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News Release

Alaska Air Group Reports 2007 Full Year and Fourth Quarter Results

SEATTLE, Jan. 24 /PRNewswire-FirstCall/ -- Alaska Air Group, Inc. (NYSE: ALK) today reported full year net income of $125.0 million, or $3.09 per diluted share, compared to a net loss of $52.6 million, or $1.39 per share, in 2006. The prior year results include charges related to the transition to an all-Boeing 737 fleet at Alaska Airlines and for voluntary severance programs related to new labor contracts. Both periods include adjustments resulting from mark-to-market fuel hedge accounting. Excluding the impact of these items, the company would have reported net income of $92.3 million, or $2.28 per diluted share, compared to net income of $137.7 million, or $3.45 per diluted share, in 2006.

The company reported fourth quarter net income of $7.4 million, or $0.19 per diluted share, compared to a net loss of $11.6 million, or $0.29 per share, in 2006. Similar to the items noted above, both periods include mark-to-market fuel hedge accounting adjustments and 2006 includes a favorable adjustment related to the voluntary severance programs. Excluding the impact of these adjustments, the company would have reported a fourth quarter net loss of $17.9 million, or $0.46 per share, compared to a net loss of $3.4 million, or $0.08 per share, in 2006. A reconciliation of these non-GAAP measures can be found on page 6.

"It's frustrating to report a fourth quarter adjusted loss in what has been a solid year relative to other carriers," said Bill Ayer, chairman and chief executive officer. "The loss was driven primarily by skyrocketing fuel costs combined with fares that have not kept pace. However, our fleet transition, fuel hedging program and other efforts to reduce fuel consumption put us in an excellent position to compete in this difficult environment."

Alaska Airlines' mainline passenger traffic in the fourth quarter increased 6.0 percent on a capacity increase of 4.6 percent. Load factor increased by 1.0 percentage points to 74.7 percent. Alaska's mainline operating revenue per available seat mile (ASM) increased 2.7 percent and its operating costs per ASM excluding fuel and the special items mentioned above decreased 3.0 percent from the prior year. Alaska's total pretax income for the quarter was $15.2 million, compared to a pretax loss of $12.1 million in 2006. Excluding the items noted above, Alaska would have reported a pretax loss of $18.8 million for the quarter compared to a $1.9 million pretax loss in the fourth quarter of 2006.

Horizon Air's combined passenger traffic in the fourth quarter increased 9.7 percent on a 10.3 percent capacity increase. Load factor declined by 0.4 percentage points to 72.6 percent. Horizon's combined operating revenue per ASM increased 3.9 percent and its operating costs per ASM excluding fuel decreased 0.8 percent. Horizon's total pretax loss for the quarter was $4.8 million, compared to a pretax loss of $3.5 million in 2006. Excluding mark-to-market fuel hedge accounting adjustments, Horizon's pretax loss was $11.2 million for the quarter, compared to a pretax loss of $0.5 million in the fourth quarter of 2006.

Alaska Air Group had cash and short-term investments at Dec. 31, 2007, of $823 million. The company repurchased 2,593,282 shares of its common stock for $62.8 million through Dec. 31, 2007, pursuant to the $100 million share repurchase program authorized by the Board of Directors in September 2007. As of yesterday, the company had repurchased 3,292,882 shares of its common stock for a total of $79.3 million.

A summary of financial and statistical data for Alaska Airlines and Horizon Air, as well as a reconciliation of the reported non-GAAP financial measures, can be found on pages 7 through 11.

A conference call regarding the full year and fourth quarter 2007 results will be simulcast via the Internet at 8:30 a.m. Pacific time on Jan. 24, 2008. It can be accessed through the company's Web site at alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at alaskaair.com/investors.

References in this report to "Air Group," "company," "we," "us," and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and together as our "airlines."

This report contains forward-looking statements that are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance and involve known and unknown risks and uncertainties that may cause our actual results or performance to be materially different from those indicated by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "forecast," "may," "will," "could," "should," "expect," "plan," "believe," "potential" or other similar words indicating future events or contingencies. Some of the things that could cause our actual results to differ from our expectations are: the competitive environment and other trends in our industry; changes in our operating costs including fuel, which can be volatile; our ability to meet our cost reduction goals; our inability to achieve or maintain profitability and fluctuations in our quarterly results; our significant indebtedness; the implementation of our growth strategy; the amounts of potential lease termination payments with lessors for our remaining MD-80 leased aircraft and related sublease payments from sub lessees, if applicable; compliance with our financial covenants; potential downgrades of our credit ratings and the availability of financing; the concentration of our revenue from a few key markets; general economic conditions, as well as economic conditions in the geographic regions we serve; actual or threatened terrorist attacks; global instability and potential U.S. military actions or activities; insurance costs; labor disputes; our ability to attract and retain qualified personnel; an aircraft accident or incident; liability and other claims asserted against us; operational disruptions; increases in government fees and taxes; changes in laws and regulations; our reliance on automated systems; and our reliance on third-party vendors and partners. For a discussion of these and other risk factors, see Item 1A of the company's Annual Report on Form 10-K for the year ended Dec. 31, 2006. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. These risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We disclaim any obligation to publicly update or revise any forward-looking statements after the date of this press release to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines and Horizon Air together serve 92 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada and Mexico. For reservations, visit alaskaair.com. For more news and information, visit the Alaska Airlines/Horizon Air Newsroom at alaskaair.com/newsroom.


