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☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

 

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from                      to                      

 

Delaware						91-1292054
(State of Incorporation)						(I.R.S. Employer Identification No.)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange

Act.

Large accelerated filer

☒

Accelerated filer

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Non-accelerated filer    (Do not check if a smaller reporting company)

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Smaller reporting company

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Emerging growth company

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If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒

 

The registrant has 126,891,838 common shares, par value $0.01, outstanding at April 30, 2024.

This document is also available on our website at http://investor.alaskaair.com.

 

 

In addition to historical information, this Form 10-Q contains forward-looking statements within the meaning of 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. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or the Company’s present expectations.

You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. For a discussion of our risk factors, see Item 1A. "Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2023. 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. Please consider our forward-looking statements in light of those risks as you read this report.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions)			March 31, 2024						December 31, 2023
ASSETS
Current Assets
Cash and cash equivalents			$	885					$	281
Marketable securities			1,393						1,510
Total cash and marketable securities			2,278						1,791
Receivables - net			384						383
Inventories and supplies - net			104						116
Prepaid expenses			177						176
Other current assets			186						239
Total Current Assets			3,129						2,705
Property and Equipment
Aircraft and other flight equipment			10,363						10,425
Other property and equipment			1,839						1,814
Deposits for future flight equipment			431						491
			12,633						12,730
Less accumulated depreciation and amortization			4,439						4,342
Total Property and Equipment - Net			8,194						8,388
Other Assets
Operating lease assets			1,174						1,195
Goodwill and intangible assets			2,033						2,033
Other noncurrent assets			283						292
Total Other Assets			3,490						3,520
Total Assets			$	14,813					$	14,613

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions, except share amounts)			March 31, 2024						December 31, 2023
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable			$	181					$	207
Accrued wages, vacation and payroll taxes			481						584
Air traffic liability			1,604						1,136
Other accrued liabilities			791						800
Deferred revenue			1,313						1,221
Current portion of operating lease liabilities			158						158
Current portion of long-term debt and finance leases			301						353
Total Current Liabilities			4,829						4,459
Long-Term Debt, Net of Current Portion			2,264						2,182
Noncurrent Liabilities
Long-term operating lease liabilities, net of current portion			1,098						1,125
Deferred income taxes			649						695
Deferred revenue			1,320						1,382
Obligation for pension and post-retirement medical benefits			365						362
Other liabilities			311						295
Total Noncurrent Liabilities			3,743						3,859
Commitments and Contingencies (Note 7)
Shareholders' Equity
Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or outstanding			—						—
Common stock, $0.01 par value, Authorized: 400,000,000 shares, Issued: 2024 - 139,137,527 shares; 2023 - 138,960,830 shares, Outstanding: 2024 - 125,705,964 shares; 2023 - 126,090,353 shares			1						1
Capital in excess of par value			707						695
Treasury stock (common), at cost: 2024 - 13,431,563 shares; 2023 - 12,870,477 shares			(840)						(819)
Accumulated other comprehensive loss			(294)						(299)
Retained earnings			4,403						4,535
			3,977						4,113
Total Liabilities and Shareholders' Equity			$	14,813					$	14,613

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

			Three Months Ended March 31,
(in millions, except per share amounts)			2024						2023
Operating Revenue
Passenger revenue			$	2,004					$	1,984
Mileage Plan other revenue			164						154
Cargo and other revenue			64						58
Total Operating Revenue			2,232						2,196
Operating Expenses
Wages and benefits			804						723
Variable incentive pay			44						47
Aircraft fuel, including hedging gains and losses			565						665
Aircraft maintenance			122						124
Aircraft rent			47						59
Landing fees and other rentals			165						152
Contracted services			97						95
Selling expenses			77						66
Depreciation and amortization			126						104
Food and beverage service			58						54
Third-party regional carrier expense			54						52
Other			205						177
Special items - fleet transition			26						13
Special items - integration costs			8						—
Special items - labor and other			—						51
Total Operating Expenses			2,398						2,382
Operating Loss			(166)						(186)
Non-operating Income (Expense)
Interest income			17						17
Interest expense			(35)						(28)
Interest capitalized			6						7
Other - net			—						(9)
Total Non-operating Expense			(12)						(13)
Loss Before Income Tax			(178)						(199)
Income tax benefit			(46)						(57)
Net Loss			$	(132)					$	(142)
Basic Loss Per Share:			$	(1.05)					$	(1.11)
Diluted Loss Per Share:			$	(1.05)					$	(1.11)
Weighted Average Shares Outstanding used for computation:
Basic			125.970						127.501
Diluted			125.970						127.501

