T
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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£
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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91-1292054
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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19300 International Boulevard, Seattle, Washington 98188
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Telephone: (206) 392-5040
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Common Stock, $0.01 Par Value
|
New York Stock Exchange
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ITEM 1. OUR BUSINESS
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|||||
Mainline passenger revenue
|
70
|
%
|
|
70
|
%
|
|
70
|
%
|
|
71
|
%
|
|
69
|
%
|
Regional passenger revenue
|
15
|
%
|
|
15
|
%
|
|
16
|
%
|
|
16
|
%
|
|
17
|
%
|
Other revenue
|
13
|
%
|
|
13
|
%
|
|
12
|
%
|
|
11
|
%
|
|
12
|
%
|
Freight and Mail revenue
|
2
|
%
|
|
2
|
%
|
|
2
|
%
|
|
2
|
%
|
|
2
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|||||
West Coast
|
36
|
%
|
|
36
|
%
|
|
34
|
%
|
|
35
|
%
|
|
37
|
%
|
Transcon/midcon
|
24
|
%
|
|
22
|
%
|
|
22
|
%
|
|
19
|
%
|
|
19
|
%
|
Hawaii
|
18
|
%
|
|
18
|
%
|
|
19
|
%
|
|
20
|
%
|
|
16
|
%
|
Alaska
|
15
|
%
|
|
15
|
%
|
|
16
|
%
|
|
17
|
%
|
|
18
|
%
|
Mexico
|
6
|
%
|
|
6
|
%
|
|
7
|
%
|
|
7
|
%
|
|
9
|
%
|
Canada
|
1
|
%
|
|
3
|
%
|
|
2
|
%
|
|
2
|
%
|
|
1
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
Alaska Airlines Signature Visa
|
|
Platinum Select AAdvantage
|
|
Gold Delta SkyMiles
|
|
United Mileage Plus Explorer
|
|
Southwest Rapid Rewards Premier
|
|
|
|
|
|
|
|
|
|
|
|
Bonus miles awarded
|
|
30,000 after spending $1,000 in 3 months*
|
|
30,000 after spending $1,000 in 3 months
|
|
30,000 after spending $1,000 in 3 months
|
|
30,000 after spending $1,000 in 3 months
|
|
50,000 after spending $2,000 in 3 months
|
Annual fee
|
|
$75
|
|
$95
|
|
$95
|
|
$95
|
|
$99
|
Miles for "on" spend
|
|
3x
|
|
2x
|
|
2x
|
|
2x
|
|
2x
|
Companion fare
|
|
Yes - annual companion fare purchased for $99 plus tax.
|
|
No
|
|
No
|
|
No
|
|
No
|
First bag free
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
No bag fees
|
•
|
offering our customers more travel destinations and better mileage credit/redemption opportunities, including elite qualifying miles on all of our major U.S. and international airline partners;
|
•
|
giving our Mileage Plan™ program a competitive advantage because of our partnership with carriers from two of the three major global alliances (Oneworld and SkyTeam);
|
•
|
giving us access to more connecting traffic from other airlines; and
|
•
|
providing members of our alliance partners’ frequent flier programs an opportunity to travel on Alaska and its regional affiliates while earning mileage credit in our partners’ programs.
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|
Frequent
Flier
Agreement
|
|
Codeshare —
Alaska Flight # on
Flights Operated by
Other Airline
|
|
Codeshare —
Other Airline Flight #
on Flights Operated by
Alaska / Horizon / SkyWest
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Major U.S. or International Airlines
|
|
|
|
|
|
Aeromexico
|
Yes
|
|
No
|
|
Yes
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American Airlines
(a)
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Yes
|
|
Yes
|
|
Yes
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Air France
|
Yes
|
|
No
|
|
Yes
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British Airways
|
Yes
|
|
No
|
|
No
|
Cathay Pacific Airways
|
Yes
|
|
No
|
|
Yes
|
Delta Air Lines
(a)
|
Yes
|
|
Yes
|
|
Yes
|
Emirates
|
Yes
|
|
No
|
|
Yes
|
Icelandair
|
Yes
|
|
No
|
|
Yes
|
Hainan Airlines
|
Yes
|
|
No
|
|
No
|
KLM
|
Yes
|
|
No
|
|
Yes
|
Korean Air
|
Yes
|
|
No
|
|
Yes
|
LAN S.A.
|
Yes
|
|
No
|
|
Yes
|
Fiji Airways
(b)
|
Yes
|
|
No
|
|
Yes
|
Qantas
|
Yes
|
|
No
|
|
Yes
|
Regional Airlines
|
|
|
|
|
|
Rav'n Alaska
|
Yes
|
|
Yes
|
|
No
|
PenAir
(b)
|
Yes
|
|
Yes
|
|
No
|
(a)
|
Alaska has codeshare agreements with American and Delta regional affiliate carriers as well.
|
(b)
|
These airlines do not have their own frequent flier program. However, Alaska’s Mileage Plan™ members can earn and redeem miles on these airlines’ route systems.
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|||||
Crude oil
|
62
|
%
|
|
72
|
%
|
|
71
|
%
|
|
65
|
%
|
|
70
|
%
|
Refining margins
|
26
|
%
|
|
18
|
%
|
|
19
|
%
|
|
25
|
%
|
|
24
|
%
|
Other
(a)
|
12
|
%
|
|
10
|
%
|
|
10
|
%
|
|
10
|
%
|
|
6
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|||||
Aircraft fuel expense
|
22
|
%
|
|
32
|
%
|
|
34
|
%
|
|
35
|
%
|
|
34
|
%
|
(a)
|
Other includes gains and losses on settled fuel hedges, unrealized mark-to-market fuel hedge gains or losses, taxes and other into-plane costs.
|
•
|
Safety record
|
•
|
Customer service and reputation
|
•
|
Fares and ancillary services
|
•
|
Routes served, flight schedules, codesharing and interline relationships, and frequent flier programs
|
•
|
Alaskaair.com:
It is less expensive for us to sell through this direct channel and, as a result, we continue to take steps to drive more business to our website. In addition, we believe this channel is preferable from a branding and customer-relationship standpoint in that we can establish ongoing communication with the customer and tailor offers accordingly.
|
•
|
Traditional and online travel agencies:
Both traditional and online travel agencies typically use Global Distribution Systems (GDS) to obtain their fare and inventory data from airlines. Bookings made through these agencies result in a fee that is charged to the airline. Many of our large corporate customers require us to use these agencies. Some of our competitors do not use this distribution channel and, as a result, have lower ticket distribution costs.
|
•
|
Reservation call centers:
These call centers are located in Phoenix, AZ, Kent, WA, and Boise, ID. We generally charge a $15 fee for booking reservations through these call centers.
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|||||
Alaskaair.com
|
60
|
%
|
|
57
|
%
|
|
55
|
%
|
|
54
|
%
|
|
51
|
%
|
Traditional agencies
|
23
|
%
|
|
25
|
%
|
|
27
|
%
|
|
27
|
%
|
|
28
|
%
|
Online travel agencies
|
11
|
%
|
|
12
|
%
|
|
13
|
%
|
|
13
|
%
|
|
13
|
%
|
Reservation call centers
|
6
|
%
|
|
6
|
%
|
|
5
|
%
|
|
6
|
%
|
|
8
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
•
|
general economic conditions and resulting changes in passenger demand,
|
•
|
pricing initiatives by us or our competitors,
|
•
|
increases in competition at our primary airports, and
|
•
|
increases or decreases in passenger and volume-driven variable costs.
|
Union
|
|
Employee Group
|
|
Number of Employees
|
|
Contract Status
|
|
Air Line Pilots Association International (ALPA)
|
|
Pilots
|
|
1,697
|
|
|
Amendable 03/31/2018
|
Association of Flight Attendants (AFA)
|
|
Flight attendants
|
|
3,660
|
|
|
Amendable 12/17/2019
|
International Association of Machinists and Aerospace Workers (IAM)
|
|
Ramp service and stock clerks
|
|
625
|
|
|
Amendable 7/19/2018
|
IAM
|
|
Clerical, office and passenger service
|
|
2,921
|
|
|
Amendable 1/1/2019
|
Aircraft Mechanics Fraternal Association (AMFA)
|
|
Mechanics, inspectors and cleaners
|
|
665
|
|
|
Amendable 10/17/2016
|
Mexico Workers Association of Air Transport
|
|
Mexico airport personnel
|
|
85
|
|
|
Amendable 9/29/2016
|
Transport Workers Union of America (TWU)
|
|
Dispatchers
|
|
44
|
|
|
Amendable 3/24/2019
|
Union
|
|
Employee Group
|
|
Number of Employees
|
|
Contract Status
|
|
International Brotherhood of Teamsters (IBT)
|
|
Pilots
(1)
|
|
643
|
|
|
Amendable 12/14/2018
|
AFA
|
|
Flight attendants
(1)
|
|
596
|
|
|
Amendable 07/18/2018
|
IBT
|
|
Mechanics and related classifications
|
|
272
|
|
|
Amendable 12/16/2020
|
National Automobile, Aerospace, Transportation and General Workers
|
|
Station personnel in
Vancouver and Victoria, BC, Canada |
|
42
|
|
|
Amendable 8/26/2018
|
Transportation Workers Union of America
|
|
Dispatchers
|
|
17
|
|
|
Amendable 2/14/2016
|
Name
|
|
Position
|
|
Age
|
|
Air Group
or Subsidiary
Officer Since
|
Bradley Tilden
|
|
Chairman, President and Chief Executive Officer of Alaska Air Group, Inc. and Alaska Airlines, Inc. and Chief Executive Officer of Horizon Air Industries, Inc.
|
|
55
|
|
1994
|
|
|
|
|
|
|
|
Benito Minicucci
|
|
Executive Vice President/Operations and Chief Operating Officer of Alaska Airlines, Inc.
|
|
49
|
|
2004
|
|
|
|
|
|
|
|
Brandon Pedersen
|
|
Executive Vice President/Finance and Chief Financial Officer of Alaska Air Group, Inc. and Alaska Airlines, Inc.
|
|
49
|
|
2003
|
|
|
|
|
|
|
|
Andrew Harrison
|
|
Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc.
|
|
45
|
|
2008
|
|
|
|
|
|
|
|
David Campbell
|
|
President and Chief Operating Officer of Horizon Air Industries, Inc.
|
|
54
|
|
2014
|
|
|
|
|
|
|
|
Herman Wacker
|
|
Former Vice President of Legal and General Counsel of Alaska Air Group, Inc. and Alaska Airlines, Inc., and Chief Ethics and Compliance officer at Alaska Air Group, Inc.
|
|
67
|
|
2014
|
|
|
|
|
|
|
|
Kyle Levine
|
|
Vice President Legal and General Counsel of Alaska Air Group, Inc. and Alaska Airlines, Inc. and Chief Ethics and Compliance Officer of Alaska Air Group, Inc.
|
|
44
|
|
2016
|
•
|
DOT:
In order to provide passenger and cargo air transportation in the U.S., a domestic airline is required to hold a certificate of public convenience and necessity issued by the DOT. Subject to certain individual airport capacity, noise and other restrictions, this certificate permits an air carrier to operate between any two points in the U.S. Certificates do not expire, but may be revoked for failure to comply with federal aviation statutes, regulations, orders or the terms of the certificates. While airlines are permitted to establish their own fares without governmental regulation,
the DOT has jurisdiction over the approval of international codeshare agreements, marketing alliance agreements between major domestic carriers, international and some domestic route authorities, Essential Air Service market subsidies, carrier liability for personal or property damage, and certain airport rates and charges disputes. International treaties may also contain restrictions or requirements for flying outside of the U.S. and impose different carrier liability limits than those applicable to domestic flights. The DOT has been active in implementing a variety of “consumer protection” regulations, covering subjects such as advertising, passenger communications, denied boarding compensation and tarmac delay response.
Airlines are subject to enforcement actions that are brought by the DOT from time to time for alleged violations of consumer protection and other economic regulations. We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate.
|
•
|
FAA:
The FAA, through Federal Aviation Regulations (FARs), generally regulates all aspects of airline operations, including establishing personnel, maintenance and flight operation standards. Domestic airlines are required to hold a valid air carrier operating certificate issued by the FAA. Pursuant to these regulations we have established, and the FAA has approved, our operations specifications and a maintenance program for each type of aircraft we operate. The maintenance program provides for the ongoing maintenance of such aircraft, ranging from frequent routine inspections to major overhauls. From time to time the FAA issues airworthiness directives (ADs) that must be incorporated into our aircraft maintenance program and operations. All airlines are subject to enforcement actions that are brought by the FAA from time to time for alleged violations of FARs or ADs. At this time, we are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate.
|
•
|
TSA:
Airlines serving the U.S. must operate a TSA-approved Aircraft Operator Standard Security Program (AOSSP), and comply with TSA Security Directives (SDs) and regulations. Airlines are subject to enforcement actions that are brought by the TSA from time to time for alleged violations of the AOSSP, SDs or security regulations. We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate. Under TSA authority, we are required to collect a September 11 Security Fee of $5.60 per one-way trip from passengers and remit that sum to the government to fund aviation security me
asures.
|
ITEM 1A. RISK FACTORS
|
•
|
lack of operational approval (e.g. new routes, aircraft deliveries, etc.);
|
•
|
congestion and/or space constraints at airports or air traffic control problems;
|
•
|
adverse weather conditions;
|
•
|
increased security measures or breaches in security;
|
•
|
contagious illness and fear of contagion;
|
•
|
changes in international treaties concerning air rights;
|
•
|
international or domestic conflicts or terrorist activity; and
|
•
|
other changes in business conditions.
|
•
|
significantly reduce passenger traffic and yields as a result of a potentially dramatic drop in demand for air travel;
|
•
|
significantly increase security and insurance costs;
|
•
|
make war risk or other insurance unavailable or extremely expensive;
|
•
|
increase fuel costs and the volatility of fuel prices;
|
•
|
increase costs from airport shutdowns, flight cancellations and delays resulting from security breaches and perceived safety threats; and
|
•
|
result in a grounding of commercial air traffic by the FAA.
|
ITEM 1B. UNRESOLVED STAFF COMMENTS
|
ITEM 2. PROPERTIES
|
Aircraft Type
|
Seats
|
|
Owned
|
|
Leased
|
|
Total
|
|
Average
Age in
Years
|
||||
B737 Freighters & Combis
|
0/72
|
|
6
|
|
|
—
|
|
|
6
|
|
|
22.2
|
|
B737-400/700
|
144/124
|
|
17
|
|
|
17
|
|
|
34
|
|
|
17.7
|
|
B737-800/900/900ER
|
163/181/181
|
|
97
|
|
|
10
|
|
|
107
|
|
|
6.4
|
|
Total Mainline Fleet
|
|
|
120
|
|
|
27
|
|
|
147
|
|
|
9.7
|
|
Q400
|
76
|
|
37
|
|
|
15
|
|
|
52
|
|
|
9.0
|
|
E175
|
76
|
|
—
|
|
|
5
|
|
|
5
|
|
|
0.5
|
|
CRJ-700
(a)
|
70
|
|
2
|
|
|
6
|
|
|
8
|
|
|
13.3
|
|
Total Regional Fleet
|
|
|
39
|
|
|
26
|
|
|
65
|
|
|
8.9
|
|
Total
|
|
|
159
|
|
|
53
|
|
|
212
|
|
|
9.5
|
|
(a)
|
In addition to the CRJ-700s in our operating fleet, we have eight leased CRJ-700s currently subleased to a third party operated for other carriers.
|
ITEM 3. LEGAL PROCEEDINGS
|
ITEM 4. MINE SAFETY DISCLOSURES
|
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
2015
|
|
2014
|
||||||||||||
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
First Quarter
|
$
|
70.83
|
|
|
$
|
57.73
|
|
|
$
|
46.97
|
|
|
$
|
36.28
|
|
Second Quarter
|
68.68
|
|
|
58.15
|
|
|
50.47
|
|
|
43.92
|
|
||||
Third Quarter
|
82.75
|
|
|
62.59
|
|
|
50.10
|
|
|
41.85
|
|
||||
Fourth Quarter
|
87.16
|
|
|
73.00
|
|
|
60.93
|
|
|
40.70
|
|
|
Total Number of
Shares Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum remaining
dollar value of shares
that can be purchased
under the plan
(in millions)
|
||||||
October 1, 2015 - October 2, 2015
(a)
|
41,246
|
|
|
$
|
78.83
|
|
|
41,246
|
|
|
|
||
October 3, 2015 – October 31, 2015
(b)
|
531,609
|
|
|
$
|
76.69
|
|
|
531,609
|
|
|
|
||
November 1, 2015 – November 30, 2015
(b)
|
484,454
|
|
|
78.16
|
|
|
484,454
|
|
|
|
|||
December 1, 2015 – December 31, 2015
(b)
|
501,214
|
|
|
82.44
|
|
|
501,214
|
|
|
|
|||
Total
|
1,558,523
|
|
|
$
|
79.10
|
|
|
1,558,523
|
|
|
$
|
880
|
|
(a)
|
In the third quarter of 2013, the Company adopted Accounting Standards Update 2009-13, "Multiple-Deliverable Revenue Arrangements - a consensus of the FASB Emerging Issues Task Force" (ASU 2009-13).
|
(b)
|
Capitalized interest was
$34 million
,
$20 million
,
$21 million
,
$18 million
, and
$12 million
for
2015
,
2014
,
2013
,
2012
, and
2011
, respectively.
|
(c)
|
Includes flights under Capacity Purchase Agreements operated by SkyWest and PenAir.