                            ALASKA AIR GROUP, INC.

     CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
     (In Millions, Except Per Share Amounts)

                                           Three Months       Twelve Months
                                          Ended December      Ended December
                                                31,                 31,
                                           2007     2006      2007      2006
    Operating Revenues:
    Passenger                             $784.3   $724.6  $3,236.5  $3,083.0
    Freight and mail                        22.2     22.5      97.8      97.3
    Other - net                             46.9     43.2     171.7     154.1
    Total Operating Revenues               853.4    790.3   3,506.0   3,334.4

    Operating Expenses:
    Wages and benefits                     243.2    240.8     957.9     937.0
    Variable incentive pay                   3.6     12.7      20.8      36.8
    Aircraft fuel, including hedging
     gains and losses                      220.5    219.8     876.3     873.5
    Aircraft maintenance                    65.1     62.1     241.8     230.7
    Aircraft rent                           45.2     43.6     178.4     180.2
    Landing fees and other rentals          56.7     51.6     226.0     204.0
    Contracted services                     41.8     38.9     160.6     153.2
    Selling expenses                        37.7     36.7     160.5     169.3
    Depreciation and amortization           45.1     43.4     177.4     157.5
    Food and beverage service               12.8     12.9      49.7      51.2
    Other                                   62.8     53.6     230.5     214.0
    Fleet transition costs - Alaska            -        -         -     189.5
    Fleet transition costs - Horizon         3.5        -      14.1         -
    Restructuring charges and adjustments      -     (7.6)        -      24.8
    Total Operating Expenses               838.0    808.5   3,294.0   3,421.7
    Operating Income (Loss)                 15.4    (18.2)    212.0     (87.3)

    Nonoperating Income (Expense):
    Interest income                         11.9     14.9      53.9      54.3
    Interest expense                       (21.7)   (20.4)    (88.0)    (78.0)
    Interest capitalized                     6.9      7.1      27.8      24.7
    Other - net                             (2.9)       -      (4.1)     (1.5)
                                            (5.8)     1.6     (10.4)     (0.5)
    Income (loss) before income tax          9.6    (16.6)    201.6     (87.8)
    Income tax expense (benefit)             2.2     (5.0)     76.6     (35.2)
    Net Income (Loss)                       $7.4   $(11.6)   $125.0    $(52.6)
    Basic Earnings (Loss) Per Share:       $0.19   ($0.29)    $3.12    ($1.39)
    Diluted Earnings (Loss) Per Share:     $0.19   ($0.29)    $3.09    ($1.39)
    Shares Used for Computation:
    Basic                                 39.210   40.214    40.125    37.939
    Diluted                               39.393   40.214    40.424    37.939


                            Alaska Air Group, Inc.

     CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

                                                December 31,      December 31,
    (In Millions)                                     2007              2006

    Cash and marketable securities                    $823            $1,014

    Total current assets                             1,391             1,572
    Property and equipment-net                       2,962             2,359
    Other assets                                       138               146
    Total assets                                    $4,491            $4,077

    Current liabilities                             $1,388            $1,236
    Long-term debt                                   1,125             1,032
    Other liabilities and credits                      954               923
    Shareholders' equity                             1,024               886
    Total liabilities and shareholders'
     equity                                         $4,491            $4,077

    Debt to Capitalization, adjusted for
     operating leases                               70%:30%           72%:28%

    Number of common shares outstanding             38.051            40.294


             Air Group Net Income (Loss) and EPS Reconciliation:

    The following table summarizes Alaska Air Group, Inc.'s net income (loss)
    and amounts per share during 2007 and 2006 excluding adjustments to
    reflect the timing of gain or loss recognition resulting from
    mark-to-market fuel-hedge accounting, fleet transition costs related to
    the impairment of the MD-80 fleet, and restructuring charges and
    adjustments, as reported in accordance with GAAP (in millions except per
    share amounts):

                                             Three Months Ended December 31,
                                                2007              2006
                                           Dollars  Diluted  Dollars  Diluted
                                                      EPS               EPS
    Net loss and diluted EPS, excluding
     mark-to-market hedging adjustments,
     and restructuring charges             $(17.9)  $(0.46)   $(3.4)  $(0.08)
    Adjustments to reflect the timing of
     gain or loss recognition resulting
     from mark-to-market fuel-hedge
     accounting, net of tax                  25.3     0.65    (13.0)   (0.33)
    Restructuring charges and
     adjustments, net of tax                    -        -      4.8     0.12
    Reported GAAP amounts                    $7.4    $0.19   $(11.6)  $(0.29)