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS (unaudited)

			Three Months Ended March 31,
(in millions)			2024						2023
Net Loss			$	(132)					$	(142)
Other comprehensive income (loss), net of tax
Marketable securities			1						21
Employee benefit plans			3						4
Interest rate derivative instruments			1						(2)
Total other comprehensive income, net of tax			$	5					$	23
Total Comprehensive Loss, Net of Tax			$	(127)					$	(119)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

						Three Months Ended March 31,
(in millions)						2024						2023
Cash Flows from Operating Activities:
Net Loss						$	(132)					$	(142)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization						126						104
Stock-based compensation and other						19						23
Special items - fleet transition						23						13
Special items - labor and other						—						51
Changes in certain assets and liabilities:
Changes in deferred income taxes						(47)						(56)
Increase in accounts receivable						(55)						(44)
Increase in air traffic liability						468						433
Increase in deferred revenue						30						46
Other - net						(140)						(206)
Net cash provided by operating activities						292						222
Cash Flows from Investing Activities:
Property and equipment additions
Aircraft and aircraft purchase deposits						31						(50)
Other flight equipment						(44)						(50)
Other property and equipment						(44)						(24)
Total property and equipment additions						(57)						(124)
Supplier proceeds						162						—
Purchases of marketable securities						(13)						(201)
Sales and maturities of marketable securities						133						388
Other investing activities						93						(3)
Net cash provided by investing activities						318						60
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt, net of issuance costs						149						—
Long-term debt payments						(102)						(96)
Common stock repurchases						(20)						(18)
Other financing activities						(32)						—
Net cash used in financing activities						(5)						(114)
Net increase in cash and cash equivalents						605						168
Cash, cash equivalents, and restricted cash at beginning of period						308						369
Cash, cash equivalents, and restricted cash at end of the period						$	913					$	537

						Three Months Ended March 31,
(in millions)						2024						2023
Supplemental disclosure:
Cash paid during the period for:
Interest, net of amount capitalized						$	35					$	32
Non-cash transactions:
Right-of-use assets acquired through operating leases						13						111
Property and equipment acquired through the issuance of debt						45						—
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents						885						516
Restricted cash included in Other noncurrent assets						28						21
Total cash, cash equivalents, and restricted cash at end of the period						$	913					$	537

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

The condensed consolidated financial statements include the accounts of Air Group, or the Company, and its primary subsidiaries, Alaska and Horizon. The condensed consolidated financial statements also include McGee Air Services (McGee), a ground services subsidiary of Alaska, and other immaterial business units. All intercompany balances and transactions have been eliminated. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. It should be read in conjunction with the consolidated financial statements and accompanying notes in the Form 10-K for the year ended December 31, 2023. In the opinion of management, all adjustments have been made that are necessary to fairly present the Company’s financial position as of March 31, 2024 and the results of operations for the three months ended March 31, 2024 and 2023. Such adjustments were of a normal recurring nature. Certain rows, columns, figures, or percentages may not recalculate due to rounding.

In preparing these statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities, as well as the reported amounts of revenue and expenses, including impairment charges. Due to seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, changes in global economic conditions, changes in the competitive environment, and other factors, operating results for the three months ended March 31, 2024 are not necessarily indicative of operating results for the entire year.

As a result of the Flight 1282 accident and the subsequent grounding of Boeing 737-9 MAX (B737-9) aircraft, Air Group's operation and results were significantly impacted. The Company received compensation from Boeing to address the financial damages incurred as a result of the grounding. As part of this compensation, Boeing paid Air Group $162 million in cash during the first quarter. Subsequent to quarter end, Boeing issued Air Group $61 million in supplier credit memos to be used on future Boeing purchases.

Compensation received under the agreement is accounted for as a reduction in cost basis of certain B737-9 aircraft. Proceeds received as of March 31, 2024 are reflected within Aircraft and other flight equipment or Deposits for future flight equipment within the condensed consolidated balance sheets.