|
(d)
|
See reconciliation of RASM and CASMex to the most directly related GAAP measure in the "Results of Operations" section.
|
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Year in Review
—highlights from
2015
outlining some of the major events that happened during the year and how they affected our financial performance.
|
•
|
Results of Operations
—an in-depth analysis of our revenues by segment and our expenses from a consolidated perspective for the three years presented in our consolidated financial statements. To the extent material to the understanding of segment profitability, we more fully describe the segment expenses per financial statement line item. Financial and statistical data is also included here. This section includes forward-looking statements regarding our view of
2016
.
|
•
|
Liquidity and Capital Resources
—an overview of our financial position, analysis of cash flows, sources and uses of cash, contractual obligations, and commitments and off-balance sheet arrangements.
|
•
|
Critical Accounting Estimates
—a discussion of our accounting estimates that involve significant judgment and uncertainties.
|
•
|
Reported record full-year net income, excluding special items, of
$842 million
, a
47%
increase over
2014
. Adjusted diluted earnings per share of
$6.51
was a
56.0%
increase compared to
2014
. See reconciliation of these non-GAAP measures to comparable GAAP figures in Results of Operations.
|
•
|
Announced a 38% increase in the quarterly dividend, from $0.20 per share to $0.275 per share in January 2016. This is the third time the company has raised the dividend since initiating the quarterly dividend in July 2013, with a cumulative increase of 175% since that time.
|
•
|
Paid
$0.20
per-share quarterly cash dividend in the fourth quarter, bringing total dividend payments in
2015
to
$102 million
.
|
•
|
Repurchased
7,208,328
shares of common stock for an average price of $70 during
2015
for
$505 million
, or approximately 6% of market capitalization at the beginning of
2015
. Since 2007, Air Group has used
$1.3 billion
to repurchase
56 million
shares at an average price of
$23.66
, representing about 35% of the Company's outstanding shares on December 31, 2006.
|
•
|
Generated nearly
$1.6 billion
of operating cash flow and
$753 million
of free cash flow in
2015
. Since the beginning of 2010 Air Group has generated $5.6 billion of operating cash flow, and $2.6 billion of free cash flow.
|
•
|
Grew passenger revenues by
6%
compared to the
fourth
quarter of
2014
, and by
5%
compared to full-year
2014
.
|
•
|
Reached a new long term agreement with Bank of America for the Alaska Airlines Visa credit card. The new agreement adds customer benefits, such as no foreign transaction fees, and is expected to generate an incremental $60 million of revenue in 2016.
|
•
|
Generated record full-year adjusted pretax margin of
24.0%
in
2015
, compared to
17.2%
in
2014
.
|
•
|
Achieved return on invested capital of
25.2%
in
2015
, compared to
18.6%
in
2014
.
|
•
|
Lowered adjusted debt-to-total capitalization ratio to
27%
as of
December 31, 2015
. Air Group currently has no net debt.
|
•
|
Lowered consolidated unit costs excluding fuel and special items for the sixth consecutive year, to the lowest level ever. Mainline unit costs excluding fuel have declined 13 of the last 14 years.
|
•
|
Held
$1.3 billion
in unrestricted cash and marketable securities as of
December 31, 2015
.
|
•
|
Ranked the best airline in the U.S. by The Wall Street Journal's "Middle Seat" scorecard for three consecutive years.
|
•
|
Ranked "Highest in Customer Satisfaction Among Traditional Network Carriers" by J.D. Power and Associates for the eighth year in a row.
|
•
|
Ranked highest by frequent fliers in the J.D. Power Airline Loyalty/Rewards Program Satisfaction Report for the second year in a row.
|
•
|
Rated the #1 Airline Rewards Program by U.S. News and World Report.
|
•
|
Named the "Airline Market Leader" by Air Transport World, becoming the only U.S. airline honored by the magazine in its 2016 Industry Achievement Awards.
|
•
|
Named No. 1 on-time carrier in North America for the sixth year in a row by FlightStats in January 2016.
|
•
|
Named Top Performing Airline among mid-sized carriers worldwide by Aviation Week magazine.
|
•
|
Ranked as the most fuel efficient airline for U.S. airlines by the International Council on Clean Transportation for the fifth year in a row.
|
•
|
Awarded Fast Travel Platinum status from the International Air Transport Association, which is awarded to airlines offering four or more Fast Travel options to at least 80% of their passengers.
|
•
|
Ranked as a top 100 of America's Best Employers by Forbes Magazine.
|
•
|
Ranked first in the Leadership 500 Excellence Awards, recognizing the success of Alaska's Gear Up leadership training.
|
•
|
Awarded a record
$120 million
in incentive pay to employees for
2015
, or more than one month's pay for most employees. Over the last five years, employees have earned more than
$500 million
in incentive pay, averaging 8.6% of annual pay.
|
•
|
Reached new long-term agreements with Horizon's pilots and flight attendants on contracts that will position Horizon for future growth. These contracts were ratified in January 2016 subsequent to year end. The flight attendant agreement becomes amendable in 2019 and the pilot agreement becomes amendable in 2024. Each contract includes a signing bonus upon ratification, which is expected to be approximately $3.5 million, in aggregate, in the first quarter of 2016.
|
•
|
Signed a four-year agreement with Alaska Airline's dispatchers in December 2015.
|
•
|
Completed "Gear Up 2" for over 1,200 leaders at Alaska and Horizon - a continuation of our award-winning leadership training workshop.
|
•
|
Delivered our "Beyond Service" customer service training to nearly 9,000 customer-facing employees.
|
•
|
Received a perfect score of 100% for workplace equality on the 2016 Corporate Equality Index (CEI).
|
•
|
Launched Preferred Plus Seating, providing customers the ability to select bulkhead and exit-row seating 24 hours in advance of the flight. Preferred Plus Seating also includes priority boarding and complimentary beer, wine or cocktail.
|
•
|
Announced plans to introduce Premium Class seating in 2016, which will provide customers greater leg room, early boarding, and premium on-board amenities, among other things.
|
•
|
Became the launch customer of Boeing's new, innovative, high-capacity 737 Space Bins, which will increase bag capacity in the cabin by 50%.
|
•
|
Added a free first checked bag as a permanent feature of the Alaska Airlines Visa Signature affinity credit card.
|
•
|
Added 11 Boeing 737-900ERs and one Bombardier Q400 aircraft to the operating fleet in 2015.
|
•
|
Added five Embraer 175 (E175) regional jets in 2015, and committed for future positions to grow the number of E175s to 23 by the end of 2017, including E175s that will replace the eight CRJ700 regional jets operating in our regional network. Furthermore, we may order an additional 30 regional jets with deliveries starting in 2017 that will likely be operated by Horizon.
|
•
|
Added 20 new markets and 10 new cities to our growing network in 2015.
|
•
|
Increased fuel efficiency (as measured by seat-miles per gallon) by 2.2% over 2014.
|
•
|
Donated nearly $12 million to support local communities, including job training for workers at the Seattle-Tacoma airport, STEM-focused education programs at Seattle's Museum of Flight, the Alaska Native Science and Engineering Program, and Seattle's bicycle sharing program.
|
•
|
Announced a 10-year sponsorship agreement with the University of Washington which includes, among other things, exclusive naming rights for Alaska Airlines Field at Husky Stadium and Alaska Airlines Arena.
|
•
|
By eliminating fuel expense and certain special items from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost-reduction initiatives. 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.
|
•
|
2013 Operating revenue per ASM (RASM) excludes a favorable, one-time, non-cash Special mileage plan revenue item of $192 million primarily related to our modified affinity card agreement with Bank of America, executed in July 2013. In accordance with accounting standards, we recorded this item in the third quarter of 2013, and it reflects a non-cash adjustment of the value of miles outstanding in the program. We believe it is appropriate to exclude this special revenue item from recurring revenues from operations.
|
•
|
Cost per ASM (CASM) excluding fuel and certain 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 CASM excluding fuel (and other items as specified in our plan documents) are important metrics for the employee incentive plan that covers all 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 compare our airlines 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 certain items, such as mark-to-market hedging adjustments, is important because it provides information on significant items that are not necessarily indicative of future performance. 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.
|
|
Twelve Months Ended December 31,
|
||||||||||||||
|
2015
|
|
2014
|
||||||||||||
(in millions, except per-share amounts)
|
Dollars
|
|
Diluted EPS
|
|
Dollars
|
|
Diluted EPS
|
||||||||
Net income and diluted EPS as reported
|
$
|
848
|
|
|
$
|
6.56
|
|
|
$
|
605
|
|
|
$
|
4.42
|
|
Mark-to-market fuel hedge adjustments, net of tax
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(0.11
|
)
|
||||
Special items, net of tax
|
20
|
|
|
0.15
|
|
|
(19
|
)
|
|
(0.13
|
)
|
||||
Special income tax benefit
|
(26
|
)
|
|
(0.20
|
)
|
|
—
|
|
|
—
|
|
||||
Non-GAAP adjusted income and per-share amounts
|
$
|
842
|
|
|
$
|
6.51
|
|
|
$
|
571
|
|
|
$
|
4.18
|
|
|
Twelve Months Ended December 31,
|
|||||||||
|
2015
|
|
2014
|
|
% Change
|
|||||
Consolidated:
|
|
|
|
|
|
|||||
Total operating expenses per ASM (CASM)
|
|
10.77
|
¢
|
|
|
12.21
|
¢
|
|
(11.8
|
)
|
Less the following components:
|
|
|
|
|
|
|
|
|||
Aircraft fuel, including hedging gains and losses
|
2.39
|
|
|
3.93
|
|
|
(39.2
|
)
|
||
Special items
|
0.08
|
|
|
(0.08
|
)
|
|
NM
|
|
||
CASM, excluding fuel and fleet transition costs
|
|
8.30
|
¢
|
|
|
8.36
|
¢
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
||||
Mainline:
|
|
|
|
|
|
|||||
Total mainline operating expenses per ASM (CASM)
|
|
9.77
|
¢
|
|
|
11.15
|
¢
|
|
(12.4
|
)
|
Less the following components:
|
|
|
|
|
|
|
|
|||
Aircraft fuel, including hedging gains and losses
|
2.29
|
|
|
3.79
|
|
|
(39.6
|
)
|
||
Special items
|
0.09
|
|
|
(0.09
|
)
|
|
NM
|
|
||
CASM, excluding fuel
|
|
7.39
|
¢
|
|
|
7.45
|
¢
|
|
(0.8
|
)
|
|
Twelve Months Ended December 31,
|
||||||||
|
2015
|
|
2014
|
|
Change
|
|
2013
|
|
Change
|
Consolidated Operating Statistics:
(a)
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
31,883
|
|
29,278
|
|
8.9%
|
|
27,414
|
|
6.8%
|
RPMs (000,000) "traffic"
|
33,578
|
|
30,718
|
|
9.3%
|
|
28,833
|
|
6.5%
|
ASMs (000,000) "capacity"
|
39,914
|
|
36,078
|
|
10.6%
|
|
33,672
|
|
7.1%
|
Load factor
|
84.1%
|
|
85.1%
|
|
(1.0) pts
|
|
85.6%
|
|
(0.5) pts
|
Yield
|
14.27¢
|
|
14.91¢
|
|
(4.3)%
|
|
14.80¢
|
|
0.7%
|
PRASM
|
12.01¢
|
|
12.69¢
|
|
(5.4)%
|
|
12.67¢
|
|
0.2%
|
RASM
(b)
|
14.03¢
|
|
14.88¢
|
|
(5.7)%
|
|
14.74¢
|
|
0.9%
|
CASM excluding fuel and fleet transition costs
(b)
|
8.30¢
|
|
8.36¢
|
|
(0.7)%
|
|
8.47¢
|
|
(1.3)%
|
Economic fuel cost per gallon
(b)
|
$1.88
|
|
$3.08
|
|
(39.0)%
|
|
$3.30
|
|
(6.7)%
|
Fuel gallons (000,000)
|
508
|
|
469
|
|
8.3%
|
|
447
|
|
4.9%
|
ASM's per gallon
|
78.6
|
|
76.9
|
|
2.2%
|
|
75.3
|
|
2.1%
|
Average number of full-time equivalent employees (FTEs)
|
13,858
|
|
12,739
|
|
8.8%
|
|
12,163
|
|
4.7%
|
|
|
|
|
|
|
|
|
|
|
Mainline Operating Statistics:
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
22,869
|
|
20,972
|
|
9.0%
|
|
19,737
|
|
6.3%
|
RPMs (000,000) "traffic"
|
30,340
|
|
27,778
|
|
9.2%
|
|
26,172
|
|
6.1%
|
ASMs (000,000) "capacity"
|
35,912
|
|
32,430
|
|
10.7%
|
|
30,411
|
|
6.6%
|
Load factor
|
84.5%
|
|
85.7%
|
|
(1.2) pts
|
|
86.1%
|
|
(0.4) pts
|
Yield
|
12.98¢
|
|
13.58¢
|
|
(4.4)%
|
|
13.33¢
|
|
1.9%
|
PRASM
|
10.97¢
|
|
11.64¢
|
|
(5.8)%
|
|
11.48¢
|
|
1.4%
|
CASM excluding fuel
(b)
|
7.39¢
|
|
7.45¢
|
|
(0.8)%
|
|
7.54¢
|
|
(1.2)%
|
Economic fuel cost per gallon
(b)
|
$1.87
|
|
$3.07
|
|
(39.1)%
|
|
$3.30
|
|
(7.0)%
|
Fuel gallons (000,000)
|
439
|
|
407
|
|
7.9%
|
|
393
|
|
3.6%
|
ASM's per gallon
|
81.8
|
|
79.7
|
|
2.6%
|
|
77.4
|
|
3.0%
|
Average number of FTE's
|
10,750
|
|
9,910
|
|
8.5%
|
|
9,493
|
|
4.4%
|
Aircraft utilization
|
10.8
|
|
10.5
|
|
2.9%
|
|
10.6
|
|
(0.9)%
|
Average aircraft stage length
|
1,195
|
|
1,182
|
|
1.1%
|
|
1,177
|
|
0.4%
|
Mainline operating fleet at period-end
|
147 a/c
|
|
137 a/c
|
|
10 a/c
|
|
131 a/c
|
|
6 a/c
|
|
|
|
|
|
|
|
|
|
|
Regional Operating Statistics:
(c)
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
9,015
|
|
8,306
|
|
8.5%
|
|
7,677
|
|
8.2%
|
RPMs (000,000) "traffic"
|
3,238
|
|
2,940
|
|
10.1%
|
|
2,661
|
|
10.5%
|
ASMs (000,000) "capacity"
|
4,002
|
|
3,648
|
|
9.7%
|
|
3,261
|
|
11.9%
|
Load factor
|
80.9%
|
|
80.6%
|
|
0.3 pts
|
|
81.6%
|
|
(1.0) pts
|
Yield
|
26.37¢
|
|
27.40¢
|
|
(3.8)%
|
|
29.20¢
|
|
(6.2)%
|
PRASM
|
21.34¢
|
|
22.08¢
|
|
(3.4)%
|
|
23.83¢
|
|
(7.3)%
|
(a)
|
Except for FTEs, data includes information related to regional CPA flying with Horizon, SkyWest and PenAir.
|
(b)
|
See reconciliation of this measure to the most directly related GAAP measure in the "Results of Operations" section.
|
(c)
|
Data presented includes information related to regional CPAs.
