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Alaska Air Group Reports Fourth Quarter And Full-Year Results

Fourth Quarter Financial and Other Highlights:

·Net income excluding special items of $4.4 million, or $0.12 per diluted share, compared to net income excluding special items of $16.4 million, or $0.45 per diluted share, in the fourth quarter of 2008. This compares to a First Call mean estimate of $0.32 per share.

·Net income under Generally Accepted Accounting Principles (GAAP) of $24.1 million, or $0.67 per diluted share, compared to a net loss of $75.2 million, or $2.08 per diluted share, in 2008.

·$1.2 billion in unrestricted cash and marketable securities as of Dec. 31, 2009.

·A $100 million contribution to Alaska's qualified defined-benefit pension plans on Dec. 30, 2009, bringing the full-year total to nearly $150 million.

SEATTLE - Alaska Air Group, Inc. (NYSE: ALK) Jan. 28 reported fourth quarter 2009 net income of $24.1 million, or $0.67 per diluted share, compared to a net loss of $75.2 million, or $2.08 per diluted share, in the fourth quarter of 2008. Excluding mark-to-market fuel hedge gains of $31.7 million ($19.7 million after tax or $0.55 per diluted share), the company reported net income of $4.4 million, or $0.12 per diluted share, in the fourth quarter of 2009, compared to net income of $16.4 million, or $0.45 per diluted share, excluding special items in the fourth quarter of 2008.

The company reported full-year 2009 net income of $121.6 million, compared to a net loss of $135.9 million in 2008. Excluding the impact of the items noted in the table below, the company reported 2009 net income of $88.7 million, or $2.45 per diluted share, an $84.3 million improvement from the $4.4 million, or $0.12 per diluted share, in 2008.

"Our traffic and unit revenue performance, driven by positive network changes, outpaced the industry throughout the year. This performance, combined with lower fuel costs, placed Alaska Air Group's profitability among the best in the industry for 2009," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "This marks our sixth consecutive year of profits on an adjusted basis."

Based on its 2009 profit and operational performance, the company will distribute a total of $76 million from its pay-for-performance incentive plans.

"Our employees' ongoing commitment to operating reliably and providing exceptional customer service is fundamental to building a great company for the long term, and broad participation in a common gain-sharing plan helps align Alaska and Horizon employees around important performance goals," said Ayer. "I want to thank our people for their hard work and dedication, which contributed significantly to our 2009 results."

The following tables reconcile the company's adjusted net income and earnings per diluted share (EPS) during the fourth quarters and full years of 2009 and 2008 to amounts as reported in accordance with GAAP (in millions except per-share amounts):







Three months ended Dec. 31,







2009




2008







Dollars



Diluted EPS




Dollars




Diluted EPS

Net income and diluted EPS, excluding items noted below

$4.4




$0.12




$16.4




$0.45

Restructuring charges, net of tax

---



---




(5.8)




(0.16)

Fleet transition costs - CRJ-700, net of tax

---



---




(4.2)




(0.12)

Adjustments to reflect the timing of gain or loss recognition resulting from mark-to-market
fuel-hedge accounting, net of tax

19.7



0.55




(50.3)




(1.39)

Realized losses on hedge portfolio restructuring, net of tax

---



---




(31.3)




(0.86)

Reported GAAP net income (loss)

$24.1



$0.67




$(75.2)




$(2.08)








Twelve months ended Dec. 31,







2009




2008







Dollars



Diluted EPS




Dollars




Diluted EPS

Net income and diluted EPS, excluding items noted below

$88.7




$2.45




$4.4




$0.12

Change in Mileage Plan terms, net of tax

---



---




26.5




0.73

New pilot contract transition costs, net of tax

(22.3)



(0.62)




---




---

Restructuring charges, net of tax

---



---




(8.1)




(0.22)

Fleet transition costs - MD-80, net of tax

---



---




(29.8)




(0.82)

Fleet transition costs - CRJ-700, net of tax

---



---




(8.4)




(0.23)

Adjustments to reflect the timing of gain or loss recognition resulting from mark-to-market
fuel-hedge accounting, net of tax

55.2



1.53




(89.2)




(2.46)

Realized losses on hedge portfolio restructuring, net of tax

---



---




(31.3)




(0.86)

Reported GAAP net income (loss)

$121.6



$3.36




$(135.9)




$(3.74)


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 in the accompanying tables. A glossary of financial terms can be found at the end of this release.

A conference call regarding the fourth quarter and full-year 2009 results will be simulcast via the Internet at 8:30 a.m. Pacific time on Jan. 28, 2010. 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 news release 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 news release contains forward-looking statements 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 and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the company's Annual Report on Form 10-K for the year ended Dec. 31, 2008 and revisions in Item 1A of the Company's Quarterly Report on Form 10-Q for the period ended Sept. 30, 2009. Some of these risks include current economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our significant indebtedness, inability to meet cost reduction goals, terrorist attacks, seasonal fluctuations in our financial results, an aircraft accident, changes in laws and regulations, and government fees and taxes. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. 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 expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report 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, subsidiaries of Alaska Air Group (NYSE: ALK), together serve more than 90 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada and Mexico. Alaska Airlines ranked "Highest in Customer Satisfaction Among Traditional Network Carriers" in the J.D. Power and Associates 2008 and 2009 North America Airline Satisfaction StudiesSM. For reservations, visit alaskaair.com. For more news and information, visit the Alaska Airlines/Horizon Air Newsroom at alaskaair.com/newsroom.

View Fourth Quarter Financial Results


Glossary of Financial Terms

ASM - Available seat miles or "capacity." Represents total seats available across the fleet multiplied by the number of miles flown.

RPM - Revenue passenger miles or "traffic." The number of those available seats that were filled with paying passengers. One passenger traveling one mile is one RPM.

RASM - Total operating revenue divided by ASMs. Operating revenue includes all passenger revenue, freight and mail, Mileage Plan and other ancillary revenue - commonly called "unit revenue" and represents the average total revenue for flying one seat one mile.

PRASM - Passenger revenue per ASM - commonly called "passenger unit revenue."

Yield - Passenger revenue per RPM. This represents the average revenue for flying one passenger one mile.

CASM - Total operating costs per ASM. This represents all operating expenses, including fuel and special items - commonly called "unit cost."

CASMex - Operating costs excluding fuel and special items per ASM. This metric is used to help track progress toward reduction of non-fuel operating costs, since fuel costs are largely out the company's control.

Economic fuel - Best estimate of the cash cost of fuel, net of the impact of the company's fuel-hedging program.

Mainline - Represents flying on Alaska jets and all associated revenue and costs.

Purchased capacity flying - Represents operations whereby Horizon and, to a much lesser extent, another small carrier in the state of Alaska fly certain routes for Alaska using Horizon's or the other carrier's fleets.

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