                                          Twelve Months Ended December 31,
                                               2007              2006
                                           Dollars  Diluted  Dollars  Diluted
                                                      EPS               EPS*
    Net income and diluted EPS, excluding
     mark-to-market hedging adjustments,
     Alaska fleet transition costs, and
     restructuring charges                  $92.3   $2.28   $137.7    $3.45
    Effect of dilutive shares*                                  NA     0.17
    Adjustments to reflect timing of gain
     or loss recognition resulting from
     mark-to-market fuel-hedge accounting,
     net of tax                              32.7    0.81    (56.3)   (1.48)
    Fleet transition - Alaska, net of tax       -       -   (118.5)   (3.12)
    Restructuring charges and
     adjustments, net of tax                    -       -    (15.5)   (0.41)
    Reported GAAP amounts                  $125.0   $3.09   $(52.6)  $(1.39)

     *Diluted earnings per share for the twelve months ended December 31,
      2006, excluding the impact of the mark-to-market losses on fuel
      hedges, fleet transition costs, and restructuring charges and
      adjustments has been calculated using the dilutive weighted-average
      number of shares outstanding of 40.386 million.

      In order to reconcile the diluted earnings per share on an adjusted
      basis to the GAAP loss per share for twelve months ended December 31,
      2006, the table above includes $0.17 per share, which represents the
      impact of the additional shares that were used in the adjusted diluted
      earnings per share.  Additionally, $1.6 million of interest, net of tax,
      on the convertible senior notes that were outstanding during the first
      quarter of the year was added back to earnings for the twelve months
      ended December 31, 2006 in order to derive the diluted earnings per
      share on an adjusted basis.

      The per share impact of the mark-to-market losses on fuel hedges, fleet
      transition costs, and restructuring and impairment charges have been
      presented in the table above using the basic shares outstanding of
      37.939 million for the twelve months ended December


                Alaska Airlines Financial and Statistical Data

                           Three Months Ended           Twelve Months Ended
                              December 31,                  December 31,

    Financial Data (in
     millions):            2007    2006  %Change     2007      2006    %Change
    Operating Revenues:
    Passenger            $612.8  $570.6     7.4  $2,547.2  $2,453.1       3.8
    Freight and mail       21.3    21.6    (1.4)     94.2      93.4       0.9
    Other - net            41.3    36.6    12.8     147.1     129.6      13.5
    Total mainline
     operating revenues   675.4   628.8           2,788.5   2,676.1
    Passenger -
     purchased capacity    71.9     3.4      NM     281.4      16.4        NM
    Total Operating
     Revenues             747.3   632.2    18.2   3,069.9   2,692.5      14.0


    Operating Expenses:
    Wages and benefits    191.0   190.4     0.3     752.9     743.3       1.3
    Variable incentive
     pay                    2.3    10.4   (77.9)     13.5      27.7     (51.3)
    Aircraft fuel,
     including hedging
     gains and losses     182.2   189.8    (4.0)    737.5     757.0      (2.6)
    Aircraft maintenance   42.0    38.2     9.9     149.8     156.8      (4.5)
    Aircraft rent          29.5    26.3    12.2     112.8     110.9       1.7
    Landing fees and
     other rentals         42.8    40.3     6.2     170.1     158.2       7.5
    Contracted services    32.9    30.2     8.9     124.1     117.5       5.6
    Selling expenses       30.0    31.5    (4.8)    129.3     141.5      (8.6)
    Depreciation and
     amortization          36.2    38.2    (5.2)    142.3     137.8       3.3
    Food and beverage
     service               12.1    12.2    (0.8)     46.9      48.3      (2.9)
    Other                  48.1    42.7    12.6     173.1     161.1       7.4
    Fleet transition
     costs                    -       -      NM         -     189.5        NM
    Restructuring
     charges and
     adjustments              -    (7.6)     NM         -      24.8        NM
    Total mainline
     operating expenses   649.1   642.6     1.0   2,552.3   2,774.4      (8.0)
    Purchased capacity
     costs                 80.7     3.2      NM     302.8      14.3        NM
    Total Operating
     Expenses             729.8   645.8           2,855.1   2,788.7

    Operating Income
     (Loss)                17.5   (13.6)     NM     214.8     (96.2)       NM

    Interest income        15.1    15.1              64.8      56.3
    Interest expense      (21.3)  (19.8)            (86.2)    (73.3)
    Interest capitalized    6.6     6.0              25.7      21.5
    Other - net            (2.7)    0.2              (3.1)     (0.5)
                           (2.3)    1.5               1.2       4.0

    Income (Loss) Before
     Income Tax           $15.2  $(12.1)           $216.0    $(92.2)