|
|
Twelve Months Ended December 31,
|
|||||||||
(in millions)
|
2015
|
|
2014
|
|
% Change
|
|||||
Passenger
|
|
|
|
|
|
|||||
Mainline
|
$
|
3,939
|
|
|
$
|
3,774
|
|
|
4
|
|
Regional
|
854
|
|
|
805
|
|
|
6
|
|
||
Total passenger revenue
|
$
|
4,793
|
|
|
$
|
4,579
|
|
|
5
|
|
Freight and mail
|
108
|
|
|
114
|
|
|
(5
|
)
|
||
Other - net
|
697
|
|
|
675
|
|
|
3
|
|
||
Total operating revenues
|
$
|
5,598
|
|
|
$
|
5,368
|
|
|
4
|
|
|
Twelve Months Ended December 31,
|
|||||||||
(in millions)
|
2015
|
|
2014
|
|
% Change
|
|||||
Fuel expense
|
$
|
954
|
|
|
$
|
1,418
|
|
|
(33
|
)
|
Non-fuel expenses
|
3,314
|
|
|
3,018
|
|
|
10
|
|
||
Special items
|
32
|
|
|
(30
|
)
|
|
NM
|
|
||
Total Operating Expenses
|
$
|
4,300
|
|
|
$
|
4,406
|
|
|
(2
|
)
|
|
Twelve Months Ended December 31,
|
||||||||
(in millions)
|
2015
|
|
2014
|
|
% Change
|
||||
Wages
|
$
|
945
|
|
|
$
|
862
|
|
|
10
|
Medical and other benefits
|
153
|
|
|
150
|
|
|
2
|
||
Defined contribution plans
|
60
|
|
|
53
|
|
|
13
|
||
Pension - Defined benefit plans
|
28
|
|
|
9
|
|
|
211
|
||
Payroll taxes
|
68
|
|
|
62
|
|
|
10
|
||
Total wages and benefits
|
$
|
1,254
|
|
|
$
|
1,136
|
|
|
10
|
|
Twelve Months Ended December 31,
|
||||||||||||||
|
2015
|
|
2014
|
||||||||||||
(in millions, except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
||||||||
Raw or "into-plane" fuel cost
|
$
|
935
|
|
|
$
|
1.84
|
|
|
$
|
1,400
|
|
|
$
|
2.99
|
|
Losses on settled hedges
|
19
|
|
|
0.04
|
|
|
41
|
|
|
0.09
|
|
||||
Consolidated economic fuel expense
|
$
|
954
|
|
|
$
|
1.88
|
|
|
$
|
1,441
|
|
|
$
|
3.08
|
|
Mark-to-market fuel hedge adjustments
|
—
|
|
|
—
|
|
|
(23
|
)
|
|
(0.05
|
)
|
||||
GAAP fuel expense
|
$
|
954
|
|
|
$
|
1.88
|
|
|
$
|
1,418
|
|
|
$
|
3.03
|
|
Fuel gallons
|
508
|
|
|
|
|
469
|
|
|
|
|
Twelve Months Ended December 31,
|
|||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
%Change
|
|||||||||
(in millions, except CASM)
|
Amount
|
|
Amount
|
|
CASM
|
|
CASM
|
|
CASM
|
|||||||||
Wages and benefits
|
$
|
1,254
|
|
|
$
|
1,136
|
|
|
|
3.14
|
¢
|
|
|
3.16
|
¢
|
|
(0.6
|
)%
|
Variable incentive pay
|
120
|
|
|
116
|
|
|
0.30
|
|
|
0.32
|
|
|
(6.3
|
)%
|
||||
Aircraft maintenance
|
253
|
|
|
229
|
|
|
0.64
|
|
|
0.63
|
|
|
1.6
|
%
|
||||
Aircraft rent
|
105
|
|
|
110
|
|
|
0.26
|
|
|
0.30
|
|
|
(13.3
|
)%
|
||||
Landing fees and other rentals
|
296
|
|
|
279
|
|
|
0.74
|
|
|
0.77
|
|
|
(3.9
|
)%
|
||||
Contracted services
|
214
|
|
|
196
|
|
|
0.54
|
|
|
0.54
|
|
|
—
|
%
|
||||
Selling expenses
|
211
|
|
|
199
|
|
|
0.53
|
|
|
0.55
|
|
|
(3.6
|
)%
|
||||
Depreciation and amortization
|
320
|
|
|
294
|
|
|
0.80
|
|
|
0.81
|
|
|
(1.2
|
)%
|
||||
Food and beverage service
|
113
|
|
|
93
|
|
|
0.28
|
|
|
0.26
|
|
|
7.7
|
%
|
||||
Other
|
356
|
|
|
308
|
|
|
0.89
|
|
|
0.86
|
|
|
3.5
|
%
|
||||
Third-party regional carrier expense
|
72
|
|
|
58
|
|
|
0.18
|
|
|
0.16
|
|
|
12.5
|
%
|
||||
Non-fuel Expenses
(a)
|
$
|
3,314
|
|
|
$
|
3,018
|
|
|
|
8.30
|
¢
|
|
|
8.36
|
¢
|
|
(0.7
|
)%
|
(a)
|
Excludes special items recorded in
2015
and
2014
.
|
•
|
Both periods include adjustments to reflect the timing of net unrealized mark-to-market gains or losses related to our fuel hedge positions. For
2014
, we recognized net mark-to-market losses of
$23 million
(
$15 million
after tax, or
$0.11
per diluted share) compared to gains of
$8 million
(
$5 million
after tax, or
$0.03
per share) in
2013
.
|
•
|
In
2014
, we recognized a one-time, non-cash benefit from the curtailment of certain post-retirement benefit plans of
$20 million
and a one-time gain associated with the settlement of a legal matter of
$10 million
. The aggregate $30 million (
$19.0 million
in aggregate after tax, or
$0.13
per diluted share) is included in Special items in the consolidated statement of operations.
|
•
|
In
2013
, we recognized a one-time, non-cash Special mileage plan revenue item of
$192 million
(
$120 million
after tax, or
$0.85
per diluted share) that resulted from the application of new accounting rules associated with the modified Bank of America Affinity Card Agreement, and the effect of an increase in the estimate of the number of frequent flier miles expected to expire unused.
|
|
Twelve Months Ended December 31,
|
||||||||||||||
|
2014
|
|
2013
|
||||||||||||
(in millions, except per-share amounts)
|
Dollars
|
|
Diluted EPS
|
|
Dollars
|
|
Diluted EPS
|
||||||||
Net income and diluted EPS as reported
|
$
|
605
|
|
|
$
|
4.42
|
|
|
$
|
508
|
|
|
$
|
3.58
|
|
Mark-to-market fuel hedge adjustments, net of tax
|
(15
|
)
|
|
(0.11
|
)
|
|
(5
|
)
|
|
(0.03
|
)
|
||||
Special items, net of tax
|
(19
|
)
|
|
(0.13
|
)
|
|
—
|
|
|
—
|
|
||||
Special mileage plan revenue, net of tax
|
—
|
|
|
—
|
|
|
(120
|
)
|
|
(0.85
|
)
|
||||
Non-GAAP adjusted income and per-share amounts
|
$
|
571
|
|
|
$
|
4.18
|
|
|
$
|
383
|
|
|
$
|
2.70
|
|
|
Twelve Months Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
% Change
|
||||
Total operating revenues
|
$
|
5,368
|
|
|
$
|
5,156
|
|
|
4.1
|
Less: Special mileage plan revenue
|
—
|
|
|
192
|
|
|
NM
|
||
Adjusted Revenue
|
$
|
5,368
|
|
|
$
|
4,964
|
|
|
8.1
|
Consolidated ASMs
|
36,078
|
|
|
33,672
|
|
|
7.1
|
||
RASM
|
|
14.88
|
¢
|
|
|
14.74
|
¢
|
|
0.9
|
|
Twelve Months Ended December 31,
|
|||||||||
|
2014
|
|
2013
|
|
% Change
|
|||||
Consolidated:
|
|
|
|
|
|
|||||
Total operating expenses per ASM (CASM)
|
|
12.21
|
¢
|
|
|
12.82
|
¢
|
|
(4.8
|
)
|
Less the following components:
|
|
|
|
|
|
|
||||
Aircraft fuel, including hedging gains and losses
|
3.93
|
|
|
4.35
|
|
|
(9.7
|
)
|
||
Special items
|
(0.08
|
)
|
|
—
|
|
|
NM
|
|
||
CASM, excluding fuel and fleet transition costs
|
|
8.36
|
¢
|
|
|
8.47
|
¢
|
|
(1.3
|
)
|
|
|
|
|
|
|
|||||
Mainline:
|
|
|
|
|
|
|||||
Total mainline operating expenses per ASM (CASM)
|
|
11.15
|
¢
|
|
|
11.77
|
¢
|
|
(5.3
|
)
|
Less the following components:
|
|
|
|
|
|
|
||||
Aircraft fuel, including hedging gains and losses
|
3.79
|
|
|
4.23
|
|
|
(10.4
|
)
|
||
Special items
|
(0.09
|
)
|
|
—
|
|
|
NM
|
|
||
CASM, excluding fuel
|
|
7.45
|
¢
|
|
|
7.54
|
¢
|
|
(1.2
|
)
|
|
Twelve Months Ended December 31,
|
||||||||
(in millions)
|
2014
|
|
2013
|
|
% Change
|
||||
Passenger
|
|
|
|
|
|
||||
Mainline
|
$
|
3,774
|
|
|
$
|
3,490
|
|
|
8
|
Regional
|
805
|
|
|
777
|
|
|
4
|
||
Total passenger revenue
|
$
|
4,579
|
|
|
$
|
4,267
|
|
|
7
|
Freight and mail
|
114
|
|
|
113
|
|
|
1
|
||
Other - net
|
675
|
|
|
584
|
|
|
16
|
||
Special mileage plan revenue
|
—
|
|
|
192
|
|
|
NM
|
||
Total operating revenues
|
$
|
5,368
|
|
|
$
|
5,156
|
|
|
4
|
|
Twelve Months Ended December 31,
|
|||||||||
(in millions)
|
2014
|
|
2013
|
|
% Change
|
|||||
Fuel expense
|
$
|
1,418
|
|
|
$
|
1,467
|
|
|
(3
|
)
|
Non-fuel expenses
|
3,018
|
|
|
2,851
|
|
|
6
|
|
||
Special items
|
(30
|
)
|
|
—
|
|
|
NM
|
|
||
Total Operating Expenses
|
$
|
4,406
|
|
|
$
|
4,318
|
|
|
2
|
|
|
Twelve Months Ended December 31,
|
|||||||||
(in millions)
|
2014
|
|
2013
|
|
% Change
|
|||||
Wages
|
$
|
862
|
|
|
$
|
788
|
|
|
9
|
|
Medical and other benefits
|
150
|
|
|
145
|
|
|
3
|
|
||
Defined contribution plans
|
53
|
|
|
44
|
|
|
20
|
|
||
Pension - Defined benefit plans
|
9
|
|
|
50
|
|
|
(82
|
)
|
||
Payroll taxes
|
62
|
|
|
59
|
|
|
5
|
|
||
Total wages and benefits
|
$
|
1,136
|
|
|
$
|
1,086
|
|
|
5
|
|
|
Twelve Months Ended December 31,
|
||||||||||||||
|
2014
|
|
2013
|
||||||||||||
(in millions, except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
||||||||
Raw or "into-plane" fuel cost
|
$
|
1,400
|
|
|
$
|
2.99
|
|
|
$
|
1,423
|
|
|
$
|
3.19
|
|
Gains on settled hedges
|
41
|
|
|
0.09
|
|
|
52
|
|
|
0.11
|
|
||||
Consolidated economic fuel expense
|
$
|
1,441
|
|
|
$
|
3.08
|
|
|
$
|
1,475
|
|
|
$
|
3.30
|
|
Mark-to-mark fuel hedge adjustments
|
(23
|
)
|
|
(0.05
|
)
|
|
(8
|
)
|
|
(0.02
|
)
|
||||
GAAP fuel expense
|
$
|
1,418
|
|
|
$
|
3.03
|
|
|
$
|
1,467
|
|
|
$
|
3.28
|
|
Fuel gallons
|
469
|
|
|
|
|
447
|
|
|
|
|
Twelve Months Ended December 31,
|
|||||||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
%Change
|
|||||||||
(in millions, except CASM)
|
Amount
|
|
Amount
|
|
CASM
|
|
CASM
|
|
CASM
|
|||||||||
Wages and benefits
|
$
|
1,136
|
|
|
$
|
1,086
|
|
|
|
3.16
|
¢
|
|
|
3.23
|
¢
|
|
(2.2
|
)%
|
Variable incentive pay
|
116
|
|
|
105
|
|
|
0.32
|
|
|
0.31
|
|
|
3.2
|
%
|
||||
Aircraft maintenance
|
229
|
|
|
247
|
|
|
0.63
|
|
|
0.73
|
|
|
(13.7
|
)%
|
||||
Aircraft rent
|
110
|
|
|
119
|
|
|
0.30
|
|
|
0.35
|
|
|
(14.3
|
)%
|
||||
Landing fees and other rentals
|
279
|
|
|
262
|
|
|
0.77
|
|
|
0.78
|
|
|
(1.3
|
)%
|
||||
Contracted services
|
196
|
|
|
176
|
|
|
0.54
|
|
|
0.52
|
|
|
3.8
|
%
|
||||
Selling expenses
|
199
|
|
|
179
|
|
|
0.55
|
|
|
0.53
|
|
|
3.8
|
%
|
||||
Depreciation and amortization
|
294
|
|
|
270
|
|
|
0.81
|
|
|
0.80
|
|
|
1.3
|
%
|
||||
Food and beverage service
|
93
|
|
|
84
|
|
|
0.26
|
|
|
0.25
|
|
|
4.0
|
%
|
||||
Other
|
308
|
|
|
278
|
|
|
0.86
|
|
|
0.83
|
|
|
3.6
|
%
|
||||
Third-party regional carrier expense
|
58
|
|
|
45
|
|
|
0.16
|
|
|
0.14
|
|
|
14.3
|
%
|
||||
Non-fuel expenses
|
$
|
3,018
|
|
|
$
|
2,851
|
|
|
|
8.36
|
¢
|
|
|
8.47
|
¢
|
|
(1.3
|
)%
|
•
|
Our existing cash and marketable securities balance of
$1.3 billion
, and our expected cash from operations;
|
•
|
Our
89
unencumbered aircraft in the operating fleet as of
December 31, 2015
, that could be financed, if necessary;
|
•
|
Our combined
$200 million
bank line-of-credit facilities, with none currently outstanding.
|
(in millions, except per share and debt-to-capital amounts)
|
December 31, 2015
|
|
December 31, 2014
|
|
Change
|
||||||
Cash and marketable securities
|
$
|
1,328
|
|
|
$
|
1,217
|
|
|
$
|
111
|
|
Cash, marketable securities, and unused lines of credit as a percentage of trailing twelve months revenue
|
28
|
%
|
|
26
|
%
|
|
2
|
pts
|
|||
Long-term debt, net of current portion
|
571
|
|
|
686
|
|
|
(115
|
)
|
|||
Shareholders’ equity
|
2,411
|
|
|
2,127
|
|
|
284
|
|
|||
Long-term debt-to-capital ratio
(a)
|
27%:73%
|
|
|
31%:69%
|
|
|
(4
|
) pts
|
(a)
|
Calculated using the present value of remaining aircraft lease payments for aircraft that are in our operating fleet as of the balance sheet date.
|
|
2015 Actuals
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
||||||||||
Aircraft and aircraft purchase deposits - firm
(a)(b)
|
$
|
681
|
|
|
$
|
450
|
|
|
$
|
470
|
|
|
$
|
400
|
|
|
$
|
345
|
|
Other flight equipment
|
79
|
|
|
40
|
|
|
45
|
|
|
40
|
|
|
40
|
|
|||||
Other property and equipment
|
71
|
|
|
150
|
|
|
105
|
|
|
85
|
|
|
85
|
|
|||||
Total property and equipment additions
(c)
|
$
|
831
|
|
|
$
|
640
|
|
|
$
|
620
|
|
|
$
|
525
|
|
|
$
|
470
|
|
Option aircraft and aircraft deposits, if exercised
|
$
|
—
|
|
|
$
|
65
|
|
|
$
|
130
|
|
|
$
|
235
|
|
|
$
|
350
|
|
|
Actual Fleet Count
|
|
Expected Fleet Activity
(a)
|
||||||||||||||
Aircraft
|
Dec 31, 2014
|
|
Dec 31, 2015
|
|
2016 Changes
|
|
Dec 31, 2016
|
|
2017 - 2018 Changes
|
|
Dec 31, 2018
|
||||||
B737 Freighters & Combis
|
6
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
(3
|
)
|
|
3
|
|
B737 Passenger Aircraft
(b)
|
131
|
|
|
141
|
|
|
3
|
|
|
144
|
|
|
12
|
|
|
156
|
|
Total Mainline Fleet
|
137
|
|
|
147
|
|
|
3
|
|
|
150
|
|
|
9
|
|
|
159
|
|
Q400
|
51
|
|
|
52
|
|
|
—
|
|
|
52
|
|
|
(15
|
)
|
|
37
|
|
E175
(c)
|
—
|
|
|
5
|
|
|
10
|
|
|
15
|
|
|
8
|
|
|
23
|
|
CRJ700
(c)
|
8
|
|
|
8
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Regional Fleet
|
59
|
|
|
65
|
|
|
2
|
|
|
67
|
|
|
(7
|
)
|
|
60
|
|
Total
|
196
|
|
|
212
|
|
|
5
|
|
|
217
|
|
|
2
|
|
|
219
|
|
(a)
|
The expected fleet counts at
December 31, 2016
,
2017
, and
2018
are subject to change.
|
(b)
|
2016
changes include the expected delivery of
19
Boeing 737-900ER aircraft, offset by the return of
13
leased 737-400 aircraft and the removal of
three
737-700 aircraft from our operating fleet to be converted into freighter aircraft and return to the fleet in 2017.
|
(c)
|
Aircraft are operated under capacity purchase agreements with a third party.
|
|
Approximate % of Expected Fuel Requirements
|
|
Weighted-Average Crude Oil Price per Barrel
|
|
Average Premium Cost per Barrel
|
First Quarter 2016
|
50%
|
|
$74
|
|
$2
|
Second Quarter 2016
|
50%
|
|
$66
|
|
$3
|
Third Quarter 2016
|
40%
|
|
$66
|
|
$3
|
Fourth Quarter 2016
|
30%
|
|
$65
|
|
$3
|
Full Year 2016
|
42%
|
|
$68
|
|
$3
|
First Quarter 2017
|
20%
|
|
$60
|
|
$3
|
Second Quarter 2017
|
10%
|
|
$58
|
|
$3
|
Full Year 2017
|
7%
|
|
$59
|
|
$3
|
(in millions)
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Beyond 2020
|
|
Total
|
||||||||||||||
Current and long-term debt obligations
|
$
|
115
|
|
|
$
|
121
|
|
|
$
|
151
|
|
|
$
|
114
|
|
|
$
|
116
|
|
|
$
|
69
|
|
|
$
|
686
|
|
Operating lease commitments
(a)
|
205
|
|
|
192
|
|
|
139
|
|
|
131
|
|
|
119
|
|
|
609
|
|
|
1,395
|
|
|||||||
Aircraft purchase commitments
(b)
|
505
|
|
|
549
|
|
|
444
|
|
|
390
|
|
|
327
|
|
|
418
|
|
|
2,633
|
|
|||||||
Interest obligations
(c)
|
32
|
|
|
27
|
|
|
21
|
|
|
13
|
|
|
7
|
|
|
5
|
|
|
105
|
|
|||||||
Other obligations
(d)
|
71
|
|
|
62
|
|
|
64
|
|
|
68
|
|
|
72
|
|
|
574
|
|
|
911
|
|
|||||||
Total
|
$
|
928
|
|
|
$
|
951
|
|
|
$
|
819
|
|
|
$
|
716
|
|
|
$
|
641
|
|
|
$
|
1,675
|
|
|
$
|
5,730
|
|
(a)
|
Operating lease commitments generally include aircraft operating leases, airport property and hangar leases, office space, and other equipment leases. Included here are E175 aircraft that are operated by SkyWest under a capacity purchase agreement.
