October 20, 2022

Media contact:						Investor/analyst contact:
Media Relations						Emily Halverson
(206) 304-0008						VP Finance and Controller
						(206) 392-5908

SEATTLE — Alaska Air Group (NYSE: ALK) today reported financial results for the third quarter ending September 30, 2022, and provided outlook for the fourth quarter ending December 31, 2022.

"I am incredibly proud of our entire team for the strong results they delivered in the third quarter, through the busiest travel season in two years," said Alaska CEO Ben Minicucci. "We ran an industry-leading operation with completion rates over 99% every month. We set a new revenue record and our double-digit pretax margin will likely lead the industry. Alaska and Horizon also ratified three major labor deals. This is a strong foundation that we look forward to building on in 2023."

•Reported net income for the third quarter of 2022 under Generally Accepted Accounting Principles (GAAP) of $40 million, or $0.31 per share, compared to a net income of $194 million, or $1.53 per share, in the third quarter of 2021.

•Reported net income for the third quarter of 2022, excluding special items and mark-to-market fuel hedge accounting adjustments, of $325 million, or $2.53 per share, compared to a net income, excluding special items and mark-to-market fuel hedge accounting adjustments, of $187 million, or $1.47 per share, in the third quarter of 2021.

•Recorded $2.8 billion in operating revenues for the third quarter, the highest revenue-generating quarter in company history.

•Generated RASM in the third quarter of 2022 26.8% above the third quarter 2019 result, driven by strong pricing, a robust demand environment and the execution of our commercial roadmap.

•Reported adjusted pretax margin for the third quarter of 15.6%.

•Held $3.2 billion in unrestricted cash and marketable securities as of September 30, 2022.

•Maintained a debt-to-capitalization ratio of 49% as of September 30, 2022, within the target range of 40% to 50%.

•Generated $174 million in operating cash flow for the third quarter.

•First major carrier to ratify a new labor agreement with mainline pilots, recognizing Alaska's more than 3,300 ALPA-represented employees for their contributions to the company's success.

•Ratified a pilot retention agreement in September with 700 Horizon Air pilots represented by the IBT.

•Ratified a two-year contract extension in August with nearly 5,700 Alaska Airlines employees represented by the IAM.

•Delivered an excellent operation, with 99% completion rates for both mainline and regional for the quarter.

•Received five Boeing 737-9 aircraft in the third quarter, bringing the total number of 737-9s in our mainline fleet to 33.

•Retired six Airbus A320 aircraft and nine Q400 aircraft during the quarter, progressing on our transition to single fleets. By the end of January 2023, the remaining 23 A320 aircraft and 22 Q400 aircraft are expected to be retired.

•Began retrofit project for the 737-800 fleet to refresh interiors and add three main cabin seats.

•Announced new nonstop service between Everett's Paine Field and Anchorage starting in November 2022.

•Mileage Plan ranked first in the U.S. News & World Report's list of Best Airline Rewards Programs for the eighth consecutive year.

•Named to Forbes' America's Best Employers for Women list, receiving the highest ranking of all airlines.

•Named for the second year in a row to Newsweek's list of America's Best Customer Service.

•Recognized by Fast Company as one of the Best Workplaces for Innovators.

•Signed agreement with Gevo Inc. to purchase 185 million gallons of sustainable aviation fuel (SAF) over five years beginning in 2026.

•Launched a new SAF initiative in partnership with Microsoft, Boeing and Washington State University to expand the use of SAF and increase education on sustainable travel topics.

•Donated funds and miles to multiple organizations assisting disaster relief and recovery in Alaska, Florida and Puerto Rico.

The following table reconciles the company's reported GAAP net income per share (EPS) for the three and nine months ended September 30, 2022, and 2021 to adjusted amounts.