On December 2, 2023, the Company entered into a definitive agreement to acquire Hawaiian Holdings, Inc. (Hawaiian). The Company has agreed to pay Hawaiian's shareholders $18.00 per share, or approximately $1.0 billion, in cash for the outstanding shares of Hawaiian. In addition, the Company expects to assume Hawaiian's debt and lease obligations on the date of acquisition. The acquisition has been approved by Hawaiian's shareholders and is subject to final approval by various regulatory bodies.

On February 7, 2024, Air Group and Hawaiian each received a request for additional information and documentary material (the “Second Request”) from the Antitrust Division of the Department of Justice (the “DOJ”) in connection with the DOJ’s review of the acquisition. On March 27, 2024, Air Group and Hawaiian entered into a timing agreement with the DOJ pursuant to which they agreed, among other things, not to consummate the acquisition before 90 days following the date on which both parties have certified substantial compliance with the Second Request unless they have received written notice from the DOJ prior to the end of such 90-day period that the DOJ has closed its investigation of the acquisition.

In the first quarter of 2024, the Company incurred integration costs of $8 million. These costs are classified as special items within the condensed consolidated statements of operations. The Company expects to continue to incur integration costs as activities supporting the proposed acquisition continue.

Ticket revenue is recorded as Passenger revenue, and represents the primary source of the Company's revenue. Also included in Passenger revenue is passenger ancillary revenue such as bag fees, on-board food and beverage, and certain revenue from the frequent flyer program.

Mileage Plan other revenue includes brand and marketing revenue from the co-branded credit card and other partners, and certain interline frequent flyer revenue, net of commissions. Cargo and other revenue includes freight and mail revenue, and to a lesser extent, other ancillary revenue products such as lounge membership and certain commissions.

The level of detail within the Company’s condensed consolidated statements of operations and in this footnote depict the nature, amount, timing, and uncertainty of revenue and how cash flows are affected by economic and other factors.

Passenger revenue recognized in the condensed consolidated statements of operations (in millions):

			Three Months Ended March 31,
			2024						2023
Passenger ticket revenue, net of taxes and fees			$	1,648					$	1,648
Passenger ancillary revenue			108						104
Mileage Plan passenger revenue			248						232
Total Passenger revenue			$	2,004					$	1,984

Mileage Plan revenue included in the condensed consolidated statements of operations (in millions):

			Three Months Ended March 31,
			2024						2023
Mileage Plan passenger revenue			$	248					$	232
Mileage Plan other revenue			164						154
Total Mileage Plan revenue			$	412					$	386

Cargo and other revenue included in the condensed consolidated statements of operations (in millions):

			Three Months Ended March 31,
			2024						2023
Cargo revenue			$	28					$	29
Other revenue			36						29
Total Cargo and other revenue			$	64					$	58

The Company recognized Passenger revenue of $584 million and $485 million from the prior year-end air traffic liability balance for the three months ended March 31, 2024 and 2023.

The Company records a receivable for amounts due from the affinity card partner and from other partners as mileage credits are sold until the payments are collected. The Company had $104 million of such receivables as of March 31, 2024 and $102 million as of December 31, 2023.

The table below presents a roll forward of the total frequent flyer liability (in millions):

			Three Months Ended March 31,
			2024						2023
Total Deferred Revenue balance at January 1			$	2,603					$	2,497
Travel miles and companion certificate redemption - Passenger revenue			(234)						(218)
Miles redeemed on partner airlines - Other revenue			(28)						(21)
Increase in liability for mileage credits issued			292						285
Total Deferred Revenue balance at March 31			$	2,633					$	2,543

In determining fair value, there is a three-level hierarchy based on the reliability of the inputs used. Level 1 refers to fair values based on quoted prices in active markets for identical assets or liabilities. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 refers to fair values estimated using significant unobservable inputs.

As of March 31, 2024, cost basis and fair value for marketable securities were $1.4 billion. Differences in cost basis and fair value of marketable securities are primarily a result of changes in interest rates. Management does not believe any unrealized losses are the result of expected credit losses based on its evaluation of industry and duration exposure, credit ratings of the securities, liquidity profiles, and other observable information as of March 31, 2024.