|
(b)
|
Includes payments for two Q400 aircraft deliveries in 2018 that are currently contracted. At this time, however, we do not expect to take delivery of those aircraft.
|
(c)
|
For variable-rate debt, future obligations are shown above using interest rates in effect as of
December 31, 2015
.
|
(d)
|
Includes minimum obligations associated with third-party CPAs with SkyWest and PenAir. Refer to the "Commitments" note in the consolidated financial statements for further information.
|
1.
|
The rate at which we defer sales proceeds related to services sold through non-airline partners:
|
2.
|
The number of miles that will not be redeemed for travel (breakage):
|
3.
|
The number of miles used per award:
|
4.
|
The number of awards redeemed for travel on our airlines versus other airlines:
|
5.
|
The costs that will be incurred to provide award travel:
|
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||||||||||||||||||
(in millions, except per share)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||||||
Operating revenues
|
$
|
1,269
|
|
|
$
|
1,222
|
|
|
$
|
1,437
|
|
|
$
|
1,375
|
|
|
$
|
1,515
|
|
|
$
|
1,465
|
|
|
$
|
1,377
|
|
|
$
|
1,306
|
|
Operating income
|
238
|
|
|
141
|
|
|
372
|
|
|
263
|
|
|
433
|
|
|
316
|
|
|
255
|
|
|
242
|
|
||||||||
Net income
|
149
|
|
|
94
|
|
|
234
|
|
|
165
|
|
|
274
|
|
|
198
|
|
|
191
|
|
|
148
|
|
||||||||
Basic earnings per share
(a)
|
1.13
|
|
|
0.69
|
|
|
1.80
|
|
|
1.20
|
|
|
2.15
|
|
|
1.47
|
|
|
1.52
|
|
|
1.12
|
|
||||||||
Diluted earnings per share
(a)
|
1.12
|
|
|
0.68
|
|
|
1.79
|
|
|
1.19
|
|
|
2.14
|
|
|
1.45
|
|
|
1.51
|
|
|
1.11
|
|
(a)
|
For earnings per share, the sum of the quarters may not equal the total for the full year due to rounding.
|
As of December 31
(in millions)
|
|
2015
|
|
2014
|
||||
ASSETS
|
|
|
|
|
||||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
73
|
|
|
$
|
107
|
|
Marketable securities
|
|
1,255
|
|
|
1,110
|
|
||
Total cash and marketable securities
|
|
1,328
|
|
|
1,217
|
|
||
Receivables - less allowance for doubtful accounts of $1 and $1
|
|
212
|
|
|
259
|
|
||
Inventories and supplies - net
|
|
51
|
|
|
58
|
|
||
Prepaid expenses and other current assets
|
|
72
|
|
|
105
|
|
||
Total Current Assets
|
|
1,663
|
|
|
1,639
|
|
||
|
|
|
|
|
||||
Property and Equipment
|
|
|
|
|
|
|
||
Aircraft and other flight equipment
|
|
5,690
|
|
|
5,165
|
|
||
Other property and equipment
|
|
955
|
|
|
896
|
|
||
Deposits for future flight equipment
|
|
771
|
|
|
555
|
|
||
|
|
7,416
|
|
|
6,616
|
|
||
Less accumulated depreciation and amortization
|
|
2,614
|
|
|
2,317
|
|
||
Total Property and Equipment - Net
|
|
4,802
|
|
|
4,299
|
|
||
|
|
|
|
|
||||
Other Assets
|
|
68
|
|
|
126
|
|
||
|
|
|
|
|
||||
Total Assets
|
|
$
|
6,533
|
|
|
$
|
6,064
|
|
As of December 31
(in millions except share amounts)
|
|
2015
|
|
2014
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
||||
Current Liabilities
|
|
|
|
|
||||
Accounts payable
|
|
63
|
|
|
62
|
|
||
Accrued wages, vacation and payroll taxes
|
|
298
|
|
|
276
|
|
||
Air traffic liability
|
|
669
|
|
|
631
|
|
||
Other accrued liabilities
|
|
661
|
|
|
585
|
|
||
Current portion of long-term debt
|
|
115
|
|
|
117
|
|
||
Total Current Liabilities
|
|
1,806
|
|
|
1,671
|
|
||
|
|
|
|
|
||||
Long-Term Debt, Net of Current Portion
|
|
571
|
|
|
686
|
|
||
Other Liabilities and Credits
|
|
|
|
|
|
|
||
Deferred income taxes
|
|
682
|
|
|
633
|
|
||
Deferred revenue
|
|
431
|
|
|
374
|
|
||
Obligation for pension and postretirement medical benefits
|
|
270
|
|
|
246
|
|
||
Other liabilities
|
|
362
|
|
|
327
|
|
||
|
|
1,745
|
|
|
1,580
|
|
||
Commitments and Contingencies
|
|
|
|
|
|
|
||
Shareholders' Equity
|
|
|
|
|
|
|
||
Preferred stock, $0.01 par value Authorized: 5,000,000 shares, none issued or outstanding
|
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value Authorized: 200,000,000 shares, Issued: 2015 - 128,442,099 shares; 2014 - 131,556,573 shares, Outstanding: 2015 - 125,175,325 shares; 2014 - 131,481,473 shares
|
|
1
|
|
|
1
|
|
||
Capital in excess of par value
|
|
73
|
|
|
296
|
|
||
Treasury stock (common), at cost: 2015 - 3,266,774 shares; 2014 - 75,100 shares
|
|
(250)
|
|
|
(4)
|
|
||
Accumulated other comprehensive loss
|
|
(303)
|
|
|
(310)
|
|
||
Retained earnings
|
|
2,890
|
|
|
2,144
|
|
||
|
|
2,411
|
|
2,127
|
||||
Total Liabilities and Shareholders' Equity
|
|
$
|
6,533
|
|
|
$
|
6,064
|
|
Year Ended December 31
(in millions, except per-share amounts)
|
2015
|
|
2014
|
|
2013
|
||||||
Operating Revenues
|
|
|
|
|
|
||||||
Passenger
|
|
|
|
|
|
||||||
Mainline
|
$
|
3,939
|
|
|
$
|
3,774
|
|
|
$
|
3,490
|
|
Regional
|
854
|
|
|
805
|
|
|
777
|
|
|||
Total passenger revenue
|
4,793
|
|
|
4,579
|
|
|
4,267
|
|
|||
Freight and mail
|
108
|
|
|
114
|
|
|
113
|
|
|||
Other - net
|
697
|
|
|
675
|
|
|
584
|
|
|||
Special mileage plan revenue
|
—
|
|
|
—
|
|
|
192
|
|
|||
Total Operating Revenues
|
5,598
|
|
|
5,368
|
|
|
5,156
|
|
|||
|
|
|
|
|
|
||||||
Operating Expenses
|
|
|
|
|
|
|
|
|
|||
Wages and benefits
|
1,254
|
|
|
1,136
|
|
|
1,086
|
|
|||
Variable incentive pay
|
120
|
|
|
116
|
|
|
105
|
|
|||
Aircraft fuel, including hedging gains and losses
|
954
|
|
|
1,418
|
|
|
1,467
|
|
|||
Aircraft maintenance
|
253
|
|
|
229
|
|
|
247
|
|
|||
Aircraft rent
|
105
|
|
|
110
|
|
|
119
|
|
|||
Landing fees and other rentals
|
296
|
|
|
279
|
|
|
262
|
|
|||
Contracted services
|
214
|
|
|
196
|
|
|
176
|
|
|||
Selling expenses
|
211
|
|
|
199
|
|
|
179
|
|
|||
Depreciation and amortization
|
320
|
|
|
294
|
|
|
270
|
|
|||
Food and beverage service
|
113
|
|
|
93
|
|
|
84
|
|
|||
Third-party regional carrier expense
|
72
|
|
|
58
|
|
|
45
|
|
|||
Other
|
356
|
|
|
308
|
|
|
278
|
|
|||
Special items
|
32
|
|
|
(30
|
)
|
|
—
|
|
|||
Total Operating Expenses
|
4,300
|
|
|
4,406
|
|
|
4,318
|
|
|||
Operating Income
|
1,298
|
|
|
962
|
|
|
838
|
|
|||
|
|
|
|
|
|
||||||
Nonoperating Income (Expense)
|
|
|
|
|
|
|
|
|
|||
Interest income
|
21
|
|
|
21
|
|
|
18
|
|
|||
Interest expense
|
(42
|
)
|
|
(48
|
)
|
|
(56
|
)
|
|||
Interest capitalized
|
34
|
|
|
20
|
|
|
21
|
|
|||
Other - net
|
1
|
|
|
20
|
|
|
(5
|
)
|
|||
|
14
|
|
|
13
|
|
|
(22
|
)
|
|||
Income before income tax
|
1,312
|
|
|
975
|
|
|
816
|
|
|||
Income tax expense
|
464
|
|
|
370
|
|
|
308
|
|
|||
Net Income
|
$
|
848
|
|
|
$
|
605
|
|
|
$
|
508
|
|
|
|
|
|
|
|
||||||
Basic Earnings Per Share:
|
$
|
6.61
|
|
|
$
|
4.47
|
|
|
$
|
3.63
|
|
Diluted Earnings Per Share:
|
$
|
6.56
|
|
|
$
|
4.42
|
|
|
$
|
3.58
|
|
Shares used for computation:
|
|
|
|
|
|
|
|
||||
Basic
|
128.373
|
|
|
135.445
|
|
|
139.910
|
|
|||
Diluted
|
129.372
|
|
|
136.801
|
|
|
141.878
|
|
|||
|
|
|
|
|
|
||||||
Cash dividend declared per share
|
$
|
0.80
|
|
|
$
|
0.50
|
|
|
$
|
0.20
|
|
Year Ended December 31 (in millions)
|
2015
|
|
2014
|
|
2013
|
||||||
|
|
|
|
|
|
||||||
Net Income
|
$
|
848
|
|
|
$
|
605
|
|
|
$
|
508
|
|
|
|
|
|
|
|
||||||
Other Comprehensive Income (Loss):
|
|
|
|
|
|
||||||
Related to marketable securities:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during the period
|
(6
|
)
|
|
2
|
|
|
(9
|
)
|
|||
Reclassification of (gains) losses into Other-net nonoperating income (expense)
|
1
|
|
|
(2
|
)
|
|
(2
|
)
|
|||
Income tax benefit (expense)
|
2
|
|
|
—
|
|
|
4
|
|
|||
Total
|
(3
|
)
|
|
—
|
|
|
(7
|
)
|
|||
|
|
|
|
|
|
||||||
Related to employee benefit plans:
|
|
|
|
|
|
||||||
Actuarial gains/(losses) related to pension and other post retirement benefit plans
|
10
|
|
|
(210
|
)
|
|
358
|
|
|||
Reclassification of net pension expense into Wages and benefits
|
14
|
|
|
9
|
|
|
42
|
|
|||
Income tax benefit (expense)
|
(14
|
)
|
|
76
|
|
|
(150
|
)
|
|||
Total
|
10
|
|
|
(125
|
)
|
|
250
|
|
|||
|
|
|
|
|
|
||||||
Related to interest rate derivative instruments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during the period
|
(5
|
)
|
|
(8
|
)
|
|
10
|
|
|||
Reclassification of (gains) losses into Aircraft rent
|
6
|
|
|
6
|
|
|
6
|
|
|||
Income tax benefit (expense)
|
(1
|
)
|
|
—
|
|
|
(6
|
)
|
|||
Total
|
—
|
|
|
(2
|
)
|
|
10
|
|
|||
|
|
|
|
|
|
||||||
Other Comprehensive Income (Loss)
|
7
|
|
|
(127
|
)
|
|
253
|
|
|||
Comprehensive Income
|
$
|
855
|
|
|
$
|
478
|
|
|
$
|
761
|
|
(in millions)
|
Common Stock Outstanding
|
|
Common Stock
|
|
Capital in Excess of Par Value
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
Balances at December 31, 2012
|
140.754
|
|
|
$
|
1
|
|
|
$
|
729
|
|
|
$
|
—
|
|
|
$
|
(436
|
)
|
|
$
|
1,127
|
|
|
$
|
1,421
|
|
2013 net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
508
|
|
|
508
|
|
||||||
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
253
|
|
|
—
|
|
|
253
|
|
||||||
Common stock repurchase
|
(4.984
|
)
|
|
—
|
|
|
(157
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(159
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
Cash dividend declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
(28
|
)
|
||||||
Stock issued for employee stock purchase plan
|
0.342
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||
Stock issued under stock plans
|
1.380
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||||
Balances at December 31, 2013
|
137.492
|
|
|
1
|
|
|
606
|
|
|
(2
|
)
|
|
(183
|
)
|
|
1,607
|
|
|
2,029
|
|
||||||
2014 net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
605
|
|
|
605
|
|
||||||
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(127
|
)
|
|
—
|
|
|
(127
|
)
|
||||||
Common stock repurchase
|
(7.317
|
)
|
|
—
|
|
|
(346
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(348
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
Cash dividend declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68
|
)
|
|
(68
|
)
|
||||||
Stock issued for employee stock purchase plan
|
0.299
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||||
Stock issued under stock plans
|
1.007
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||||
Balances at December 31, 2014
|
131.481
|
|
|
1
|
|
|
296
|
|
|
(4
|
)
|
|
(310
|
)
|
|
2,144
|
|
|
2,127
|
|
||||||
2015 net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
848
|
|
|
848
|
|
||||||
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||
Common stock repurchase
|
(7.208
|
)
|
|
—
|
|
|
(259
|
)
|
|
(246
|
)
|
|
—
|
|
|
—
|
|
|
(505
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||||
Cash dividend declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(102
|
)
|
|
(102
|
)
|
||||||
Stock issued for employee stock purchase plan
|
0.281
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
||||||
Stock issued under stock plans
|
0.621
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||
Balances at December 31, 2015
|
125.175
|
|
|
$
|
1
|
|
|
$
|
73
|
|
|
$
|
(250
|
)
|
|
$
|
(303
|
)
|
|
$
|
2,890
|
|
|
$
|
2,411
|
|
Year Ended December 31
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
848
|
|
|
$
|
605
|
|
|
$
|
508
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Special mileage plan accounting adjustment
|
|
—
|
|
|
—
|
|
|
(192
|
)
|
|||
Depreciation and amortization
|
|
320
|
|
|
294
|
|
|
270
|
|
|||
Stock-based compensation and other
|
|
25
|
|
|
6
|
|
|
32
|
|
|||
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
||||||
Changes in deferred tax provision
|
|
56
|
|
|
114
|
|
|
146
|
|
|||
(Increase) decrease in accounts receivable
|
|
47
|
|
|
(110
|
)
|
|
(19
|
)
|
|||
Increase (decrease) in air traffic liability
|
|
38
|
|
|
67
|
|
|
29
|
|
|||
Increase (decrease) in deferred revenue
|
|
57
|
|
|
40
|
|
|
84
|
|
|||
Changes in pension and other postretirement benefits
|
|
36
|
|
|
(18
|
)
|
|
62
|
|
|||
Other - net
|
|
157
|
|
|
32
|
|
|
148
|
|
|||
Pension contribution
|
|
—
|
|
|
—
|
|
|
(87
|
)
|
|||
Net cash provided by operating activities
|
|
1,584
|
|
|
1,030
|
|
|
981
|
|
|||
|
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|||
Property and equipment additions:
|
|
|
|
|
|
|
|
|
|
|||
Aircraft and aircraft purchase deposits
|
|
(681
|
)
|
|
(498
|
)
|
|
(487
|
)
|
|||
Other flight equipment
|
|
(79
|
)
|
|
(131
|
)
|
|
(41
|
)
|
|||
Other property and equipment
|
|
(71
|
)
|
|
(65
|
)
|
|
(38
|
)
|
|||
Total property and equipment additions
|
|
(831
|
)
|
|
(694
|
)
|
|
(566
|
)
|
|||
Purchases of marketable securities
|
|
(1,327
|
)
|
|
(949
|
)
|
|
(1,218
|
)
|
|||
Sales and maturities of marketable securities
|
|
1,175
|
|
|
1,092
|
|
|
1,089
|
|
|||
Proceeds from disposition of assets and changes in restricted deposits
|
|
53
|
|
|
10
|
|
|
(3
|
)
|
|||
Net cash used in investing activities
|
|
(930
|
)
|
|
(541
|
)
|
|
(698
|
)
|
|||
|
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of long-term debt
|
|
—
|
|
|
51
|
|
|
—
|
|
|||
Long-term debt payments
|
|
(116
|
)
|
|
(119
|
)
|
|
(161
|
)
|
|||
Common stock repurchases
|
|
(505
|
)
|
|
(348
|
)
|
|
(159
|
)
|
|||
Cash dividend paid
|
|
(102
|
)
|
|
(68
|
)
|
|
(28
|
)
|
|||
Other financing activities
|
|
35
|
|
|
22
|
|
|
23
|
|
|||
Net cash used in financing activities
|
|
(688
|
)
|
|
(462
|
)
|
|
(325
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
(34
|
)
|
|
27
|
|
|
(42
|
)
|
|||
Cash and cash equivalents at beginning of year
|
|
107
|
|
|
80
|
|
|
122
|
|
|||
Cash and cash equivalents at end of year
|
|
$
|
73
|
|
|
$
|
107
|
|
|
$
|
80
|
|
|
|
|
|
|
|
|
||||||
Supplemental disclosure:
|
|
|
|
|
|
|
|
|
|
|||
Cash paid during the year for:
|
|
|
|
|
|
|
||||||
Interest, net of amount capitalized
|
|
$
|
8
|
|
|
$
|
28
|
|
|
$
|
35
|
|
Income taxes, net of refunds received
|
|
349
|
|
|
326
|
|
|
149
|
|
Aircraft and related flight equipment:
|
|
Boeing 737 aircraft
|
20 years
|
Bombardier Q400
|
15 years
|
Buildings
|
25-30 years
|
Minor building and land improvements
|
10 years
|
Capitalized leases and leasehold improvements
|
Shorter of lease term or
estimated useful life
|
Computer hardware and software
|
3-5 years
|
Other furniture and equipment
|
5-10 years
|
|
2015
|
|
2014
|
||||
Current Liabilities:
|
|
|
|
||||
Other accrued liabilities
|
$
|
368
|
|
|
$
|
343
|
|
Other Liabilities and Credits:
|
|
|
|
|
|
||
Deferred revenue
|
427
|
|
|
367
|
|
||
Other liabilities
|
19
|
|
|
20
|
|
||
Total
|
$
|
814
|
|
|
$
|
730
|
|
|
2015
|
|
2014
|
|
2013
|
||||||
Passenger revenues
|
$
|
267
|
|
|
$
|
246
|
|
|
$
|
208
|
|
Other-net revenues
|
329
|
|
|
295
|
|
|
256
|
|
|||
Special mileage plan revenue
(a)
|
—
|
|
|
—
|
|
|
192
|
|
|||
Total Mileage Plan revenues
|
$
|
596
|
|
|
$
|
541
|
|
|
$
|
656
|
|
(a)
|
Refer to Note 10 for further information.