			Three Months Ended September 30,
			2022												2021
(in millions, except per-share amounts)			Dollars						Diluted EPS						Dollars						Diluted EPS
GAAP net income per share			$	40					$	0.31					$	194					$	1.53
Mark-to-market fuel hedge adjustments			131						1.02						—						—
Special items - fleet transition(a)			155						1.21						(9)						(0.07)
Special items - labor ratification bonus(b)			90						0.70						—						—
Income tax effect of reconciling items above			(91)						(0.71)						2						0.01
Non-GAAP adjusted net income per share			$	325					$	2.53					$	187					$	1.47
			Nine Months Ended September 30,
			2022												2021
(in millions, except per-share amounts)			Dollars						Diluted EPS						Dollars						Diluted EPS
GAAP net income per share			$	36					$	0.28					$	460					$	3.64
Payroll support program grant wage offset			—						—						(914)						(7.24)
Mark-to-market fuel hedge adjustments			64						0.50						(68)						(0.54)
Special items - fleet transition(a)			376						2.94						5						0.04
Special items - labor ratification bonus(b)			90						0.70						—						—
Special items - restructuring(c)			—						—						(12)						(0.09)
Income tax effect of reconciling items above			(128)						(1.00)						242						1.92
Non-GAAP adjusted net income (loss) per share			$	438					$	3.42					$	(287)					$	(2.27)

Statistical data, 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 on the last page of this release.

Alaska will hold its quarterly conference call to discuss third quarter results at 8:30 a.m. PDT on October 20, 2022. A webcast of the call is available to the public at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the call.

(a) Due to the unusual nature of 2021 and 2020, all 2022 comparisons are versus the comparable period in 2019.

(b) As filed on July 21, 2022.

For full year 2022, we continue to expect capacity down 8% to 9% as we prioritize our transition to single fleet and operational reliability. For the same period we expect CASMex to be up 19% to 20%, now reflecting the impacts of our three newly ratified labor agreements. Despite the impact of elevated fuel and new labor deals, we still expect to deliver a full year adjusted pre-tax margin of 6% to 9%.

References in this update to “Air Group,” “Company,” “we,” “us,” and “our” refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified.

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, 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 our forward-looking statements, assumptions or beliefs. 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 December 31, 2021. Some of these risks include competition, labor costs, relations and availability, general economic conditions including those associated with pandemic recovery, increases in operating costs including fuel, inability to meet cost reduction, ESG and other strategic goals, seasonal fluctuations in demand and financial results, supply chain risks, events that negatively impact aviation safety and security, and changes in laws and regulations that impact our business. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed in our most recent Form 10-K and in our subsequent SEC filings. 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 made today to conform them to actual results. Over time, our actual results, performance or achievements may differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, assumptions or beliefs and such differences might be significant and materially adverse.

Alaska Airlines and our regional partners serve more than 120 destinations across the United States, Belize, Canada, Costa Rica and Mexico. We emphasize low fares and award-winning customer service. Alaska is a member of the oneworld global alliance. With the alliance and our additional airline partners, our guests can travel to more than 900 destinations on more than 20 airlines while earning and redeeming miles on flights to locations around the world. Learn more about Alaska at news.alaskair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).

###

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
Alaska Air Group, Inc.
(in millions)			September 30, 2022						December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents			$	688					$	470
Marketable securities			2,462						2,646
Total cash and marketable securities			3,150						3,116
Receivables - net			345						546
Inventories and supplies - net			94						62
Prepaid expenses and other current assets			221						196
Total Current Assets			3,810						3,920
Property and Equipment
Aircraft and other flight equipment			8,811						8,127
Other property and equipment			1,589						1,489
Deposits for future flight equipment			300						384
			10,700						10,000
Less accumulated depreciation and amortization			4,046						3,862
Total Property and Equipment - Net			6,654						6,138
Other Assets
Operating lease assets			1,605						1,453
Goodwill and intangible assets			2,040						2,044
Other noncurrent assets			422						396
Other Assets			4,067						3,893
Total Assets			$	14,531					$	13,951

(a) As reported in Form 10-Q for the second quarter of 2022.

(b) Cash flows for the three months ended September 30, 2022, can be calculated by subtracting cash flows for the six months ended June 30, 2022, as reported in Form 10-Q for the second quarter 2022, from the nine months ended September 30, 2022.

(a)Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.

(b)See a reconciliation of this non-GAAP measure and Note A for a discussion of the importance of this measure to investors in the accompanying pages.

(c)Data presented includes information for flights operated by Horizon and third-party carriers.

(d)Excludes all aircraft removed from operating service.