Fair values of financial instruments on the condensed consolidated balance sheets (in millions):

			March 31, 2024																		December 31, 2023
			Level 1						Level 2						Total						Level 1						Level 2						Total
Assets
Marketable securities
U.S. government and agency securities			$	370					$	—					$	370					$	387					$	—					$	387
Equity mutual funds			6						—						6						5						—						5
Foreign government bonds			—						10						10						—						10						10
Asset-backed securities			—						170						170						—						192						192
Mortgage-backed securities			—						103						103						—						115						115
Corporate notes and bonds			—						695						695						—						763						763
Municipal securities			—						39						39						—						38						38
Total Marketable securities			376						1,017						1,393						392						1,118						1,510
Derivative instruments
Fuel hedge contracts - call options			—						11						11						—						11						11
Interest rate swap agreements			—						9						9						—						8						8
Total Assets			$	376					$	1,037					$	1,413					$	392					$	1,137					$	1,529

The Company uses the market and income approach to determine the fair value of marketable securities. U.S. government securities and equity mutual funds are Level 1 as the fair value is based on quoted prices in active markets. Foreign government bonds, asset-backed securities, mortgage-backed securities, corporate notes and bonds, and municipal securities are Level 2 as the fair value is based on standard valuation models that are calculated based on observable inputs such as quoted interest rates, yield curves, credit ratings of the security and other observable market information.

The Company uses the market approach and the income approach to determine the fair value of derivative instruments. The fair value for fuel hedge call options is determined utilizing an option pricing model based on inputs that are readily available in active markets or can be derived from information available in active markets. In addition, the fair value considers the exposure to credit losses in the event of non-performance by counterparties. Interest rate swap agreements are Level 2 as the fair value of these contracts are determined based on the difference between the fixed interest rate in the agreements and the observable interest SOFR-based forward rates at period end multiplied by the total notional value.

Maturities for marketable securities (in millions):

March 31, 2024			Cost Basis						Fair Value
Due in one year or less			$	443					$	436
Due after one year through five years			939						907
Due after five years			34						31
Due after 10 years			14						13
No maturity date			4						6
Total			$	1,434					$	1,393

The Company uses the following methods and assumptions to determine the fair value of financial instruments that are not recognized at fair value as described below.

Cash, Cash Equivalents, and Restricted Cash: Cash equivalents consist of highly liquid investments with original maturities of three months or less, such as money market funds, commercial paper, and certificates of deposit. They are carried at cost, which approximates fair value.

The Company's restricted cash balances are primarily used to guarantee various letters of credit, self-insurance programs, or other contractual rights. Restricted cash consists of highly liquid securities with original maturities of three months or less. They are carried at cost, which approximates fair value.

Debt: To estimate the fair value of all fixed-rate debt as of March 31, 2024, the Company uses the income approach by discounting cash flows or estimation using quoted market prices, utilizing borrowing rates for comparable debt over the remaining life of the outstanding debt. The estimated fair value of the fixed-rate Enhanced Equipment Trust Certificate (EETC) debt is Level 2, as it is estimated using observable inputs, while the estimated fair value of $582 million of other fixed-rate debt, including PSP notes payable, is classified as Level 3, as it is not actively traded and is valued using discounted cash flows which is an unobservable input.

Fixed-rate debt on the condensed consolidated balance sheets and the estimated fair value of long-term fixed-rate debt (in millions):

			March 31, 2024						December 31, 2023
Fixed-rate debt			$	1,452					$	1,515
Estimated fair value			$	1,346					$	1,382

Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property, plant and equipment, operating and finance lease assets, goodwill, and intangible assets. These assets are subject to fair valuation when there is evidence of impairment. No material impairments were recorded during the three months ended March 31, 2024.

 

Long-term debt obligations on the condensed consolidated balance sheets (in millions):

			March 31, 2024						December 31, 2023
Fixed-rate notes payable due through 2029			$	73					$	80
Fixed-rate PSP notes payable due through 2031			600						600
Fixed-rate EETC payable due through 2025 & 2027			779						835
Variable-rate notes payable due through 2036			1,128						971
Less debt issuance costs			(15)						(15)
Total debt			2,565						2,471
Less current portion(a)			301						289
Long-term debt, less current portion			$	2,264					$	2,182
Weighted-average fixed-interest rate			3.3		%				3.4		%
Weighted-average variable-interest rate			6.8		%				6.8		%

(a) Excludes finance lease liabilities recognized within Current portion of long-term debt and finance leases in the condensed consolidated balance sheets as of December 31, 2023.