|
December 31, 2015
|
Cost Basis
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
||||||||
Cash
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Cash equivalents
|
69
|
|
|
—
|
|
|
—
|
|
|
69
|
|
||||
Cash and cash equivalents
|
73
|
|
|
—
|
|
|
—
|
|
|
73
|
|
||||
U.S. government and agency securities
|
254
|
|
|
—
|
|
|
(1
|
)
|
|
253
|
|
||||
Foreign government bonds
|
31
|
|
|
—
|
|
|
—
|
|
|
31
|
|
||||
Asset-backed securities
|
130
|
|
|
—
|
|
|
—
|
|
|
130
|
|
||||
Mortgage-backed securities
|
117
|
|
|
—
|
|
|
(1
|
)
|
|
116
|
|
||||
Corporate notes and bonds
|
711
|
|
|
1
|
|
|
(4
|
)
|
|
708
|
|
||||
Municipal securities
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||
Marketable securities
|
1,260
|
|
|
1
|
|
|
(6
|
)
|
|
1,255
|
|
||||
Total
|
$
|
1,333
|
|
|
$
|
1
|
|
|
$
|
(6
|
)
|
|
$
|
1,328
|
|
December 31, 2014
|
Cost Basis
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
||||||||
Cash
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Cash equivalents
|
103
|
|
|
—
|
|
|
—
|
|
|
103
|
|
||||
Cash and cash equivalents
|
107
|
|
|
—
|
|
|
—
|
|
|
107
|
|
||||
U.S. government and agency securities
|
166
|
|
|
—
|
|
|
—
|
|
|
166
|
|
||||
Foreign government bonds
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||
Asset-backed securities
|
130
|
|
|
—
|
|
|
—
|
|
|
130
|
|
||||
Mortgage-backed securities
|
127
|
|
|
—
|
|
|
(1
|
)
|
|
126
|
|
||||
Corporate notes and bonds
|
644
|
|
|
3
|
|
|
(2
|
)
|
|
645
|
|
||||
Municipal securities
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
||||
Marketable securities
|
1,110
|
|
|
3
|
|
|
(3
|
)
|
|
1,110
|
|
||||
Total
|
$
|
1,217
|
|
|
$
|
3
|
|
|
$
|
(3
|
)
|
|
$
|
1,217
|
|
|
2015
|
|
2014
|
|
2013
|
||||||
Proceeds from sales and maturities
|
$
|
1,175
|
|
|
$
|
1,092
|
|
|
$
|
1,089
|
|
Gross realized gains
|
2
|
|
|
4
|
|
|
4
|
|
|||
Gross realized losses
|
(3
|
)
|
|
(2
|
)
|
|
(2
|
)
|
December 31, 2015
|
Cost Basis
|
|
Fair Value
|
||||
Due in one year or less
|
$
|
182
|
|
|
$
|
182
|
|
Due after one year through five years
|
1,055
|
|
|
1,050
|
|
||
Due after five years through 10 years
|
14
|
|
|
14
|
|
||
Due after 10 years
|
9
|
|
|
9
|
|
||
Total
|
$
|
1,260
|
|
|
$
|
1,255
|
|
|
2015
|
|
2014
|
||||
Derivative Instruments Not Designated as Hedges
|
|
|
|
||||
Fuel hedge contracts
|
|
|
|
||||
Prepaid expenses and other current assets
|
$
|
2
|
|
|
$
|
3
|
|
Other assets
|
2
|
|
|
4
|
|
||
|
|
|
|
||||
Derivative Instruments Designated as Hedges
|
|
|
|
||||
Interest rate swaps
|
|
|
|
||||
Other accrued liabilities
|
(5
|
)
|
|
(6
|
)
|
||
Other liabilities
|
(13
|
)
|
|
(13
|
)
|
||
Losses in accumulated other comprehensive loss (AOCL)
|
(18
|
)
|
|
(19
|
)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Derivative Instruments Not Designated as Hedges
|
|
|
|
|
|
||||||
Fuel hedge contracts
|
|
|
|
|
|
||||||
Gains (losses) recognized in aircraft fuel expense
|
$
|
(19
|
)
|
|
$
|
(18
|
)
|
|
$
|
(44
|
)
|
|
|
|
|
|
|
||||||
Derivative Instruments Designated as Hedges
|
|
|
|
|
|
||||||
Interest rate swaps
|
|
|
|
|
|
||||||
Gains (losses) recognized in aircraft rent
|
(6
|
)
|
|
(6
|
)
|
|
(6
|
)
|
|||
Gains (losses) recognized in other comprehensive income (OCI)
|
(5
|
)
|
|
(8
|
)
|
|
10
|
|
December 31, 2015
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Assets
|
|
|
|
|
|
||||||
Marketable securities
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
253
|
|
|
$
|
—
|
|
|
$
|
253
|
|
Foreign government bonds
|
—
|
|
|
31
|
|
|
31
|
|
|||
Asset-backed securities
|
—
|
|
|
130
|
|
|
130
|
|
|||
Mortgage-backed securities
|
—
|
|
|
116
|
|
|
116
|
|
|||
Corporate notes and bonds
|
—
|
|
|
708
|
|
|
708
|
|
|||
Municipal securities
|
—
|
|
|
17
|
|
|
17
|
|
|||
Derivative instruments
|
|
|
|
|
|
||||||
Fuel hedge contracts
|
|
|
|
|
|
||||||
Call options
|
—
|
|
|
4
|
|
|
4
|
|
|||
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Derivative instruments
|
|
|
|
|
|
||||||
Interest rate swap agreements
|
—
|
|
|
(18
|
)
|
|
(18
|
)
|
December 31, 2014
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Assets
|
|
|
|
|
|
||||||
Marketable securities
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
166
|
|
|
$
|
—
|
|
|
$
|
166
|
|
Foreign government bonds
|
—
|
|
|
25
|
|
|
25
|
|
|||
Asset-backed securities
|
—
|
|
|
130
|
|
|
130
|
|
|||
Mortgage-backed securities
|
—
|
|
|
126
|
|
|
126
|
|
|||
Corporate notes and bonds
|
—
|
|
|
645
|
|
|
645
|
|
|||
Municipal securities
|
—
|
|
|
18
|
|
|
18
|
|
|||
Derivative instruments
|
|
|
|
|
|
||||||
Fuel hedge contracts
|
|
|
|
|
|
||||||
Call options
|
—
|
|
|
7
|
|
|
7
|
|
|||
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Derivative instruments
|
|
|
|
|
|
||||||
Interest rate swap agreements
|
—
|
|
|
(19
|
)
|
|
(19
|
)
|
|
2015
|
|
2014
|
||||
Carrying Amount
|
$
|
520
|
|
|
$
|
614
|
|
Fair value
|
557
|
|
|
666
|
|
|
2015
|
|
2014
|
||||
Fixed-rate notes payable due through 2024
|
$
|
520
|
|
|
$
|
614
|
|
Variable-rate notes payable due through 2025
|
166
|
|
|
189
|
|
||
Long-term debt
|
686
|
|
|
803
|
|
||
Less current portion
|
115
|
|
|
117
|
|
||
|
$
|
571
|
|
|
$
|
686
|
|
|
|
|
|
||||
Weighted-average fixed-interest rate
|
5.7
|
%
|
|
5.7
|
%
|
||
Weighted-average variable-interest rate
|
1.8
|
%
|
|
1.6
|
%
|
|
Total
|
||
2016
|
$
|
115
|
|
2017
|
121
|
|
|
2018
|
151
|
|
|
2019
|
114
|
|
|
2020
|
116
|
|
|
Thereafter
|
69
|
|
|
Total principal payments
|
$
|
686
|
|
|
2015
|
|
2014
|
||||
Excess of tax over book depreciation
|
$
|
1,110
|
|
|
$
|
1,042
|
|
Other—net
|
23
|
|
|
22
|
|
||
Gross deferred tax liabilities
|
1,133
|
|
|
1,064
|
|
||
|
|
|
|
||||
Mileage Plan
|
(208
|
)
|
|
(206
|
)
|
||
Inventory obsolescence
|
(22
|
)
|
|
(20
|
)
|
||
Deferred gains
|
(8
|
)
|
|
(10
|
)
|
||
Employee benefits
|
(167
|
)
|
|
(166
|
)
|
||
Fuel hedge contracts
|
(5
|
)
|
|
(5
|
)
|
||
Other—net
|
(41
|
)
|
|
(24
|
)
|
||
Gross deferred tax assets
|
(451
|
)
|
|
(431
|
)
|
||
Net deferred tax liabilities
|
$
|
682
|
|
|
$
|
633
|
|
|
2015
|
|
2014
|
|
2013
|
||||||
Current tax expense:
|
|
|
|
|
|
||||||
Federal
|
$
|
397
|
|
|
$
|
229
|
|
|
$
|
145
|
|
State
|
30
|
|
|
27
|
|
|
17
|
|
|||
Total current
|
427
|
|
|
256
|
|
|
162
|
|
|||
|
|
|
|
|
|
||||||
Deferred tax expense:
|
|
|
|
|
|
|
|
|
|||
Federal
|
60
|
|
|
103
|
|
|
131
|
|
|||
State
|
(23
|
)
|
|
11
|
|
|
15
|
|
|||
Total deferred
|
37
|
|
|
114
|
|
|
146
|
|
|||
Income tax expense
|
$
|
464
|
|
|
$
|
370
|
|
|
$
|
308
|
|
|
2015
|
|
2014
|
|
2013
|
||||||
Income before income tax
|
$
|
1,312
|
|
|
$
|
975
|
|
|
$
|
816
|
|
|
|
|
|
|
|
||||||
Expected tax expense
|
459
|
|
|
341
|
|
|
286
|
|
|||
Nondeductible expenses
|
4
|
|
|
4
|
|
|
4
|
|
|||
State income taxes
|
19
|
|
|
25
|
|
|
21
|
|
|||
State income sourcing
|
(15
|
)
|
|
—
|
|
|
—
|
|
|||
Other—net
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||
Actual tax expense
|
$
|
464
|
|
|
$
|
370
|
|
|
$
|
308
|
|
|
|
|
|
|
|
||||||
Effective tax rate
|
35.4
|
%
|
|
37.9
|
%
|
|
37.7
|
%
|
Jurisdiction
|
Period
|
Federal
|
2012 to 2014
|
Alaska
|
2012 to 2014
|
California
|
2010 to 2014
|
Oregon
|
2003 to 2014*
|
|
2015
|
|
2014
|
|
2013
|
||||||
Balance at January 1,
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
1
|
|
Additions based on tax positions and settlements related to the current year
|
19
|
|
|
1
|
|
|
1
|
|
|||
Balance at December 31,
|
$
|
22
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
2015
|
|
2014
|
Discount rates
(a)
|
4.55% to 4.69%
|
|
4.20%
|
Rate of compensation increases
(a)
|
2.06% to 2.65%
|
|
2.85% to 3.91%
|
(a)
|
Varies by plan and related work group.
|
(a)
|
Varies by plan and related work group.
|
|
2015
|
|
2014
|
||
Asset category:
|
|
|
|
||
Domestic equity securities
|
28
|
%
|
|
33
|
%
|
Non-U.S. equity securities
|
12
|
%
|
|
14
|
%
|
Fixed income securities
|
55
|
%
|
|
53
|
%
|
Real estate
|
5
|
%
|
|
—
|
%
|
Plan assets
|
100
|
%
|
|
100
|
%
|
Domestic equities:
|
21% - 33%
|
Non-U.S. equities:
|
7% - 17%
|
Fixed income:
|
48% - 67%
|
Real estate:
|
0% - 8%
|
|
2015
|
|
2014
|
Fair Value Hierarchy
|
||||
Fund type:
|
|
|
|
|
||||
U.S. equity market fund
|
491
|
|
|
634
|
|
(a)
|
||
Non-U.S. equity fund
|
208
|
|
|
272
|
|
(a)
|
||
Credit bond index fund
|
953
|
|
|
190
|
|
(a)
|
||
Government/credit bond index fund
|
—
|
|
|
821
|
|
(a)
|
||
Plan assets in common commingled trusts
|
$
|
1,652
|
|
|
$
|
1,917
|
|
|
Real estate
|
85
|
|
|
—
|
|
Level 3
|
||
Total plan assets
|
$
|
1,737
|
|
|
$
|
1,917
|
|
|
Asset Category
|
December 31, 2014 Balance
|
|
Net Realized and Unrealized Gains/Losses
|
|
Net Purchases, Issuances and Settlements
|
|
Net Transfers Into/(Out of) Level 3
|
|
December 31, 2015 Balance
|
|||||||
Real Estate
|
$
|
—
|
|
|
5
|
|
|
80
|
|
|
—
|
|
|
$
|
85
|
|
|
2015
|
|
2014
|
||||
Projected benefit obligation (PBO)
|
|
|
|
||||
Beginning of year
|
$
|
2,050
|
|
|
$
|
1,709
|
|
Service cost
|
41
|
|
|
33
|
|
||
Interest cost
|
84
|
|
|
81
|
|
||
Plan settlement
|
(62
|
)
|
|
—
|
|
||
Actuarial (gain) loss
|
(140
|
)
|
|
298
|
|
||
Benefits paid
|
(75
|
)
|
|
(71
|
)
|
||
End of year
|
$
|
1,898
|
|
|
$
|
2,050
|
|
|
|
|
|
||||
Plan assets at fair value
|
|
|
|
|
|
||
Beginning of year
|
$
|
1,917
|
|
|
$
|
1,769
|
|
Actual return on plan assets
|
(43
|
)
|
|
219
|
|
||
Employer contributions
|
—
|
|
|
—
|
|
||
Plan settlement
|
(62
|
)
|
|
—
|
|
||
Benefits paid
|
(75
|
)
|
|
(71
|
)
|
||
End of year
|
$
|
1,737
|
|
|
$
|
1,917
|
|
Funded status (unfunded)
|
$
|
(161
|
)
|
|
$
|
(133
|
)
|
|
|
|
|
||||
Percent funded
|
92
|
%
|
|
94
|
%
|
|
2015
|
|
2014
|
||||
Accrued benefit liability-long term
|
$
|
173
|
|
|
$
|
133
|
|
Plan assets-long term (within noncurrent Other Assets)
|
(12
|
)
|
|
—
|
|
||
Total liability recognized
|
$
|
161
|
|
|
$
|
133
|
|
|
2015
|
|
2014
|
||||
Prior service credit
|
$
|
(11
|
)
|
|
$
|
(12
|
)
|
Net loss
|
499
|
|
|
514
|
|
||
Amount recognized in AOCL (pretax)
|
$
|
488
|
|
|
$
|
502
|
|
|
2015
|
|
2014
|
|
2013
|
||||||
Service cost
|
$
|
41
|
|
|
$
|
33
|
|
|
$
|
46
|
|
Interest cost
|
84
|
|
|
81
|
|
|
73
|
|
|||
Expected return on assets
|
(122
|
)
|
|
(117
|
)
|
|
(111
|
)
|
|||
Amortization of prior service cost
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|||
Recognized actuarial loss
|
26
|
|
|
13
|
|
|
43
|
|
|||
Settlement expense
(special item)
|
14
|
|
|
—
|
|
|
—
|
|
|||
Net pension expense
|
$
|
42
|
|
|
$
|
9
|
|
|
$
|
50
|
|
2016
|
$
|
77
|
|
2017
|
86
|
|
|
2018
|
93
|
|
|
2019
|
96
|
|
|
2020
|
107
|
|
|
2021 - 2024
|
613
|
|
•
|
Performance-Based Pay
(PBP) is a program that rewards all employees. The program is based on four separate metrics related to Air Group profitability, safety, achievement of unit-cost goals, and employee engagement as measured by customer satisfaction.
