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ALASKA AIR GROUP
Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K
CURRENT REPORT

Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

August 19, 2002
(Date of Report)

ALASKA AIR GROUP, INC.
(Exact name of registrant as specified in its charter)
Commission file number 1-8957

     
Delaware
(State or other jurisdiction of
incorporation or organization)
  
91-1292054
(I.R.S. Employer
Identification No.)

19300 Pacific Highway South, Seattle, Washington 98188
(Address of principal executive offices)
(206) 431-7040
(Registrant’s telephone number)

 

TABLE OF CONTENTS

ITEM 7. Exhibits
ITEM 9. Statements Under Oath
Signature
EXHIBIT 99.1
EXHIBIT 99.2

Table of Contents

ITEM 7. Exhibits

Exhibit 99.1 Statement Under Oath of Chief Executive Officer pursuant to SEC Order 4-460

Exhibit 99.2 Statement Under Oath of Chief Financial Officer pursuant to SEC Order 4-460

ITEM 9.
Statements Under Oath

On August 13, 2002, the Chief Executive Officer and Chief Financial Officer of Alaska Air Group executed the sworn statements required by SEC Order 4-460. These sworn statements are included as exhibits to this report.

Table of Contents

Table of Contents

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALASKA AIR GROUP, INC.

Registrant

Date: August 19, 2002

/s/ Bradley D. Tilden

Bradley D. Tilden
Executive Vice President/Finance and Chief Financial Officer

4 



                                                                    Exhibit 99.1

   Statement Under Oath of Principal Executive Officer and Principal Financial
   Officer Regarding Facts and Circumstances Relating to Exchange Act Filings

I, John F. Kelly, state and attest that:

      (1) To the best of my knowledge, based upon a review of the covered
      reports of Alaska Air Group, Inc., and, except as set forth on Exhibit A
      hereto or as corrected or supplemented in a subsequent covered report:

                  -     no covered report contained an untrue statement of a
                        material fact as of the end of the period covered by
                        such report (or in the case of a report on Form 8-K or
                        definitive proxy materials, as of the date on which it
                        was filed); and

                  -     no covered report omitted to state a material fact
                        necessary to make the statements in the covered report,
                        in light of the circumstances under which they were
                        made, not misleading as of the end of the period covered
                        by such report (or in the case of a report on Form 8-K
                        or definitive proxy materials, as of the date on which
                        it was filed).

      (2) I have reviewed the contents of this statement with the Company's
      audit committee.

      (3) In this statement under oath, each of the following, if filed on or
      before the date of this statement, is a "covered report":

                  -     the Annual Report on Form 10-K filed with the Commission
                        on March 3, 2002 for fiscal year ended December 31, 2001
                        of Alaska Air Group, Inc;

                  -     all reports on Form 10-Q, all reports on Form 8-K and
                        all definitive proxy materials of Alaska Air Group, Inc.
                        filed with the Commission subsequent to the filing of
                        the Form 10-K identified above; and

                  -     any amendments to any of the foregoing.

      /s/ John F. Kelly                      Subscribed and sworn to before
      ------------------------------         me this____ day of August, 2002.
      John F. Kelly
      Date: August 13, 2002
                                             ----------------------
                                             Notary Public
                                             My Commission Expires:





                                    EXHIBIT A

As previously announced, in June 2002 Alaska Air Group, Inc. (the "Company")
changed its accounting policies relating to the accrual for certain lease return
costs and the capitalization of software development costs. These changes, which
are more fully described below, are being implemented following a consultation
with the Company's new independent auditors, who were appointed in May 2002. The
Company will be restating its financial statements and related filings with the
Securities and Exchange Commission. The restatements will change the periods in
which certain expenses are recognized. The effect of these changes is as shown
in the Company's quarterly report on Form 10-Q for the fiscal quarter ended June
30, 2002, but in summary, they result in an increase of $29.3 million of equity
as of June 30, 2002 and modestly better results than those previously reported.
However, for the first and second quarters of 2001, operating expenses are
slightly higher than those previously reported and the operating result is
slightly lower. For future periods, these changes may affect the timing and
amounts of the Company's reported operating expenses. Additionally, the Company
changed its accounting for aircraft purchase commitments assumed by a third
party, and made a reclassification of deferred income taxes, both of which do
not impact equity or earnings.