Approximately $240 million of the Company's total variable-rate notes payable are effectively fixed via interest rate swaps at March 31, 2024, resulting in an effective weighted-average interest rate for the full debt portfolio of 4.6%.

During the three months ended March 31, 2024, the Company incurred debt of $195 million from multiple lenders and sources. New debt includes proceeds of $150 million which is secured by aircraft. Additionally, $45 million of debt was incurred as part of an agreement to finance certain E175 deliveries. Debt from this agreement is reflected as a non-cash transaction within the supplemental disclosures in the condensed consolidated statements of cash flows. During the three months ended March 31, 2024, the Company made debt payments of $102 million.

At March 31, 2024, long-term debt principal payments for the next five years and thereafter are as follows (in millions):

			Total
Remainder of 2024			$	201
2025			365
2026			322
2027			646
2028			131
Thereafter			915
Total Principal Payments			$	2,580

 

Alaska has three credit facilities totaling $626 million as of March 31, 2024. One credit facility is for $150 million, expires in March 2025, and is secured by certain accounts receivable, spare engines, spare parts, and ground service equipment. A second credit facility is for $400 million, expires in June 2026, and is secured by aircraft. Both facilities have variable interest rates based on SOFR plus a specified margin. A third credit facility is for $76 million, expires in June 2024, and is secured by aircraft.

Alaska has secured letters of credit against the third facility, but has no plans to borrow using either of the other two facilities. All credit facilities have a requirement to maintain a minimum unrestricted cash and marketable securities balance of $500 million. Alaska was in compliance with this covenant at March 31, 2024.

Subsequent to quarter end, the Company executed an amendment to extend the term of the $150 million credit facility from March 2025 to April 2028.

Net periodic benefit costs for qualified defined-benefit plans include the following (in millions):

			Three Months Ended March 31,
			2024						2023
Service cost			$	7					$	7
Pension expense included in Wages and benefits			7						7
Interest cost			27						27
Expected return on assets			(32)						(28)
Recognized actuarial loss			5						6
Pension expense included in Non-operating Income (Expense)			$	—					$	5

Future minimum contractual payments for commitments as of March 31, 2024 (in millions):

						Aircraft-Related Commitments(a)						Capacity Purchase Agreements and Other Obligations (b)
Remainder of 2024						$	1,164					$	177
2025						830						230
2026						1,634						223
2027						601						220
2028						151						223
Thereafter						717						515
Total						$	5,097					$	1,588

(a)Includes contractual commitments for aircraft, engines, and aircraft maintenance, and incorporates the impact of expected delays for certain B737 aircraft as communicated by Boeing. Option deliveries are excluded from minimum commitments until exercise.

(b)Primarily comprised of non-lease costs associated with capacity purchase agreements, as well as other various sponsorship agreements and investment commitments.

Aircraft purchase commitments include contractual commitments for aircraft and engines. Details for contractual aircraft commitments as of March 31, 2024 are outlined below.

Aircraft maintenance commitments include contractual commitments for engine maintenance agreements requiring monthly payments based upon utilization, such as flight hours, cycles, and age of the aircraft. In turn, these maintenance agreements transfer certain risks to the third-party service provider. Alaska has contracts for maintenance on its B737-800 and B737-900ER aircraft engines through 2026 and 2032, respectively. Horizon has contracts for maintenance on its E175 aircraft engines through 2033 and 2039.

In August 2015, the Board of Directors authorized a $1 billion share repurchase program. As of March 31, 2024, the Company has repurchased 11.7 million shares for $709 million under this program.

Share purchase activity (in millions, except share amounts):

			Three Months Ended March 31,
			2024												2023
			Shares						Amount						Shares						Amount
2015 Repurchase Program—$1 billion			561,086						$	21					413,554						$	18

As taxpayer protection required under the Payroll Support Program (PSP) under the CARES Act, the Company granted the U.S. government a total of 1,455,437 warrants to purchase ALK common stock in 2020 and 2021. An additional 427,080 warrants were issued in conjunction with a draw on the CARES Act Loan in 2020. These warrants are non-voting, freely transferable, may be settled as net shares or in cash at the Company's option, and have a five-year term.