|
•
|
The
Operational Performance Rewards Program
entitles all Air Group employees to quarterly payouts of up to
$300
per person if certain operational and customer service objectives are met.
|
|
Aircraft Leases
|
|
Facility Leases
|
|
Aircraft Commitments
|
|
Capacity Purchase Agreements
|
||||||||
2016
|
$
|
113
|
|
|
$
|
92
|
|
|
$
|
505
|
|
|
$
|
67
|
|
2017
|
104
|
|
|
88
|
|
|
549
|
|
|
58
|
|
||||
2018
|
98
|
|
|
41
|
|
|
444
|
|
|
60
|
|
||||
2019
|
90
|
|
|
41
|
|
|
390
|
|
|
64
|
|
||||
2020
|
81
|
|
|
38
|
|
|
327
|
|
|
68
|
|
||||
Thereafter
|
467
|
|
|
142
|
|
|
418
|
|
|
554
|
|
||||
Total
|
$
|
953
|
|
|
$
|
442
|
|
|
$
|
2,633
|
|
|
$
|
871
|
|
|
2015
|
|
2014
|
|
2013
|
|||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|||||||||
2015 $1 billion Repurchase Program
|
1,517,277
|
|
|
$
|
120
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
2014 $650 million Repurchase Program
|
5,691,051
|
|
|
$
|
385
|
|
|
5,497,427
|
|
|
$
|
265
|
|
|
—
|
|
|
$
|
—
|
|
2012 $250 million Repurchase Program
|
—
|
|
|
—
|
|
|
1,819,304
|
|
|
83
|
|
|
4,984,186
|
|
|
159
|
|
|||
Total
|
7,208,328
|
|
|
$
|
505
|
|
|
7,316,731
|
|
|
$
|
348
|
|
|
4,984,186
|
|
|
$
|
159
|
|
|
2015
|
|
2014
|
||||
Related to marketable securities
|
(3
|
)
|
|
—
|
|
||
Related to employee benefit plans
|
(288
|
)
|
|
(298
|
)
|
||
Related to interest rate derivatives
|
(12
|
)
|
|
(12
|
)
|
||
|
$
|
(303
|
)
|
|
$
|
(310
|
)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Stock options
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Stock awards
|
11
|
|
|
10
|
|
|
10
|
|
|||
Deferred stock awards
|
1
|
|
|
1
|
|
|
1
|
|
|||
Employee stock purchase plan
|
3
|
|
|
2
|
|
|
2
|
|
|||
Stock-based compensation
|
$
|
17
|
|
|
$
|
16
|
|
|
$
|
16
|
|
|
|
|
|
|
|
||||||
Tax benefit related to stock-based compensation
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
Amount
|
|
Weighted-
Average
Period
|
||
Stock options
|
$
|
3
|
|
|
1.0
|
Stock awards
|
8
|
|
|
0.7
|
|
Unrecognized stock-based compensation
|
$
|
11
|
|
|
0.7
|
|
2015
|
|
2014
|
|
2013
|
||||||
Expected volatility
|
53
|
%
|
|
65
|
%
|
|
67
|
%
|
|||
Expected term
|
6 years
|
|
|
6 years
|
|
|
6 years
|
|
|||
Risk-free interest rate
|
1.67
|
%
|
|
1.87
|
%
|
|
1.1
|
%
|
|||
Expected dividend yield
|
1.25
|
%
|
|
1.25
|
%
|
|
—
|
|
|||
Weighted-average grant date fair value per share
|
$
|
28.71
|
|
|
$
|
21.70
|
|
|
$
|
14.74
|
|
Estimated fair value of options granted (millions)
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
Per Share
|
|
Weighted-
Average
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value (in
millions)
|
|||||
Outstanding, December 31, 2014
|
707,688
|
|
|
$
|
21.57
|
|
|
6.4
|
|
$
|
27
|
|
Granted
|
93,660
|
|
|
65.30
|
|
|
|
|
|
|||
Exercised
|
(255,717
|
)
|
|
15.97
|
|
|
|
|
|
|||
Canceled
|
(1
|
)
|
|
38.76
|
|
|
|
|
|
|||
Forfeited or expired
|
(5,285
|
)
|
|
44.56
|
|
|
|
|
|
|||
Outstanding, December 31, 2015
|
540,345
|
|
|
$
|
31.58
|
|
|
6.3
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|||||
Exercisable, December 31, 2015
|
195,873
|
|
|
$
|
18.62
|
|
|
5.6
|
|
$
|
12
|
|
Vested or expected to vest, December 31, 2015
|
539,868
|
|
|
$
|
31.57
|
|
|
6.3
|
|
$
|
26
|
|
(in millions)
|
2015
|
|
2014
|
|
2013
|
||||||
Intrinsic value of option exercises
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
19
|
|
Cash received from stock option exercises
|
4
|
|
|
6
|
|
|
8
|
|
|||
Tax benefit related to stock option exercises
|
5
|
|
|
7
|
|
|
7
|
|
|||
Fair value of options vested
|
3
|
|
|
2
|
|
|
3
|
|
|
Number
of Units
|
|
Weighted-
Average
Grant
Date Fair
Value
|
|
Weighted-
Average
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value (in
millions)
|
|||||
Non-vested, December 31, 2014
|
1,027,390
|
|
|
$
|
26.19
|
|
|
0.6
|
|
$
|
61
|
|
Granted
|
244,874
|
|
|
50.94
|
|
|
|
|
|
|
||
Vested
|
(764,322
|
)
|
|
26.33
|
|
|
|
|
|
|
||
Forfeited
|
(37,227
|
)
|
|
35.86
|
|
|
|
|
|
|
||
Non-vested, December 31, 2015
|
470,715
|
|
|
$
|
38.09
|
|
|
0.8
|
|
$
|
38
|
|
|
Alaska
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Year Ended December 31, 2015
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
|
|
Air Group Adjusted
(a)
|
|
Special Items
(b)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Mainline
|
$
|
3,939
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,939
|
|
|
$
|
—
|
|
|
$
|
3,939
|
|
Regional
|
—
|
|
|
854
|
|
|
—
|
|
|
—
|
|
|
854
|
|
|
—
|
|
|
854
|
|
|||||||
Total passenger revenues
|
3,939
|
|
|
854
|
|
|
—
|
|
|
—
|
|
|
4,793
|
|
|
—
|
|
|
4,793
|
|
|||||||
CPA revenues
|
—
|
|
|
—
|
|
|
408
|
|
|
(408
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Freight and mail
|
103
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
108
|
|
|
—
|
|
|
108
|
|
|||||||
Other-net
|
621
|
|
|
72
|
|
|
4
|
|
|
—
|
|
|
697
|
|
|
—
|
|
|
697
|
|
|||||||
Total operating revenues
|
4,663
|
|
|
931
|
|
|
412
|
|
|
(408
|
)
|
|
5,598
|
|
|
—
|
|
|
5,598
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
2,653
|
|
|
695
|
|
|
375
|
|
|
(409
|
)
|
|
3,314
|
|
|
32
|
|
|
3,346
|
|
|||||||
Economic fuel
|
823
|
|
|
131
|
|
|
—
|
|
|
—
|
|
|
954
|
|
|
—
|
|
|
954
|
|
|||||||
Total operating expenses
|
3,476
|
|
|
826
|
|
|
375
|
|
|
(409
|
)
|
|
4,268
|
|
|
32
|
|
|
4,300
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
19
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|||||||
Interest expense
|
(28
|
)
|
|
—
|
|
|
(10
|
)
|
|
(4
|
)
|
|
(42
|
)
|
|
—
|
|
|
(42
|
)
|
|||||||
Other
|
28
|
|
|
—
|
|
|
1
|
|
|
6
|
|
|
35
|
|
|
—
|
|
|
35
|
|
|||||||
|
19
|
|
|
—
|
|
|
(9
|
)
|
|
4
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|||||||
Income (loss) before income tax
|
$
|
1,206
|
|
|
$
|
105
|
|
|
$
|
28
|
|
|
$
|
5
|
|
|
$
|
1,344
|
|
|
$
|
(32
|
)
|
|
$
|
1,312
|
|
|
Alaska
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Year Ended December 31, 2014
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
|
|
Air Group Adjusted
(a)
|
|
Special Items
(b)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Mainline
|
$
|
3,774
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,774
|
|
|
$
|
—
|
|
|
$
|
3,774
|
|
Regional
|
—
|
|
|
805
|
|
|
—
|
|
|
—
|
|
|
805
|
|
|
—
|
|
|
805
|
|
|||||||
Total passenger revenues
|
3,774
|
|
|
805
|
|
|
—
|
|
|
—
|
|
|
4,579
|
|
|
—
|
|
|
4,579
|
|
|||||||
CPA revenues
|
—
|
|
|
—
|
|
|
371
|
|
|
(371
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Freight and mail
|
109
|
|
|
5
|
|
|
—
|
|
|
|
|
|
114
|
|
|
—
|
|
|
114
|
|
|||||||
Other-net
|
592
|
|
|
78
|
|
|
5
|
|
|
|
|
|
675
|
|
|
—
|
|
|
675
|
|
|||||||
Total operating revenues
|
4,475
|
|
|
888
|
|
|
376
|
|
|
(371
|
)
|
|
5,368
|
|
|
—
|
|
|
5,368
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
2,417
|
|
|
623
|
|
|
349
|
|
|
(371
|
)
|
|
3,018
|
|
|
(30
|
)
|
|
2,988
|
|
|||||||
Economic fuel
|
1,251
|
|
|
190
|
|
|
—
|
|
|
—
|
|
|
1,441
|
|
|
(23
|
)
|
|
1,418
|
|
|||||||
Total operating expenses
|
3,668
|
|
|
813
|
|
|
349
|
|
|
(371
|
)
|
|
4,459
|
|
|
(53
|
)
|
|
4,406
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
20
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|||||||
Interest expense
|
(32
|
)
|
|
—
|
|
|
(12
|
)
|
|
(4
|
)
|
|
(48
|
)
|
|
—
|
|
|
(48
|
)
|
|||||||
Other
|
39
|
|
|
(1
|
)
|
|
2
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
|||||||
|
27
|
|
|
(1
|
)
|
|
(10
|
)
|
|
(3
|
)
|
|
13
|
|
|
—
|
|
|
13
|
|
|||||||
Income (loss) before income tax
|
$
|
834
|
|
|
$
|
74
|
|
|
$
|
17
|
|
|
$
|
(3
|
)
|
|
$
|
922
|
|
|
$
|
53
|
|
|
$
|
975
|
|
|
Alaska
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Year Ended December 31, 2013
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
|
|
Air Group Adjusted
(a)
|
|
Special Items
(b)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Mainline
|
$
|
3,490
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,490
|
|
|
$
|
—
|
|
|
$
|
3,490
|
|
Regional
|
—
|
|
|
777
|
|
|
—
|
|
|
—
|
|
|
777
|
|
|
—
|
|
|
777
|
|
|||||||
Total passenger revenues
|
3,490
|
|
|
777
|
|
|
—
|
|
|
—
|
|
|
4,267
|
|
|
—
|
|
|
4,267
|
|
|||||||
CPA revenues
|
—
|
|
|
—
|
|
|
368
|
|
|
(368
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Freight and mail
|
109
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
113
|
|
|
—
|
|
|
113
|
|
|||||||
Other-net
|
513
|
|
|
66
|
|
|
5
|
|
|
—
|
|
|
584
|
|
|
192
|
|
|
776
|
|
|||||||
Total operating revenues
|
4,112
|
|
|
847
|
|
|
373
|
|
|
(368
|
)
|
|
4,964
|
|
|
192
|
|
|
5,156
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
2,293
|
|
|
585
|
|
|
341
|
|
|
(368
|
)
|
|
2,851
|
|
|
—
|
|
|
2,851
|
|
|||||||
Economic fuel
|
1,294
|
|
|
181
|
|
|
—
|
|
|
—
|
|
|
1,475
|
|
|
(8
|
)
|
|
1,467
|
|
|||||||
Total operating expenses
|
3,587
|
|
|
766
|
|
|
341
|
|
|
(368
|
)
|
|
4,326
|
|
|
(8
|
)
|
|
4,318
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
|||||||
Interest expense
|
(38
|
)
|
|
—
|
|
|
(14
|
)
|
|
(4
|
)
|
|
(56
|
)
|
|
—
|
|
|
(56
|
)
|
|||||||
Other
|
25
|
|
|
(12
|
)
|
|
2
|
|
|
1
|
|
|
16
|
|
|
—
|
|
|
16
|
|
|||||||
|
5
|
|
|
(12
|
)
|
|
(12
|
)
|
|
(3
|
)
|
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
|||||||
Income (loss) before income tax
|
$
|
530
|
|
|
$
|
69
|
|
|
$
|
20
|
|
|
$
|
(3
|
)
|
|
$
|
616
|
|
|
$
|
200
|
|
|
$
|
816
|
|
(a)
|
The adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations and does not include certain income and charges.
|
(b)
|
Includes accounting adjustments related to mark-to-market fuel-hedge accounting charges (all years), pension settlement charge (2015), litigation-related matter (2015), non-cash curtailment gain (2014), a gain related to a legal matter (2014), and Special mileage plan revenue (2013).
|
|
2015
|
|
2014
|
|
2013
|
||||||
Depreciation:
|
|
|
|
|
|
||||||
Alaska
(a)
|
$
|
268
|
|
|
243
|
|
|
$
|
223
|
|
|
Horizon
|
52
|
|
|
51
|
|
|
47
|
|
|||
Parent company
|
—
|
|
|
—
|
|
|
—
|
|
|||
Consolidated
|
$
|
320
|
|
|
$
|
294
|
|
|
$
|
270
|
|
|
|
|
|
|
|
||||||
Capital expenditures:
|
|
|
|
|
|
||||||
Alaska
(a)
|
$
|
821
|
|
|
$
|
659
|
|
|
$
|
494
|
|
Horizon
|
10
|
|
|
35
|
|
|
72
|
|
|||
Consolidated
|
$
|
831
|
|
|
$
|
694
|
|
|
$
|
566
|
|
|
|
|
|
|
|
||||||
Total assets at end of period:
|
|
|
|
|
|
|
|
|
|||
Alaska
(a)
|
$
|
8,129
|
|
|
$
|
6,665
|
|
|
|
||
Horizon
|
718
|
|
|
809
|
|
|
|
||||
Parent company
|
4,734
|
|
|
3,551
|
|
|
|
||||
Elimination of inter-company accounts
|
(7,048
|
)
|
|
(4,961
|
)
|
|
|
||||
Consolidated
|
$
|
6,533
|
|
|
$
|
6,064
|
|
|
|
(a)
|
There are no depreciation expenses, capital expenditures or assets associated with purchased capacity flying at Alaska Regional.
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A. CONTROLS AND PROCEDURES
|
ITEM 9B. OTHER INFORMATION
|
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11. EXECUTIVE COMPENSATION
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
Weighted-average exercise price of outstanding options, warrants and rights
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
||
Plan category
|
(a)
|
|
(b)
|
|
(c)
|
||
Equity compensation plans approved by security holders
|
1,405,741
(1)
|
|
|
$31.58
(2)
|
|
12,813,915
(3)
|
|
Equity compensation plans not approved by security holders
|
—
|
|
|
Not applicable
|
|
—
|
|
Total
|
1,405,741
|
|
|
$31.58
|
|
12,813,915
|
|
(1)
|
Of these shares, 540,345 were subject to options then outstanding under the 2008 Plan, and 865,396 were subject to outstanding restricted, performance and deferred stock unit awards granted under the 2008 Plan. Outstanding performance awards are reflected in the table assuming that the target level of performance will be achieved.
|
(2)
|
This number does not reflect the 865,396 shares that were subject to outstanding stock unit awards granted under the 2008 Plan.
|
(3)
|
Of the aggregate number of shares that remained available for future issuance, 6,299,700 shares were available under the 2008 Plan and 6,514,215 shares were available under the ESPP. Subject to certain express limits of the 2008 Plan, shares available for award purposes under the 2008 Plan generally may be used for any type of award authorized under that plan including options, stock appreciation rights, and other forms of awards granted or denominated in shares of our common stock including, without limitation, stock bonuses, restricted stock, restricted stock units and performance shares.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15. EXHIBITS
|
1.
|
Exhibits:
See Exhibit Index.
|
|
|
|
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ALASKA AIR GROUP, INC.
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By:
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/s/ BRADLEY D. TILDEN
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Date:
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February 11, 2016
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Bradley D. Tilden
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President and Chief Executive Officer
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/s/ BRADLEY D. TILDEN
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Chairman, President, and Chief Executive Officer
(Principal Executive Officer)
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Bradley D. Tilden
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/s/ BRANDON S. PEDERSEN
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Executive Vice President/Finance and Chief Financial Officer
(Principal Financial Officer)
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Brandon S. Pedersen
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/s/ CHRISTOPHER M. BERRY
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Controller, Alaska Airlines Managing Director, Accounting (Principal Accounting Officer)
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Christopher M. Berry
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/s/ PATRICIA M. BEDIENT
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Director
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Patricia M. Bedient
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/s/ MARION C. BLAKEY
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Director
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Marion C. Blakey
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/s/ PHYLLIS J. CAMPBELL
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Director
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Phyllis J. Campbell
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/s/ DHIREN R. FONSECA
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Director
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Dhiren R. Fonseca
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/s/ JESSIE J. KNIGHT, JR.