    Mainline Operating
     Statistics:
    Revenue passengers
     (000)                4,191   4,107     2.0    17,558    17,165       2.3
    RPMs (000,000)
     "traffic"            4,498   4,243     6.0    18,451    17,822       3.5
    ASMs (000,000)
     "capacity"           6,020   5,755     4.6    24,208    23,278       4.0
    Passenger load
     factor                74.7%   73.7%  1.0pts     76.2%     76.6%  (0.4)pts
    Yield per passenger
     mile (in cents)      13.62   13.45     1.3     13.81     13.76       0.3
    Operating revenue
     per ASM (in cents)   11.22   10.93     2.7     11.52     11.50       0.2
    Passenger revenue
     per ASM (in cents)   10.18    9.91     2.7     10.52     10.54      (0.2)
    Operating expense
     per ASM (in cents)   10.78   11.17    (3.5)    10.54     11.92     (11.6)
    Aircraft fuel per
     ASM (in cents)        3.02    3.30    (8.3)     3.04      3.25      (6.4)
    Fleet transition
     costs per ASM (a)
     (in cents)               -       -      NM         -      0.81        NM
    Restructuring
     charges per ASM (a)
     (in cents)               -   -0.13      NM         -      0.11        NM
    Operating expense
     per ASM excluding
     fuel,
     restructuring
     charges and fleet
     transition costs
     (a) (in cents)        7.76    8.00    (3.0)     7.50      7.75      (3.2)
    GAAP fuel cost per
     gallon               $2.09   $2.18    (4.3)    $2.08     $2.14      (2.6)
    Economic fuel cost
     per gallon (b)       $2.48   $1.98    25.2     $2.20     $1.92      15.1
    Fuel gallons
     (000,000)             87.2    87.1     0.1     354.3     354.3       0.0
    Average number of
     full-time
     equivalent
     employees            9,672   9,485     2.0     9,679     9,322       3.8
    Aircraft utilization
     (blk hrs/day)         10.7    10.6     0.9      10.9      11.0      (0.9)
    Average aircraft
     stage length
     (miles)                946     914     3.5       926       919       0.8
    Operating fleet at
     period-end             115     114    1 a/c      115       114      1 a/c

    Regional Operating
     Statistics:
    RPMs (000,000)          287       9       NM    1,099        41         NM
    ASMs (000,000)          386      15       NM    1,453        67         NM

    NM = Not Meaningful

    (a) See page 9 for a reconciliation of these non-GAAP measures and a
        discussion about why these measures may be important to investors.
    (b) See page 11 for a reconciliation of economic fuel cost.


                  Horizon Air Financial and Statistical Data

                              Three Months Ended       Twelve Months Ended
                                 December 31,              December 31,

    Financial Data (in
     millions):              2007    2006   % Change   2007    2006   % Change
    Operating Revenues:
    Passenger (a)          $179.6  $155.0      15.9  $709.2  $633.1      12.0
    Freight and mail          0.5     0.9     (44.4)    2.3     3.9     (41.0)
    Other - net               1.8     2.9     (37.9)    6.9     7.0      (1.4)
    Total Operating
     Revenues               181.9   158.8      14.5   718.4   644.0      11.6

    Operating Expenses:
    Wages and benefits       51.1    49.0       4.3   201.2   189.3       6.3
    Variable incentive pay    1.3     2.3     (43.5)    7.3     9.1     (19.8)
    Aircraft fuel,
     including hedging
     gains and losses        38.3    30.0      27.7   138.8   116.5      19.1
    Aircraft maintenance     23.1    23.9      (3.3)   92.0    73.9      24.5
    Aircraft rent            15.7    17.3      (9.2)   65.6    69.3      (5.3)
    Landing fees and other
     rentals                 14.1    11.6      21.6    56.9    46.9      21.3
    Contracted services       7.2     6.9       4.3    27.1    27.0       0.4
    Selling expenses          7.7     6.3      22.2    31.2    31.5      (1.0)
    Depreciation and
     amortization             8.6     4.9      75.5    33.9    18.5      83.2
    Food and beverage
     service                  0.7     0.7      (0.0)    2.8     2.9      (3.4)
    Other                    12.3     9.9      24.2    48.0    46.9       2.3
    Fleet transition costs    3.5       -        NM    14.1       -        NM
    Total Operating
     Expenses               183.6   162.8      12.8   718.9   631.8      13.8

    Operating Income
     (Loss)                  (1.7)   (4.0)       NM    (0.5)   12.2        NM

    Interest income           1.1     1.0               4.5     3.7
    Interest expense         (4.5)   (1.6)            (16.6)   (7.4)
    Interest capitalized      0.3     1.1               2.1     3.2
    Other - net                 -       -              (0.1)      -
                             (3.1)    0.5             (10.1)   (0.5)