Given the unusual nature of 2021 and 2020, we believe that some analysis of specific financial and operational results compared to 2019 provides meaningful insight. The table below includes comparative results from 2022 to 2019.

(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 allocation and excludes certain charges. See Note A in the accompanying pages for further information.

(c)Includes payroll support program grant wage offsets, special items, and mark-to-market fuel hedge accounting adjustments.

(a)Operating income can be reconciled using the trailing twelve month operating income as filed quarterly with the SEC.

Note A: Pursuant to Regulation G, 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:

•By eliminating fuel expense and certain other items (such as the Payroll Support Program grant wage offset and other special items) from our unit metrics, we believe that we have better visibility into the results of operations. Our industry is highly competitive and is 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, maintenance costs, etc., which are more controllable by management.

•Cost per ASM (CASM) excluding fuel and certain other items, such as the Payroll Support Program grant wage offset and other special items, is one of the most important measures used by management and by the Air Group Board of Directors in assessing quarterly and annual cost performance.

•Adjusted income before income tax (and other items as specified in our plan documents) is an important metric for the employee incentive plan, which covers the majority of Air Group employees.

•CASM excluding fuel and certain special items is a measure commonly used by industry analysts, and we believe it is the basis by which they have historically compared our airline to others in the industry. The measure is also the subject of frequent questions from investors.

•Disclosure of the individual impact of certain noted items provides investors the ability to measure and monitor performance both with and without these special items. We believe that disclosing the impact of these items as noted above. Industry analysts and investors consistently measure our performance without these items for better comparability between periods and among other airlines.

•Although we disclose our passenger unit revenues, we do not (nor are we able to) evaluate unit revenues excluding the impact that changes in fuel costs have had on ticket prices. Fuel expense represents a large percentage of our total operating expenses. Fluctuations in fuel prices often drive changes in unit revenues in the mid-to-long term. Although we believe it is useful to evaluate non-fuel unit costs for the reasons noted above, we would caution readers of these financial statements not to place undue reliance on unit costs excluding fuel as a measure or predictor of future profitability because of the significant impact of fuel costs on our business.

Adjusted net debt - long-term debt, including current portion, plus capitalized operating leases, less cash and marketable securities

Adjusted net debt to EBITDAR - represents net adjusted debt divided by EBITDAR (trailing twelve months earnings before interest, taxes, depreciation, amortization, special items and rent)

Aircraft Utilization - block hours per day; this represents the average number of hours per day our aircraft are in transit

Aircraft Stage Length - represents the average miles flown per aircraft departure

ASMs - available seat miles, or “capacity”; represents total seats available across the fleet multiplied by the number of miles flown

CASM - operating costs per ASM, or "unit cost"; represents all operating expenses including fuel and special items

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 is largely out of our control

Debt-to-capitalization ratio - represents adjusted debt (long-term debt plus capitalized operating lease liabilities) divided by total equity plus adjusted debt

Diluted Earnings per Share - represents earnings per share (EPS) using fully diluted shares outstanding

Diluted Shares - represents the total number of shares that would be outstanding if all possible sources of conversion, such as stock options, were exercised

Economic Fuel - best estimate of the cash cost of fuel, net of the impact of our fuel-hedging program

Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with paying passengers

Mainline - represents flying Boeing 737, Airbus 320 and Airbus 321neo family jets and all associated revenues and costs

Productivity - number of revenue passengers per full-time equivalent employee

RASM - operating revenue per ASMs, or "unit revenue"; operating revenue includes all passenger revenue, freight & mail, Mileage Plan and other ancillary revenue; represents the average total revenue for flying one seat one mile

Regional - represents capacity purchased by Alaska from Horizon and SkyWest. In this segment, Regional records actual on-board passenger revenue, less costs such as fuel, distribution costs, and payments made to Horizon and SkyWest under the respective capacity purchased arrangement (CPAs). Additionally, Regional includes an allocation of corporate overhead such as IT, finance, other administrative costs incurred by Alaska and on behalf of Horizon.

RPMs - revenue passenger miles, or "traffic"; represents the number of seats that were filled with paying passengers; one passenger traveling one mile is one RPM

Yield - passenger revenue per RPM; represents the average revenue for flying one passenger one mile