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Director
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Jessie J. Knight, Jr.
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/s/ DENNIS F. MADSEN
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Director
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Dennis F. Madsen
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/s/ HELVI K. SANDVIK
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Director
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Helvi K. Sandvik
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/s/ KATHERINE J. SAVITT
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Director
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Katherine J. Savitt
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/s/ J. KENNETH THOMPSON
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Director
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J. Kenneth Thompson
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/s/ ERIC K. YEAMAN
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Director
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Eric K. Yeaman
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Name
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State of Incorporation
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Alaska Airlines, Inc.
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Alaska
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Horizon Air Industries, Inc.
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Washington
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Air Group Leasing, Inc.
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Delaware
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1.
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I have reviewed this annual report on Form 10-K of Alaska Air Group, Inc. for the period ended
December 31, 2015
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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e)
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The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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By:
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/s/ BRADLEY D. TILDEN
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Bradley D. Tilden
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President and Chief Executive Officer
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1.
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I have reviewed this annual report on Form 10-K of Alaska Air Group, Inc. for the period ended
December 31, 2015
;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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By:
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/s/ BRANDON S. PEDERSEN
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Brandon S. Pedersen
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Chief Financial Officer
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By:
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/s/ BRADLEY D. TILDEN
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Bradley D. Tilden
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President and Chief Executive Officer
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By:
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/s/ BRANDON S. PEDERSEN
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Brandon S. Pedersen
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Chief Financial Officer
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1.
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PURPOSE OF PLAN
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2.
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ELIGIBILITY
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3.
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PLAN ADMINISTRATION
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(a)
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determine eligibility and, from among those persons determined to be eligible, the particular Eligible Persons who will receive an award under this Plan;
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(b)
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grant awards to Eligible Persons, determine the price at which securities will be offered or awarded and the number of securities to be offered or awarded to any of such persons, determine the other specific terms and conditions of such awards consistent with the express limits of this Plan, establish the installments (if any) in which such awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable performance targets, and establish the events of termination or reversion of such awards;
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(c)
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approve the forms of award agreements (which need not be identical either as to type of award or among participants);
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(d)
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construe and interpret this Plan and any agreements defining the rights and obligations of the Corporation, its Subsidiaries, and participants under this Plan,
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(e)
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cancel, modify, or waive the Corporation’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consent under Section 8.6.5;
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(f)
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accelerate or extend the vesting or exercisability or extend the term of any or all such outstanding awards (in the case of options or stock appreciation rights, within the maximum ten-year term of such awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a termination of employment or services or other events of a personal nature) subject to any required consent under Section 8.6.5;
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(g)
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adjust the number of shares of Common Stock subject to any award, adjust the price of any or all outstanding awards or otherwise change previously imposed terms and conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to Sections 4 and 8.6 (and subject to the no repricing provision below);
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(h)
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determine the date of grant of an award, which may be a designated date after but not before the date of the Administrator’s action (unless otherwise designated by the Administrator, the date of grant of an award shall be the date upon which the Administrator took the action granting an award);
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(i)
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determine whether, and the extent to which, adjustments are required pursuant to Section 7 hereof and authorize the termination, conversion, substitution or succession of awards upon the occurrence of an event of the type described in Section 7;
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(j)
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acquire or settle (subject to Sections 7 and 8.6) rights under awards in cash, stock of equivalent value, or other consideration (subject to the no repricing provision below); and
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(k)
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determine the fair market value of the Common Stock or awards under this Plan from time to time and/or the manner in which such value will be determined.
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(1)
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16,000,000 shares of Common Stock, plus
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(2)
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the number of shares of Common Stock available for additional award grant purposes under the Corporation’s 2004 Long-Term Incentive Plan (the “
2004 Plan
”) as of the date of stockholder approval of this Plan (the “
Stockholder Approval Date
”) and determined immediately prior to the termination of the authority to grant new awards under the 2004 Plan as of the Stockholder Approval Date, plus
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(3)
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the number of any shares subject to stock options granted under the 2004 Plan and outstanding on the Stockholder Approval Date which expire, or for any reason are cancelled or terminated, after the Stockholder Approval Date without being exercised (including any shares subject to stock options granted under the Corporation’s 1999 Long-Term Equity Incentive Plan (the “
1999 Plan
”) outstanding on the Stockholder Approval Date which expire, or for any reason are cancelled or terminated, after the Stockholder Approval Date and would otherwise become eligible for award grant purposes under the 2004 Plan in accordance with the provisions of that plan);
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(4)
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the number of any shares subject to restricted stock and restricted stock unit awards granted under the 2004 Plan that are outstanding and unvested on the Stockholder Approval Date that are forfeited, terminated, cancelled or otherwise reacquired by the Corporation without having become vested.
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(a)
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The maximum number of shares of Common Stock that may be delivered pursuant to options qualified as incentive stock options granted under this Plan is 16,000,000
shares.
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(b)
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The maximum number of shares of Common Stock subject to those options and stock appreciation rights that are granted during any calendar year to any individual under this Plan is 1,200,000
shares.
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(c)
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Additional limits with respect to Performance-Based Awards are set forth in Section 5.2.3.
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•
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services rendered by the recipient of such award;
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cash, check payable to the order of the Corporation, or electronic funds transfer;
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notice and third party payment in such manner as may be authorized by the Administrator;
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the delivery of previously owned shares of Common Stock;
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by a reduction in the number of shares otherwise deliverable pursuant to the award; or
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•
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subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards.
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(a)
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transfers to the Corporation (for example, in connection with the expiration or termination of the award),
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(b)
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the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution,
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(c)
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subject to any applicable limitations on ISOs, transfers to a family member (or former family member) pursuant to a domestic relations order if approved or ratified by the Administrator,
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(d)
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if the participant has suffered a disability, permitted transfers or exercises on behalf of the participant by his or her legal representative, or
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(e)
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the authorization by the Administrator of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of awards consistent with applicable laws and the express authorization of the Administrator.
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(i)
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the consummation of:
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(A)
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any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of common stock of the Corporation would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of common stock of the Corporation immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger; or
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(B)
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any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Corporation.
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(ii)
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at any time during a period of twenty-four (24) months, fewer than a majority of the members of the Board are Incumbent Directors. For these purposes, “
Incumbent Directors
” means (A) individuals who constitute the Board at the beginning of such period; and (B) individuals who were nominated or elected by all of, or a committee composed entirely of, the individuals described in (A); and (C) individuals who were nominated or elected by individuals described in (B).
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(iii)
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any Person (meaning any individual, entity or group within the meaning of Section 13(d)(3) or 14(d) of the Exchange Act) shall, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of the then-outstanding securities of the Corporation ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of members of the Board (“Voting Securities” to be calculated as provided in paragraph (d) of Rule 13d-3 in the case of rights to acquire common stock of the Corporation) representing 20% or more of the combined voting power of the then-outstanding Voting Securities.
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(iv)
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approval by the stockholders of the Corporation of any plan or proposal for the liquidation or dissolution of the Corporation.
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8.
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OTHER PROVISIONS
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(a)
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require the participant (or the participant’s personal representative or beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount of any taxes which the Corporation or one of its Subsidiaries may be required to withhold with respect to such award event or payment; or
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(b)
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deduct from any amount otherwise payable in cash (whether related to the award or otherwise) to the participant (or the participant’s personal representative or beneficiary, as the case may be) the minimum amount of any taxes which the Corporation or one of its Subsidiaries may be required to withhold with respect to such award event or payment.
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(a)
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Rule 16b-3
. It is the intent of the Corporation that the awards and transactions permitted by awards be interpreted in a manner that, in the case of participants who are or may be subject to Section 16 of the Exchange Act, qualify, to the maximum extent compatible with the express terms of the award, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. Notwithstanding the foregoing, the Corporation shall have no liability to any participant for Section 16 consequences of awards or events under awards if an award or event does not so qualify.
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(b)
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Section 162(m)
. Awards under Section 5.1.4 to persons described in Section 5.2 that are either granted or become vested, exercisable or payable based on attainment of one or more performance goals related to the Business Criteria, as well as Qualifying Options and Qualifying SARs granted to
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1.
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PURPOSE
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2.
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DEFINITIONS
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(a)
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“
Account
” means the bookkeeping account maintained by the Company, or by a record keeper on behalf of the Company, for a Participant pursuant to Section 7(a).
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(b)
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“
Board
” means the Board of Directors of the Company.
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(c)
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“
Code
” means the U.S. Internal Revenue Code of 1986, as amended from time to time.
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(d)
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“
Commission
” means the U.S. Securities and Exchange Commission.
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(e)
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“
Committee
” means the committee appointed by the Board to administer the Plan pursuant to Section 12.
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(f)
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“
Common Stock
” means the common stock, par value $1.00 per share, of the Company, and such other securities or property as may become the subject of Options pursuant to an adjustment made under Section 17.
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(g)
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“
Compensation
” means an Eligible Employee’s base pay, inclusive of overtime and any employer paid leave. Compensation also includes any amounts contributed as salary reduction contributions to a plan qualifying under Section 401(k), 125, or 129 of the Code. Any other form of remuneration is excluded from Compensation, including (but not limited to) the following: cash bonuses, severance pay, hiring bonuses, prizes, awards, relocation or housing allowances, stock option exercises, stock appreciation right payments, the vesting or grant of restricted stock, the payment of stock units, performance awards, auto allowances, tuition reimbursement, perquisites, non-cash compensation and other forms of imputed income. Notwithstanding the foregoing, Compensation shall not include any amounts deferred under or paid from any nonqualified deferred compensation plan maintained by the Company or any Subsidiary (including, without limitation, the Company’s Nonqualified Deferred Compensation Plan).
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(h)
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“
Contributions
” means the bookkeeping amounts credited to the Account of the Participant pursuant to this Plan, equal in amount to the amount of Compensation that the Participant has elected to contribute for the purchase of Common Stock under and in accordance with this Plan.
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(i)
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“
Company
” means Alaska Air Group, Inc., a Delaware corporation, and its successors.
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(j)
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“
Effective Date
” means March 11, 2010, the date on which this Plan was initially adopted by the Board.
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(k)
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“
Eligible Employee
” means any employee of the Company, or of any Subsidiary which has been designated in writing by the Committee as a “Participating Subsidiary.” Notwithstanding the foregoing, “Eligible Employee” shall not include any employee:
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(1)
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who has not completed at least six (6) months of continuous employment with the Company or a Subsidiary; or
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(2)
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whose customary employment is for less than five (5) months in a calendar year.
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(l)
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“
Exchange Act
” means the U.S. Securities Exchange Act of 1934, as amended from time to time.
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(m)
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“
Exercise Date
” means, with respect to an Offering Period, the last day of that Offering Period.
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(n)
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“
Fair Market Value
” on any date means:
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(1)
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if the Common Stock is listed or admitted to trade on a national securities exchange, the closing price of a share of Common Stock on such date on the principal national securities exchange on which the Common Stock is so listed or admitted to trade, or, if there is no trading of the Common Stock on such date, then the closing price of a share of Common Stock on such exchange on the next preceding date on which there was trading in the shares of Common Stock;
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(2)
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in the absence of exchange data required to determine Fair Market Value pursuant to the foregoing, the value as established by the Committee as of the relevant time for purposes of this Plan.
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(o)
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“
Grant Date
” means, with respect to an Offering Period, the first day of that Offering Period.
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(p)
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“
Individual Limit
” has the meaning given to such term in Section 4(b).
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(q)
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“
Offering Period
” means the six (6) month period commencing on each Grant Date; provided, however, that the Committee may declare, as it deems appropriate and in advance of the applicable Offering Period, a shorter (not to be less than three months) Offering Period or a longer (not to exceed 27 months) Offering Period. Unless otherwise expressly provided by the Committee in advance of a particular Offering Period, the Grant Date for that Offering Period may not occur on or before the Exercise Date for the immediately preceding Offering Period.
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(r)
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“
Option
” means the stock option to acquire shares of Common Stock granted to a Participant pursuant to Section 8.
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(s)
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“
Option Price
” means the per share exercise price of an Option as determined in accordance with Section 8(b).
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(t)
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“
Parent
” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company in which each corporation (other than the Company) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain.
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(u)
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“
Participant
” means an Eligible Employee who has elected to participate in this Plan and who has filed a valid and effective Subscription Agreement to make Contributions pursuant to Section 6.
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(v)
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“
Participating Subsidiary
” shall have the meaning given to such term in Section 19(c).
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(w)
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“
Plan
” means this Alaska Air Group, Inc. 2010 Employee Stock Purchase Plan, as it may be amended or restated from time to time.
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(x)
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“
Subscription Agreement
” means the written agreement or applicable electronic form of agreement filed by an Eligible Employee with the Company pursuant to Section 6 to participate in this Plan.
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(y)
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“
Subsidiary
” means any corporation (other than the Company) in an unbroken chain of corporations (beginning with the Company) in which each corporation (other than the last corporation) owns stock possessing 50% ore more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain.
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3.
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ELIGIBILITY
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4.
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STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS
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(a)
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Aggregate Share Limit
. Subject to the provisions of Section 17, the capital stock that may be delivered under this Plan will be shares of the Company’s authorized but unissued Common Stock. The maximum number of shares of Common Stock that may be delivered pursuant to Options granted under this Plan is 8,000,000 shares, subject to adjustments pursuant to Section 17.
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(b)
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Individual Share Limit
. The maximum number of shares of Common Stock that any one individual may acquire upon exercise of his or her Option with respect to any one Offering Period is 8,000, subject to adjustments pursuant to Section 17 (the “
Individual Limit
”). The Committee may amend the Individual Limit, effective no earlier than the first Offering Period commencing after the adoption of such amendment, without stockholder approval.
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(c)
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Shares Not Actually Delivered
. Shares that are subject to or underlie Options, which for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall again, except to the extent prohibited by law, be available for subsequent Options under this Plan.
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5.
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OFFERING PERIODS
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6.
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PARTICIPATION
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(a)
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Enrollment
. An Eligible Employee may become a participant in this Plan by completing a Subscription Agreement on a form approved by and in a manner prescribed by the Committee (or its delegate). To become effective, a Subscription Agreement must be signed by the Eligible Employee and be filed with the Company at the time specified by the Committee, but in all cases prior to the start of the Offering Period with respect to which it is to become effective, and must set forth a whole percentage (or, if the Committee so provides, a stated amount) of the Eligible Employee’s Compensation to be credited to the Participant’s Account as Contributions each pay period.
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(b)
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Contribution Limits
. Notwithstanding the foregoing, a Participant may not elect to contribute less than one percent (1%) nor more than ten percent (10%) (or such other limit as the Committee may establish prior to the start of the applicable Offering Period) of his or her Compensation during any one pay period as Plan Contributions. The Committee also may prescribed other limits, rules or procedures for Contributions.
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(c)
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Content and Duration of Subscription Agreements
. Subscription Agreements shall contain the Eligible Employee’s authorization and consent to the Company’s withholding from his or her Compensation the amount of his or her Contributions. An Eligible Employee’s Subscription Agreement, and his or her participation election and withholding consent thereon, shall remain valid for all Offering Periods until (1) the Eligible Employee’s participation terminates pursuant to the terms hereof, (2) the Eligible Employee files a new Subscription Agreement that becomes effective, or (3) the Committee requires that a new Subscription Agreement be executed and filed with the Company.
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7.
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METHOD OF PAYMENT OF CONTRIBUTIONS
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(a)
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Participation Accounts
. The Company shall maintain on its books, or cause to be maintained by a record keeper, an Account in the name of each Participant. The percentage of Compensation elected to be applied as Contributions by a Participant shall be deducted from such Participant’s Compensation on each payday during the period for payroll deductions set forth below and such payroll deductions shall be credited to that Participant’s Account as soon as administratively practicable after such date. A Participant may not make any additional payments to his or her Account. A Participant’s Account shall be reduced by any amounts used to pay the Option Price of shares acquired, or by any other amounts distributed pursuant to the terms hereof.
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(b)
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Payroll Deductions
. Subject to such other rules as the Committee may adopt, payroll deductions with respect to an Offering Period shall commence as of the first day of the payroll period which coincides with or immediately follows the applicable Grant Date and shall end on the last date of the payroll period which coincides with or immediately proceeds the applicable Exercise Date, unless sooner terminated by the Participant as provided in Section 7(d) or until his or her participation terminates pursuant to Section 11.
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(c)
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Changes in Contribution Elections for Next Offering Period
. A Participant may discontinue, increase, or decrease the level of his or her Contributions (within the Plan limits) by completing and filing with the Company, on such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. Subject to any other timing requirements that the Committee may impose, an election
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(d)
|
Withdrawal During an Offering Period
. A Participant may terminate his or her Contributions during an Offering Period (and receive a distribution of the balance of his or her Account in accordance with Section 11) by completing and filing with the Company, in such form and on such terms as the Committee (or its delegate) may prescribe, a written withdrawal form or applicable electronic withdrawal form which shall be signed by the Participant. Such termination shall be effective as soon as administratively practicable after its receipt by the Company. A withdrawal election pursuant to this Section 7(d) with respect to an Offering Period shall only be effective, however, if it is received by the Company prior to the Exercise Date of the Offering Period (or such earlier deadline that the Committee may reasonably require to process the withdrawal prior to the applicable Exercise Date). Partial withdrawals of Accounts are not permitted.
|
(e)
|
Discontinuance of Contributions During an Offering Period
. A Participant may discontinue his or her Contributions at any time during an Offering Period by completing and filing with the Company, on such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. If a Participant elects to discontinue his or her Contributions pursuant to this Section 7(e), the Contributions previously credited to the Participant’s Account for that Offering Period shall be used to exercise the Participant’s Option as of the applicable Exercise Date in accordance with Section 9 (unless the Participant makes a timely withdrawal election in accordance with Section 7(d), in which case such Participant’s Account shall be paid to him or her in cash in accordance with Section 11(a)).
|
(f)
|
Leaves of Absence
. During leaves of absence approved by the Company or a Participating Subsidiary and meeting the requirements of Regulation 1.421-1(h)(2) under the Code, a Participant may elect to continue participation in this Plan by delivering cash payments to the Company on his or her normal paydays equal to the reduction in his or her Plan Contributions caused by his or her leave.
|
8.
|
GRANT OF OPTION
|
(a)
|
Grant Date; Number of Shares
.