    Income (Loss) Before
     Income Tax             $(4.8)  $(3.5)           $(10.6)  $11.7

    Combined Operating
     Statistics: (a)
    Revenue passengers
     (000)                  1,930   1,689      14.3   7,552   6,860      10.1
    RPMs (000,000)
     "traffic"                723     659       9.7   2,918   2,691       8.4
    ASMs (000,000)
     "capacity"               996     903      10.3   3,978   3,632       9.5
    Passenger load factor    72.6%   73.0%  (0.4)pts   73.4%   74.1%  (0.7)pts
    Yield per passenger
     mile (in cents)        24.84   23.52       5.6   24.30   23.53       3.3
    Operating revenue per
     ASM (in cents)         18.26   17.59       3.9   18.06   17.73       1.9
    Operating expenses per
     ASM  (in cents)        18.43   18.03       2.2   18.07   17.40       3.9
    Aircraft fuel per
     ASM (in cents)          3.84    3.32      15.4    3.49    3.21       8.8
    Operating expense per
     ASM excluding fuel
     (b) (in cents)         14.59   14.71      (0.8)  14.58   14.19       2.8
    Fleet transition costs
     per ASM (b) (in cents)  0.35       -        NM    0.35       -        NM
    Operating expense per
     ASM excluding
     fuel and fleet
     transition costs
     (b) (in cents)         14.24   14.71      (3.2)  14.23   14.19       0.3
    GAAP fuel cost per
     gallon                 $2.18   $2.19      (0.6)  $2.14   $2.14       0.1
    Economic fuel cost per
     gallon (c)             $2.54   $1.98      28.5   $2.28   $1.93      17.9
    Fuel gallons (000,000)   17.6    13.7      28.5    64.8    54.3      19.3
    Average number of
     full-time equivalent
     employees              3,887   3,670       5.9   3,806   3,611       5.4
    Aircraft utilization
     (blk hrs/day)            8.4     8.6      (2.3)    8.6     8.8      (2.3)
    Operating fleet at
     period-end                70      69      1 a/c     70      69      1 a/c

    NM = Not Meaningful

    (a) Represents combined information for all Horizon flights, including
        those operated under Capacity Purchase Agreements (CPAs) with
        Alaska and as Frontier Jet Express.  See page 10 for additional line
        of business information.
    (b) See pages 9 and 10 for a reconciliation of these non-GAAP measures and
        a discussion about why these measures may be important to investors.
    (c) See page 11 for a reconciliation of economic fuel cost.


    Note A:  Pursuant to Regulation G, we are providing disclosure of the
    reconciliation of reported non-GAAP financial measures to their most
    directly comparable financial measures reported on a GAAP basis. We
    believe that consideration of this measure of unit costs excluding fuel,
    purchased capacity costs, and other noted items may be important to
    investors for the following reasons:

    *  Cost per available seat mile (ASM) excluding fuel, purchased capacity
       costs, and other special items is one of the most important measures
       used by managements of both Alaska and Horizon and the Air Group Board
       of Directors in assessing quarterly and annual cost performance and,
       for Alaska Airlines, the operating results of the ''mainline''
       operation, which includes the operation of the B737 and MD80 aircraft
       fleets branded in Alaska Airlines livery.

    *  Cost per ASM excluding fuel, purchased capacity costs, and other
       items as specified in our governing documents is an important metric in
       the employee incentive plan that covers company management and
       executives.

    *  By eliminating fuel expense from our unit cost metrics, we believe that
       we have better visibility into the results of our non-fuel
       cost-reduction initiatives.  Our industry is highly competitive, and
       characterized by high fixed costs, so even a small reduction in
       non-fuel operating costs can result in a significant improvement in
       operating results.  In addition, we believe that all domestic carriers
       are similarly impacted by changes in jet fuel costs over the long run,
       so it is important for management (and thus investors) to understand
       the impact of (and trends in) company specific cost drivers such as
       labor rates and productivity, airport costs, and maintenance costs,
       which are more controllable by management.

    *  Cost per ASM excluding fuel and purchased capacity costs is a measure
       commonly used by industry analysts and we believe it is the basis by
       which they compare our airlines to others in the industry.  The measure
       is also the subject of frequent questions from holders of our common
       stock.

    *  By eliminating the impact of certain noted items, management is
       provided the ability to measure and monitor performance both with and
       without these special items.  Management believes that the disclosure
       of the impact of certain items such as the fleet transition costs and
       restructuring charges is important to the reader as it provides
       information on significant items that are not indicative of future
       performance.  Industry analysts and investors consistently measure the
       Company's performance without these items for better comparability
       between periods and between other airlines.

