 8%, 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.