On each Grant Date, each Eligible Employee who is a Participant during that Offering Period shall be granted an Option to purchase a number of shares of Common Stock. The Option shall be exercised on the Exercise Date. The number of shares of Common Stock subject to the Option shall be determined by dividing the Participant’s Account balance as of the applicable Exercise Date by the Option Price, subject to the limits of Section 8(c).
|
(b)
|
Option Price.
The Option Price per share of the shares subject to an Option for an Offering Period shall be the
lesser
of: (i) 85% of the Fair Market Value of a Share on the Grant Date of that Offering Period; or (ii) 85% of the Fair Market Value of a Share on the Exercise Date of that Offering Period; provided, however, that the Committee may provide prior to the start of any Offering Period that the Option Price for that Offering Period shall be determined by applying a discount amount (not to exceed 15%) to either (1) the Fair Market Value of a share of Common Stock on that Grant Date of that Offering Period, or (2) the Fair Market Value of a share of Common Stock on the Exercise Date of that Offering Period, or (3) the lesser of the Fair Market Value of a share of Common Stock on
|
(c)
|
Limits on Share Purchases.
Notwithstanding anything else contained herein, the maximum number of shares subject to an Option for an Offering Period shall be subject to the Individual Limit in effect on the Grant Date of that Offering Period (subject to adjustment pursuant to Section 17) and any person who is otherwise an Eligible Employee shall not be granted any Option (or any Option granted shall be subject to compliance with the following limitations) or other right to purchase shares under this Plan to the extent:
|
(1)
|
it would, if exercised, cause the person to own stock (within the meaning of Section 423(b)(3) of the Code) possessing 5% or more of the total combined voting power or value of all classes of stock of the Company, or of any Parent, or of any Subsidiary; or
|
(2)
|
such Option causes such individual to have rights to purchase stock under this Plan and any other plan of the Company, any Parent, or any Subsidiary which is qualified under Section 423 of the Code which accrue at a rate which exceeds $25,000 of the fair market value of the stock of the Company, of any Parent, or of any Subsidiary (determined at the time the right to purchase such stock is granted, before giving effect to any discounted purchase price under any such plan) for each calendar year in which such right is outstanding at any time.
|
9.
|
EXERCISE OF OPTION
|
(a)
|
Purchase of Shares
. Unless a Participant withdraws pursuant to Section 7(d) or the Participant’s Plan participation is terminated as provided in Section 11, his or her Option for the purchase of shares shall be exercised automatically on the Exercise Date for that Offering Period, without any further action on the Participant’s part, and the maximum number of whole shares of Common Stock subject to such Option (subject to the limits of Section 8(c)) shall be purchased at the Option Price with the balance of such Participant’s Account.
|
(b)
|
Account Balance Remaining After Purchase
. If any amount which is not sufficient to purchase a whole share remains in a Participant’s Account after the exercise of his or her Option on the Exercise Date: (1) such amount shall be credited to such Participant’s Account for the next Offering Period, if he or she is then a Participant; or (2) if such Participant is not a Participant in the next Offering Period, or if the Committee so elects, such amount shall be refunded to such Participant as soon as administratively practicable after such date. If the share limit of Section 4(a) is reached, any amount that remains in a Participant’s Account after the exercise of his or her Option on the Exercise Date to purchase the number of shares that he or she is allocated shall be refunded to the Participant as soon as administratively practicable after such date. If any amount which exceeds the limits of Section 8(c) remains in a Participant’s Account after the exercise of
|
10.
|
DELIVERY OF SHARES
|
11.
|
TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS
|
(a)
|
General
. Except as provided in Section 11(b) below, if a Participant ceases to be an Eligible Employee for any reason (including, without limitation, due to the Participant’s death, disability, resignation or retirement, or due to a layoff or other termination of employment with or without cause), or if the Participant elects to withdraw from the Plan pursuant to Section 7(d), at any time prior to the last day of an Offering Period in which he or she participates, such Participant’s Account shall be paid to him or her (or, in the event of the Participant’s death, to the person or persons entitled thereto under Section 13) in cash, and such Participant’s Option and participation in the Plan shall automatically terminate as of the time that the Participant ceased to be an Eligible Employee.
|
(b)
|
Change in Eligible Status; Leave
. If a Participant (1) ceases to be an Eligible Employee during an Offering Period but remains an employee of the Company or a Subsidiary through the Exercise Date (for example, and without limitation, due to a change in the Participant’s employer from the Company or a Participating Subsidiary to a non-Participating Subsidiary, if the Participant’s employer ceases to maintain the Plan as a Participating Subsidiary but otherwise continues as a Subsidiary, or if the Participant’s customary level of employment no longer satisfies the requirements set forth in the definition of Eligible Employee), or (2) during an Offering Period commences a sick leave, military leave, or other leave of absence approved by the Company or a Participating Subsidiary, and the leave meets the requirements of Treasury Regulation Section 1.421-1(h)(2) and the Participant is an employee of the Company or a Subsidiary or on such leave as of the applicable Exercise Date, such Participant’s Contributions shall cease (subject to Section 7(d)), and the Contributions previously credited to the Participant’s Account for that Offering Period shall be used to exercise the Participant’s Option as of the applicable Exercise Date in accordance with Section 9 (unless the Participant makes a timely withdrawal election in accordance with Section 7(d), in which case such Participant’s Account shall be paid to him or her in cash in accordance with Section 11(a)).
|
(c)
|
Re-Enrollment
. A Participant’s termination from Plan participation precludes the Participant from again participating in this Plan during that Offering Period. However, such termination shall not have any effect upon his or her ability to participate in any
|
(d)
|
Change in Subsidiary Status
. For purposes of this Plan, if a Subsidiary ceases to be a Subsidiary, each person employed by that Subsidiary will be deemed to have terminated employment for purposes of this Plan, unless the person continues as an employee of the Company or another Subsidiary.
|
12.
|
ADMINISTRATION
|
(a)
|
The Committee
. The Board shall appoint the Committee, which shall be composed of not less than two members of the Board. The Board may, at any time, increase or decrease the number of members of the Committee, may remove from membership on the Committee all or any portion of its members, and may appoint such person or persons as it desires to fill any vacancy existing on the Committee, whether caused by removal, resignation, or otherwise. The Board may also, at any time, assume the administration of all or a part of this Plan, in which case references (or relevant references in the event the Board assumes the administration of only certain aspects of this Plan) to the “Committee” shall be deemed to be references to the Board. Action of the Committee with respect to this Plan shall be taken pursuant to a majority vote or by the unanimous written consent of its members. No member of the Committee shall be entitled to act on or decide any matters relating solely to himself or herself or solely to any of his or her rights or benefits under this Plan.
|
(b)
|
Powers and Duties of the Committee
. Subject to the express provisions of this Plan, the Committee shall supervise and administer this Plan and shall have the full authority and discretion: (1) to construe and interpret this Plan and any agreements defining the rights and obligations of the Company, any Subsidiary, and Participants under this Plan; (2) to further define the terms used in this Plan; (3) to prescribe, amend and rescind rules and regulations relating to the administration of this Plan (including, without limitation, deadlines for making elections or for providing any notices contemplated by this Plan, which deadlines may be more restrictive than any deadlines otherwise contemplated by this Plan); and (4) to make all other determinations and take such other action as contemplated by this Plan or as may be necessary or advisable for the administration of this Plan or the effectuation of its purposes. Notwithstanding anything else contained in this Plan to the contrary, the Committee may also adopt rules, procedures or sub-plans applicable to particular Subsidiaries or locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code and need not comply with the otherwise applicable provisions of this Plan.
|
(c)
|
Decisions of the Committee are Binding
. Any action taken by, or inaction of, the Company, any Subsidiary, the Board or the Committee relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons.
|
(d)
|
Indemnification
. Neither the Board nor any Committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan, and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees)
|
(e)
|
Reliance on Experts
. In making any determination or in taking or not taking any action under this Plan, the Committee or the Board, as the case may be, may obtain and may rely upon the advice of experts, including professional advisors to the Company. No director, officer or agent of the Company or any Participating Subsidiary shall be liable for any such action or determination taken or made or omitted in good faith.
|
(f)
|
Delegation
. The Committee may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or a Subsidiary.
|
13.
|
DESIGNATION OF BENEFICIARY
|
14.
|
TRANSFERABILITY
|
15.
|
USE OF FUNDS; INTEREST
|
16.
|
REPORTS
|
17.
|
ADJUSTMENTS OF AND CHANGES IN THE STOCK
|
18.
|
POSSIBLE EARLY TERMINATION OF PLAN AND OPTIONS
|
19.
|
TERM OF PLAN; AMENDMENT OR TERMINATION
|
(a)
|
Effective Date; Termination
. Subject to Section 19(b), this Plan shall become effective as of the Effective Date. No new Offering Periods shall commence on or after March 1, 2020 and this Plan shall terminate as of the Exercise Date on or immediately following such date unless sooner terminated pursuant to Section 18 or this Section 19. In the event that all of the shares of Common Stock made available under this Plan are subscribed prior to the expiration of this Plan, this Plan shall terminate at the end of that Offering Period and the shares available shall be allocated for purchase by Participants in that Offering Period on a pro-rata basis determined with respect to Participants’ Account balances.
|
(b)
|
Board Amendment Authority
. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part and without notice. Stockholder approval for any amendment or modification shall not be required, except to the extent required by law or applicable stock exchange rules, or required under Section 423 of the Code in order to preserve the intended tax consequences of this Plan. No Options may be granted during any suspension of this Plan or after the termination of this Plan, but the Committee will retain jurisdiction as to Options then outstanding in accordance with the terms of this Plan. No amendment, modification, or termination pursuant to this Section 19(b) shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of such Participant or obligations of the Company under any Option granted under this Plan prior to the effective date of such change. Changes contemplated by Section 17 or Section 18 shall not be deemed to constitute changes or amendments requiring Participant consent.
|
(c)
|
Certain Additional Committee Authority
. Notwithstanding the amendment provisions of Section 19(b) and without limiting the Board’s authority thereunder and without limiting the Committee’s authority pursuant to any other provision of this Plan, the Committee shall have the right (1) to designate from time to time the Subsidiaries whose employees may be eligible to participate in this Plan (including, without limitation, any Subsidiary that may first become such after the date stockholders first approve this Plan) (each a “
Participating Subsidiary
”), and (2) to change the service and other qualification requirements sets forth under the definition of Eligible Employee in Section 2 (subject to the requirements of Section 423(b) of the Code and applicable rules and regulations thereunder). Any such change shall not take effect earlier than the first Offering Period that starts on or after the effective date of such change. Any such change shall not require stockholder approval.
|
20.
|
NOTICES
|
21.
|
CONDITIONS UPON ISSUANCE OF SHARES
|
22.
|
PLAN CONSTRUCTION
|
(a)
|
Section 16
. It is the intent of the Company that transactions involving Options under this Plan (other than “
Discretionary Transactions
” as that term is defined in Rule 16b-3(b)(1) promulgated by the Commission under Section 16 of the Exchange Act, to the extent there are any Discretionary Transactions under the Plan), in the case of Participants who are or may be subject to the prohibitions of Section 16 of the Exchange Act, satisfy the requirements for exemption under Rule 16b-3(c) promulgated by the Commission under Section 16 of the Exchange Act to the maximum extent possible. Notwithstanding the foregoing, the Company shall have no liability to any Participant for Section 16 consequences of Options or other events with respect to this Plan.
|
(b)
|
Section 423
. Except as the Committee may expressly provide in the case of one or more sub-plans adopted pursuant to Section 12(b), this Plan and Options are intended to qualify under Section 423 of the Code. Accordingly, all Participants are to have the same rights and privileges (within the meaning of Section 423(b)(5) of the Code and except as not required thereunder to qualify this Plan under Section 423) under this Plan, subject to differences in Compensation among Participants and subject to the Contribution and share limits of this Plan.
|
(c)
|
Interpretation
. If any provision of this Plan or of any Option would otherwise frustrate or conflict with the intents expressed above, that provision to the extent possible shall be interpreted so as to avoid such conflict. If the conflict remains irreconcilable, the Committee may disregard the provision if it concludes that to do so furthers the interest of the Company and is consistent with the purposes of this Plan as to such persons in the circumstances.
|
23.
|
EMPLOYEES’ RIGHTS
|
(a)
|
No Employment Rights
. Nothing in this Plan (or in any Subscription Agreement or other document related to this Plan) will confer upon any Eligible Employee or Participant any right to continue in the employ or other service of the Company or any Subsidiary, constitute any contract or agreement of employment or other service or effect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Company or any Subsidiary to change such person’s compensation or other benefits or to terminate his or her employment or other service, with or without cause. Nothing
|
(b)
|
No Rights to Assets of the Company
. No Participant or other person will have any right, title or interest in any fund or in any specific asset (including shares of Common Stock) of the Company or any Subsidiary by reason of any Option hereunder. Neither the provisions of this Plan (or of any Subscription Agreement or other document related to this Plan), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan will create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or any Subsidiary and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to this Plan, such right will be no greater than the right of any unsecured general creditor of the Company.
|
(c)
|
No Stockholder Rights
. A Participant will not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the Participant. No adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.
|
24.
|
MISCELLANEOUS
|
(a)
|
Governing Law
. This Plan, the Options, Subscription Agreements and other documents related to this Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware.
|
(b)
|
Severability
. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
|
(c)
|
Captions and Headings
. Captions and headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such captions and headings shall not be deemed in any way material or relevant to the construction of interpretation of this Plan or any provision hereof.
|
(d)
|
No Effect on Other Plans or Corporate Authority
. The adoption of this Plan shall not affect any other Company or Subsidiary compensation or incentive plans in effect. Nothing in this Plan will limit or be deemed to limit the authority of the Board or Committee (1) to establish any other forms of incentives or compensation for employees of the Company or any Subsidiary (with or without reference to the Common Stock), or (2) to grant or assume options (outside the scope of and in addition to those contemplated by this Plan) in connection with any proper corporate purpose; to the extent consistent with any other plan or authority. Benefits received by a Participant under an Option granted pursuant to this Plan shall not be deemed a part of the Participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Subsidiary, except where the Committee or the Board (or the Board of Directors of the Subsidiary that sponsors such plan or arrangement, as applicable) expressly otherwise provides or authorizes in writing.
|
25.
|
TAX WITHHOLDING
|
26.
|
NOTICE OF SALE
|
1.
|
Election procedures.
To be valid, elections must be made on forms provided by the Administrator and received by the Administrator on or before the specified deadline. An election must state the number or percentage of shares of Common Stock to be awarded that the director wishes to defer.
|
1.
|
Term
|
2.
|
Certain Definitions
|
(i)
|
embezzlement, dishonesty or other fraud, conviction of a felony or conspiracy against the Employer; or
|
(ii)
|
if prior to a Change of Control, any willful or intentional injury to either the Employer, its property, or its employees in connection with the business affairs of the Employer.
|
(i)
|
the material reduction in the Executive's annual base salary;
|
(ii)
|
the material diminution or reduction of the Executive's authority, duties, or responsibilities;
|
(iii)
|
a material change in the geographic location at which the Executive must perform services; or
|
(iv)
|
any material breach by the Employer of any other provision of this Agreement;
|
(o)
|
"Notice of Termination" is defined in Section 6(a).
|
3.
|
Change of Control
|
(i)
|
any consolidation or merger of Air Group in which Air Group is not the continuing or surviving corporation or pursuant to which shares of common stock of Air Group would be converted into cash, securities or other property, other than a merger of Air Group in which the holders of common stock of Air Group immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger; or
|
(ii)
|
any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of Air Group.
|
(i)
|
individuals who constitute the Board at the beginning of such period; and
|
(ii)
|
individuals who were nominated or elected by all of, or a committee composed entirely of, the individuals described in (i); and
|
(iii)
|
individuals who were nominated or elected by individuals described in (ii).
|
(c)
|
any Person shall, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of the then-outstanding securities of Air Group ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of members of the Board ("Voting Securities" to be calculated as provided in paragraph (d) of Rule 13d-3 in the case of rights to acquire common stock of Air Group) representing 20% or more of the combined voting power of the then-outstanding Voting Securities.
|
(d)
|
approval by the stockholders of Air Group of any plan or proposal for the liquidation or dissolution of Air Group.
|
4.
|
Employment Period
|
5.
|
Terms of Employment
|
6.
|
Termination of Employment
|
7.
|
Obligations of the Employer Upon Certain Terminations; Release
|
8.
|
Nonexclusivity of Rights
|
9.
|
Full Settlement; Resolution of Disputes
|
10.
|
Certain Adjustments
|
11.
|
Confidential Information
|
12.
|
Successors
|
13.
|
Miscellaneous
|