    *  Although we disclose our "mainline" unit revenues for Alaska to
       eliminate those revenues associated with purchased capacity flying
       performed by others on our behalf, we do not (nor are we able to)
       present unit revenues excluding the impact that rising fuel costs have
       had on ticket prices.  This is a limitation of our non-GAAP measure
       that excludes fuel from unit costs, as fuel represents nearly 30% of
       our total mainline operating expenses, and fluctuations in our fuel
       prices are often the driver of changes in unit revenues in the mid-to
       long term.  We would caution the readers of these financial statements
       not to place undue reliance on unit costs excluding fuel as a measure
       or predictor of future profitability.


    The following tables reconcile our non-GAAP financial measures to the most
    directly comparable GAAP financial measures for both Alaska Airlines, Inc.
    and Horizon Air Industries, Inc.:


     Alaska Airlines, Inc.
     (in millions, except for per ASM unit information)

                                            Three Months       Twelve Months
                                           Ended December      Ended December
                                                31,                 31,

    Mainline unit cost reconciliations:      2007    2006      2007      2006
    Mainline operating expenses            $649.1  $642.6  $2,552.3  $2,774.4
    Mainline ASMs                           6,020   5,755    24,208    23,278

    Mainline operating expenses
     per ASM (in cents)                     10.78   11.17     10.54     11.92

    Mainline operating expenses            $649.1  $642.6  $2,552.3  $2,774.4
    Less: aircraft fuel                    (182.2) (189.8)   (737.5)   (757.0)
    Less: fleet transition costs                -       -         -    (189.5)
    Less: restructuring charges and
     adjustments                                -     7.6         -     (24.8)
    Mainline operating expenses excluding
     fuel, fleet transition costs, and
     restructuring charges and
     adjustments                           $466.9  $460.4  $1,814.8  $1,803.1
    Mainline ASMs                           6,020   5,755    24,208    23,278
    Mainline operating expenses per ASM
     excluding fuel, fleet transition
     costs, and restructuring charges
     and adjustments (in cents)              7.76    8.00      7.50      7.75



                                              Three Months      Twelve Months
                                             Ended December     Ended December
                                                  31,                31,

    Reconciliation to GAAP income (loss)
     before taxes :                          2007     2006     2007     2006
    Income (loss) before taxes, excluding
     mark-to-market hedging gains
     (losses), fleet transition costs,
     and restructuring charges and
     adjustments                           $(18.8)   $(1.9)  $172.7   $200.5
    Adjustments to reflect timing of gain
     or loss recognition resulting from
     mark-to-market accounting on fuel
     hedges                                  34.0    (17.8)    43.3    (78.4)
    Less: fleet transition costs                -        -        -   (189.5)
    Less: restructuring charges and
     adjustments                                -      7.6        -    (24.8)
    GAAP income (loss) before taxes as
     reported                               $15.2   $(12.1)  $216.0   $(92.2)



     Horizon Air Industries, Inc.
     (in millions, except for per ASM unit information)

                                         Three Months Ended   Twelve Months
                                            December 31,    Ended December 31,

    Unit cost reconciliations:               2007     2006     2007     2006
    Operating expenses                     $183.6   $162.8   $718.9   $631.8
    ASMs                                      996      903    3,978    3,632

    Operating expenses per ASM (in cents)   18.43    18.03    18.07    17.40

    Operating expenses                     $183.6   $162.8   $718.9   $631.8
    Less: aircraft fuel                     (38.3)   (30.0)  (138.8)  (116.5)

    Operating expenses excluding fuel      $145.3   $132.8   $580.1   $515.3
    ASMs                                      996      903    3,978    3,632

    Operating expenses per ASM excluding
     fuel (in cents)                        14.59    14.71    14.58    14.19

    Unit cost reconciliations-excluding
     fleet transition costs:
    Operating expenses                     $183.6   $162.8   $718.9   $631.8
    Less:  aircraft fuel                    (38.3)   (30.0)  (138.8)  (116.5)
    Less:  fleet transition costs            (3.5)       -    (14.1)       -

    Operating expenses excluding fuel and
     fleet transition costs                $141.8   $132.8   $566.0   $515.3
    ASMs                                      996      903    3,978    3,632

    Operating expenses per ASM excluding
     fuel and fleet transition
     costs (in cents)                       14.24    14.71    14.23    14.19

    Reconciliation to GAAP income (loss)
     before taxes:
    Income (loss) before taxes, excluding
     mark-to-market fuel hedging gains
     (losses)                              $(11.2)   $(0.5)  $(19.5)   $23.2
    Adjustments to reflect timing of gain
     or loss recognition resulting from
     mark-to-market accounting on fuel
     hedges                                   6.4     (3.0)     8.9    (11.5)
    GAAP income (loss) before taxes as
     reported                               $(4.8)   $(3.5)  $(10.6)   $11.7


    Line of Business Information:
    Horizon brand flying includes those routes in the Horizon system not
    covered by the Alaska and Frontier Capacity Purchase Agreements (CPA).
    Horizon bears the revenue risk in those markets and, as a result, traffic,
    yield and load factor impact revenue recorded by Horizon.  In both CPA
    arrangements, Horizon is insulated from market revenue factors and is
    guaranteed contractual revenue amounts based on operational capacity.  As
    a result, yield and load factor information is not presented.