As of March 31, 2024, there are 1,882,517 total warrants outstanding, with a weighted average strike price of $39.06. The value of the warrants was estimated using a Black-Scholes option pricing model. The total fair value of all outstanding warrants was $30 million, recorded in stockholders' equity at issuance.

Basic loss per share and diluted loss per share are calculated by dividing net loss by the weighted average number of common shares outstanding during the period.

A roll forward of the amounts included in accumulated other comprehensive loss is shown below for the three months ended March 31, 2024 and 2023:

Alaska Air Group has two operating airlines – Alaska and Horizon. Each is regulated by the U.S. Department of Transportation’s Federal Aviation Administration. Alaska has CPAs for regional capacity with Horizon and SkyWest, under which Alaska receives all passenger revenue.

Under 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. Historically, our CODM has reviewed financial performance information for our airline operations and Horizon CPA as part of three reportable operating segments:

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

•Regional - includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S., Canada, and Mexico under a CPA. This segment includes the actual revenue 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.

In addition to these reported segments, we have a "Consolidating and Other" column which 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.

Over time, our Mainline and Regional airline segments have increasingly been managed as a single component that provides scheduled air transportation for passengers and cargo, and includes our loyalty program. Managing this component in an integrated manner enables our team to leverage our comprehensive network, single route scheduling system, and fleet as a single business to deliver optimized consolidated financial results. In the first quarter of 2024, management began evaluating changes to internal reporting that may change the discrete information that is provided to our CODM in the future to better align with the way the business is managed. Such changes may have an impact on the company’s reportable segments once finalized. We will continue to report using the existing segment structure until changes in our internal reporting have been fully implemented, and a segment analysis has been performed to determine if any changes to reportable segments are indicated.

Operating segment information is as follows (in millions):

			Three Months Ended March 31, 2024
			Mainline						Regional						Horizon						Consolidating & Other(a)						Air Group Adjusted(b)						Special Items(c)						Consolidated
Operating Revenue
Passenger revenue			$	1,629					$	375					$	—					$	—					$	2,004					$	—					$	2,004
CPA revenue			—						—						104						(104)						—						—						—
Mileage Plan other revenue			149						15						—						—						164						—						164
Cargo and other revenue			62						—						—						2						64						—						64
Total Operating Revenue			1,840						390						104						(102)						2,232						—						2,232
Operating Expenses
Operating expenses, excluding fuel			1,514						299						88						(102)						1,799						34						1,833
Fuel expense			485						93						—						—						578						(13)						565
Total Operating Expenses			1,999						392						88						(102)						2,377						21						2,398
Non-operating Income (Expense)			(3)						—						(11)						2						(12)						—						(12)
Income (Loss) Before Income Tax			$	(162)					$	(2)					$	5					$	2					$	(157)					$	(21)					$	(178)
Pretax Margin																											(7.0)		%										(8.0)		%
			Three Months Ended March 31, 2023
			Mainline						Regional						Horizon						Consolidating & Other(a)						Air Group Adjusted(b)						Special Items(c)						Consolidated
Operating Revenue
Passenger revenue			$	1,673					$	311					$	—					$	—					$	1,984					$	—					$	1,984
CPA revenue			—						—						78						(78)						—						—						—
Mileage Plan other revenue			143						11						—						—						154						—						154
Cargo and other revenue			57						—						—						1						58						—						58
Total Operating Revenue			1,873						322						78						(77)						2,196						—						2,196
Operating Expenses
Operating expenses, excluding fuel			1,390						256						84						(77)						1,653						64						1,717
Fuel expense			561						85						—						(1)						645						20						665
Total Operating Expenses			1,951						341						84						(78)						2,298						84						2,382
Non-operating Income (Expense)			(6)						—						(8)						1						(13)						—						(13)
Income (Loss) Before Income Tax			$	(84)					$	(19)					$	(14)					$	2					$	(115)					$	(84)					$	(199)
Pretax Margin																											(5.2)		%										(9.1)		%