OPERATING SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

OPERATING SEGMENT INFORMATION

OPERATING SEGMENT INFORMATION

Alaska Air Group has two operating airlines—Alaska (including Virgin America after the single operating certificate was received in January 2018) and Horizon. Each is regulated by the U.S. Department of Transportation’s Federal Aviation Administration. Alaska has CPAs for regional capacity with Horizon, as well as with third-party carriers SkyWest and PenAir, under which Alaska receives all passenger revenues.

Under U.S. GAAP, operating segments are defined as components of a business for which there is discrete financial information that is regularly assessed by the Chief Operating Decision Maker (CODM) in making resource allocation decisions. Financial performance for the operating airlines and CPAs is managed and reviewed by the Company's CODM as part of three reportable operating segments:

• Mainline - includes scheduled air transportation on Alaska's Boeing or Airbus jet aircraft for passengers and cargo throughout the U.S., and in parts of Canada, Mexico, and Costa Rica.

• Regional - includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S. under CPAs. This segment includes the actual revenues and expenses associated with regional flying, as well as an allocation of corporate overhead incurred by Air Group on behalf of the regional operations.

• Horizon - includes the capacity sold to Alaska under CPA. Expenses include those typically borne by regional airlines such as crew costs, ownership costs and maintenance costs.

The CODM makes resource allocation decisions for these reporting segments based on flight profitability data, aircraft type, route economics and other financial information.

The "Consolidating and Other" column reflects Air Group parent company activity, McGee Air Services, consolidating entries and other immaterial business units of the company. The “Air Group Adjusted” column represents a non-GAAP measure that is used by the Company's CODM to evaluate performance and allocate resources. Adjustments are further explained below in reconciling to consolidated GAAP results.

Operating segment information is as follows (in millions):

	Three Months Ended June 30, 2019
	Mainline			Regional		Horizon			Consolidating & Other(a)			Air Group Adjusted(b)			Special Items(c)			Consolidated
Operating revenues
Passenger revenues	$	1,767		$	344	$	—		$	—		$	2,111		$	—		$	2,111
CPA revenues	—			—		112			(112		)	—			—			—
Mileage Plan other revenue	105			13		—			—			118			—			118
Cargo and other	57			—		—			2			59			—			59
Total operating revenues	1,929			357		112			(110		)	2,288			—			2,288
Operating expenses
Operating expenses, excluding fuel	1,167			268		95			(116		)	1,414			8			1,422
Economic fuel	422			77		—			—			499			3			502
Total operating expenses	1,589			345		95			(116		)	1,913			11			1,924
Nonoperating income (expense)
Interest income	17			—		—			(6		)	11			—			11
Interest expense	(19		)	—		(7		)	6			(20		)	—			(20		)
Interest capitalized	3			—		—			—			3			—			3
Other - net	(7		)	—		—			—			(7		)	—			(7		)
Total nonoperating income (expense)	(6		)	—		(7		)	—			(13		)	—			(13		)
Income (loss) before income tax	$	334		$	12	$	10		$	6		$	362		$	(11	)	$	351

	Three Months Ended June 30, 2018
	Mainline			Regional			Horizon			Consolidating & Other(a)			Air Group Adjusted(b)			Special Items(c)			Consolidated
Operating revenues
Passenger revenues	$	1,711		$	286		$	—		$	—		$	1,997		$	—		$	1,997
CPA revenues	—			—			137			(137		)	—			—			—
Mileage Plan other revenue	99			9			—			—			108			—			108
Cargo and other	49			1			1			—			51			—			51
Total operating revenues	1,859			296			138			(137		)	2,156			—			2,156
Operating expenses
Operating expenses, excluding fuel	1,135			249			123			(136		)	1,371			39			1,410
Economic fuel	432			65			—			—			497			(22		)	475
Total operating expenses	1,567			314			123			(136		)	1,868			17			1,885
Nonoperating income (expense)
Interest income	13			—			—			(3		)	10			—			10
Interest expense	(22		)	—			(5		)	2			(25		)	—			(25		)
Interest capitalized	4			—			—			—			4			—			4
Other - net	1			(2		)	—			—			(1		)	—			(1		)
Total nonoperating income (expense)	(4		)	(2		)	(5		)	(1		)	(12		)	—			(12		)
Income (loss) before income tax	$	288		$	(20	)	$	10		$	(2	)	$	276		$	(17	)	$	259

	Six Months Ended June 30, 2019
	Mainline			Regional			Horizon			Consolidating & Other(a)			Air Group Adjusted(b)			Special Items(c)			Consolidated
Operating revenues
Passenger revenues	$	3,189		$	638		$	—		$	—		$	3,827		$	—		$	3,827
CPA revenues	—			—			228			(228		)	—			—			—
Mileage Plan other revenue	205			23			—			—			228			—			228
Cargo and other	105			1			1			2			109			—			109
Total operating revenues	3,499			662			229			(226		)	4,164			—			4,164
Operating expenses
Operating expenses, excluding fuel	2,319			542			192			(234		)	2,819			34			2,853
Economic fuel	780			143			—			—			923			(1		)	922
Total operating expenses	3,099			685			192			(234		)	3,742			33			3,775
Nonoperating income (expense)
Interest income	33			—			—			(13		)	20			—			20
Interest expense	(40		)	—			(15		)	13			(42		)	—			(42		)
Interest capitalized	7			—			—			—			7			—			7
Other - net	(17		)	—			—			—			(17		)	—			(17		)
Total nonoperating income (expense)	(17		)	—			(15		)	—			(32		)	—			(32		)
Income (loss) before income tax	$	383		$	(23	)	$	22		$	8		$	390		$	(33	)	$	357

	Six Months Ended June 30, 2018
	Mainline			Regional			Horizon			Consolidating & Other(a)			Air Group Adjusted(b)			Special Items(c)			Consolidated
Operating revenues
Passenger revenues	$	3,152		$	529		$	—		$	—		$	3,681		$	—		$	3,681
CPA revenues	—			—			247			(247		)	—			—			—
Mileage Plan other revenue	197			18			—			—			215			—			215
Cargo and other	89			1			2			—			92			—			92
Total operating revenues	3,438			548			249			(247		)	3,988			—			3,988
Operating expenses
Operating expenses, excluding fuel	2,266			488			227			(247		)	2,734			70			2,804
Economic fuel	799			120			—			—			919			(35		)	884
Total operating expenses	3,065			608			227			(247		)	3,653			35			3,688
Nonoperating income (expense)
Interest income	24			—			—			(6		)	18			—			18
Interest expense	(44		)	—			(10		)	5			(49		)	—			(49		)
Interest capitalized	8			—			1			—			9			—			9
Other - net	(4		)	(9		)	—			—			(13		)	—			(13		)
Total nonoperating income (expense)	(16		)	(9		)	(9		)	(1		)	(35		)	—			(35		)
Income (loss) before income tax	$	357		$	(69	)	$	13		$	(1	)	$	300		$	(35	)	$	265

(a) Includes consolidating entries, Air Group parent company, McGee Air Services, and other immaterial business units.

(b) The Air Group Adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations and excludes certain income and charges.

(c) Includes merger-related costs, mark-to-market fuel-hedge accounting adjustments, and other special items.

Total assets were as follows (in millions):

	June 30, 2019			December 31, 2018
Mainline	$	19,050		$	16,853
Horizon	1,222			1,229
Consolidating & Other	(7,321		)	(7,170		)
Consolidated	$	12,951		$	10,912