                          Three Months Ended December 31, 2007

                            Capacity and Mix                 Load Factor
                    Actual          Current  Point Change         Point Change
                  (000,000) %Change  %Total   Yr-over-Yr   Actual   Yr-over-Yr
    Brand Flying   568,100   30.0%    57%          8       70.3%      (4.0)
    Alaska CPA     369,202   39.8%    37%          8         NM         NM
    Frontier CPA    58,727  -70.9%     6%        (16)        NM         NM
    System Total   996,029   10.3%   100%          -       72.6%      (0.4)

                              Yield                             RASM
                   Actual (in cents)  %Change     Actual (in cents)   %Change
    Brand Flying          24.86        (7.7)            17.88          (13.7)
    Alaska CPA               NM          NM             20.60           (1.1)
    Frontier CPA             NM          NM              7.33           11.4
    System Total          24.84         5.6             18.26            3.9


                          Twelve Months Ended December 31, 2007

                              Capacity and Mix                Load Factor
                      Actual          Current  Point Change       Point Change
                    (000,000) %Change %Total   Yr-over-Yr   Actual  Yr-over-Yr
    Brand Flying   2,086,047   19.6    52%          4        71.8%    (2.4)
    Alaska CPA     1,383,271   29.7    35%          6          NM       NM
    Frontier CPA     508,990  (38.1)   13%        (10)         NM       NM
    System Total   3,978,308    9.5   100%          -        73.4%    (0.7)


                                Yield                             RASM
                   Actual (in cents)   %Change     Actual (in cents)   %Change
    Brand Flying          26.14        (5.9)             19.20           (8.8)
    Alaska CPA               NM          NM              20.49           (2.7)
    Frontier CPA             NM          NM               6.77            6.0
    System Total          24.30         3.3              18.06            1.9

    NM= Not Meaningful.


     Alaska Airlines Fuel Reconciliation
     (in millions, except for per gallon amounts)

                                          Three Months Ended December 31,
                                               2007              2006
                                           Dollars Cost/Gal  Dollars  Cost/Gal
    Raw or "into-plane" fuel cost          $240.5    $2.76    $180.0   $2.07
    Minus gains during the period on
     settled hedges                         (24.3)   (0.28)     (8.0)  (0.09)
    Economic fuel expense                  $216.2    $2.48    $172.0   $1.98
    Minus the gain, or plus the loss,
     recognized during current period for
     contracts settling in future periods   (47.6)   (0.55)      7.2    0.08
    Plus cumulative gains recognized in
     prior periods for contracts
     settled in current period               13.6     0.16      10.6    0.12
    Net adjustments                         (34.0)   (0.39)     17.8    0.20
    GAAP fuel expense                      $182.2    $2.09    $189.8   $2.18
    Fuel gallons                             87.2               87.1

                                          Twelve Months Ended December 31,
                                               2007             2006
                                           Dollars Cost/Gal  Dollars  Cost/Gal
    Raw or "into-plane" fuel cost          $825.7   $2.33   $765.6   $2.16
    Minus gains during the period on
     settled hedges                         (44.9)  (0.13)   (87.0)  (0.24)
    Economic fuel expense                  $780.8   $2.20   $678.6   $1.92
    Minus the gain, or plus the loss,
     recognized during current period for
     contracts settling in future periods   (62.8)  (0.18)     5.1    0.01
    Plus cumulative gains recognized in
     prior periods for contracts
     settled in current period               19.5    0.06     73.3    0.21
    Net adjustments                         (43.3)  (0.12)    78.4    0.22
    GAAP fuel expense                      $737.5   $2.08   $757.0   $2.14
    Fuel gallons                            354.3            354.3


     Horizon Air Fuel Reconciliation
     (in millions, except for per gallon amounts)

                                           Three Months Ended December 31,
                                                2007              2006
                                           Dollars Cost/Gal  Dollars  Cost/Gal
    Raw or "into-plane" fuel cost            $49.3   $2.80    $28.3   $2.07
    Minus gains during the period on
     settled hedges                           (4.6)  (0.26)    (1.3)  (0.09)
    Economic fuel expense                    $44.7   $2.54    $27.0   $1.98
    Minus the gain, or plus the loss,
     recognized during current period for
     contracts settling in future periods     (9.0)  (0.51)     1.2    0.09
    Plus cumulative gains recognized in
     prior periods for contracts
     settled in current period                 2.6    0.15      1.8    0.12
    Net adjustments                           (6.4)  (0.36)     3.0    0.21
    GAAP fuel expense                        $38.3   $2.18    $30.0   $2.19
    Fuel gallons                              17.6             13.7

                                          Twelve Months Ended December 31,
                                               2007              2006
                                           Dollars Cost/Gal  Dollars  Cost/Gal
    Raw or "into-plane" fuel cost           $156.2   $2.41   $119.1   $2.19
    Minus gains during the period on
     settled hedges                           (8.5)  (0.13)   (14.1)  (0.26)
    Economic fuel expense                   $147.7   $2.28   $105.0   $1.93
    Minus the gain, or plus the loss,
     recognized during current period for
     contracts settling in future periods    (12.9)  (0.20)     0.8    0.01
    Plus cumulative gains recognized in
     prior periods for contracts
     settled in current period                 4.0    0.06     10.7    0.20
    Net adjustments                           (8.9)  (0.14)    11.5    0.21
    GAAP fuel expense                       $138.8   $2.14   $116.5   $2.14
    Fuel gallons                              64.8             54.3


     Air Group Fuel Hedge Positions:

                             Approximate                     Approximate
                            % of Expected                     Crude Oil
                          Fuel Requirements                Price per Barrel

    First quarter 2008            50%                           $66.88
    Second quarter 2008           50%                           $72.60
    Third quarter 2008            33%                           $68.62
    Fourth quarter 2008           34%                           $68.21
    Full year 2008                42%                           $69.23
    First quarter 2009            11%                           $77.84
    Second quarter 2009           11%                           $76.73
    Third quarter 2009             6%                           $68.25
    Fourth quarter 2009            5%                           $67.20
    Full year 2009                 8%                           $74.07


    Air Group Capacity Guidance:
    The following table summarizes Alaska's and Horizon's expected increase in
    capacity as measured in available seat miles for 2008.

                                    Alaska                        Horizon
    First quarter 2008             5% - 6%                          1%
    Full year 2008                    3%                           (4)%


    Alaska and Horizon Unit Cost Forecast
    During our quarterly earnings conference call, we expect to discuss
    forward-looking forecasted unit cost information for the 2008.  This
    forecasted unit cost information includes non-GAAP unit cost estimates
    which are summarized in the following table together with the most
    directly comparable GAAP unit cost for both Alaska Mainline and Horizon
    Combined:


                                 Alaska Airlines-Mainline

                   Forecast of cost     Forecast of fuel     Forecast of total
                      per available        cost per         operating cost per
                      seat mile,           available              available
                       excluding        seat mile (cents)         seat mile,
                       fuel (cents)                           as reported on a
                                                            GAAP basis (cents)
    First quarter 2008      7.8                4.1                     11.9
    Full year 2008          7.5                3.8                     11.3



                                    Horizon Air Combined

                   Forecast of cost     Forecast of fuel     Forecast of total
                      per available        cost per         operating cost per
                      seat mile,           available              available
                        excluding       seat mile (cents)         seat mile,
                        fuel (cents)                          as reported on a
                                                            GAAP basis (cents)
    First quarter 2008      15.6               5.5                     21.1
    Full year 2008          14.6               5.1                     19.7


    Our forecast of fuel costs is based on anticipated gallons consumed and
    estimated raw fuel cost per gallon. The estimate does not include the
    benefit of hedges that will settle in the period, nor does it include an
    estimate of mark-to-market adjustments in our fuel hedge portfolio. Given
    the volatility of fuel prices and the likely mark-to-market adjustments on
    our fuel hedge portfolio, readers should be cautioned that actual fuel
    expense will likely differ from the forecast above.


    Air Group Operating Fleet

    The following table displays the fleet count for Alaska and Horizon as of
    the end of 2007 and the anticipated fleet count as of December 31, 2008:

                                        Actual         Actual         Planned
                         Seats       31-Dec-06      31-Dec-07       31-Dec-08
    Alaska Airlines
    737-200C**             111               2              -               -
    MD80                   140              23             14               -
    737-400                144              39             34              32
    737-400F**               -               1              1               1
    737-400C**              72               -              5               5
    737-700                124              22             20              20
    737-800*               157              15             29              46
    737-900                172              12             12              12
     Totals                                114            115             116

                                        Actual         Actual         Planned
                         Seats       31-Dec-06      31-Dec-07       31-Dec-08
    Horizon Air
    Q200                    37              28             16              10
    Q400                 74-76              20             33              36
    CRJ-700                 70              21             21              20
    Totals                                  69             70              66

    *   The total includes one additional leased aircraft in 2008.
    **  F=Freighter; C=Combination freighter/passenger


     Air Group Year-to-Date and Projected Capital Expenditures
     (In Millions)

                                                         Total 2008
    Alaska                                                    $465
    Horizon                                                    105
    Total Air Group                                           $570

SOURCE Alaska Air Group, Inc.

CONTACT: Media, Amanda Tobin Bielawski, Media Relations Manager, +1-206-392-5134, or Investor|analysts, Shannon Alberts, Managing Director of Investor Relations, +1-206-392-5218, both of Alaska Air Group, Inc

Web site: http://www.alaskaair.com