Leased Aircraft Return Costs

The Company leases many of its aircraft under relatively long-term operating
lease agreements. These aircraft are subject to periodic airframe and engine
overhauls based on the Company's maintenance program. The Company's previous
policy was to capitalize these overhauls and amortize the costs over the
estimated lives of the overhauls. Separately, many of the Company's lease
agreements contain provisions which require that at the end of the lease, either
certain minimum times remain until the next overhaul or the Company make a cash
payment to the lessor. At the inception of the lease, the Company does not know
the balance between actual time remaining to the next overhaul and cash payments
that will be used to satisfied its return commitments. Under the previous
method, the Company accrued for the costs of returning leased aircraft,
including any cash payments due to lessors and any unamortized overhauls, on a
straight-line basis over the lives of the leases. Airframe and engine overhauls
will now be capitalized and amortized over the remaining lease term, if shorter
than the life of the overhaul. Additionally, under our new method, since the
timing and amount of cash payments cannot be reasonably predicted at the
inception of the lease, the Company will be accruing cash payments expected to
be made to lessors over the last few years of the lease, versus over the entire
lease term.

Internally Developed Software

The Company also revised its accounting practices for certain costs of
internally developed software. These costs were previously charged to expense as
they were incurred, and they will now be capitalized and amortized over the
estimated lives of the software.

Aircraft Purchase Commitments

The Company has an aircraft purchase commitment, which may trigger a liability
under certain events of default. The Company previously recognized a portion of
this commitment which was funded by a third party as a liability, and related
aircraft purchase deposits, on its





balance sheet. Since the executory contract for the purchase commitment is not
an obligation of the Company until the aircraft is delivered, this commitment is
now disclosed as a purchase commitment and not included in long-term debt or
deposits for future flight equipment.

The Company expects to complete the revisions to its historical financial
statements and file appropriate amendments with the SEC as soon as practicable.
To the extent these revisions may involve the reaudit of historical financial
statements by the Company's new independent auditors, they could result in the
restatement of other items not described in this Exhibit, although I have no
knowledge of any such required restatements.



                                                                    Exhibit 99.2

   Statement Under Oath of Principal Executive Officer and Principal Financial
   Officer Regarding Facts and Circumstances Relating to Exchange Act Filings

I, Bradley D. Tilden, state and attest that:

      (1) To the best of my knowledge, based upon a review of the covered
      reports of Alaska Air Group, Inc., and, except as set forth on Exhibit A
      hereto or as corrected or supplemented in a subsequent covered report:

                  -     no covered report contained an untrue statement of a
                        material fact as of the end of the period covered by
                        such report (or in the case of a report on Form 8-K or
                        definitive proxy materials, as of the date on which it
                        was filed); and

                  -     no covered report omitted to state a material fact
                        necessary to make the statements in the covered report,
                        in light of the circumstances under which they were
                        made, not misleading as of the end of the period covered
                        by such report (or in the case of a report on Form 8-K
                        or definitive proxy materials, as of the date on which
                        it was filed).

      (2) I have reviewed the contents of this statement with the Company's
      audit committee.

      (3) In this statement under oath, each of the following, if filed on or
      before the date of this statement, is a "covered report":

                  -     the Annual Report on Form 10-K filed with the Commission
                        on March 3, 2002 for fiscal year ended December 31, 2001
                        of Alaska Air Group, Inc;

                  -     all reports on Form 10-Q, all reports on Form 8-K and
                        all definitive proxy materials of Alaska Air Group, Inc.
                        filed with the Commission subsequent to the filing of
                        the Form 10-K identified above; and

                  -     any amendments to any of the foregoing.

      /s/ Bradley D. Tilden                   Subscribed and sworn to before me
      ----------------------------------      this ____ day of August, 2002.
      Bradley D. Tilden
      Date: August 13, 2002
                                              ----------------------
                                              Notary Public
                                              My Commission Expires:





                                    EXHIBIT A

As previously announced, in June 2002 Alaska Air Group, Inc. (the "Company")
changed its accounting policies relating to the accrual for certain lease return
costs and the capitalization of software development costs. These changes, which
are more fully described below, are being implemented following a consultation
with the Company's new independent auditors, who were appointed in May 2002. The
Company will be restating its financial statements and related filings with the
Securities and Exchange Commission. The restatements will change the periods in
which certain expenses are recognized. The effect of these changes is as shown
in the Company's quarterly report on Form 10-Q for the fiscal quarter ended June
30, 2002, but in summary, they result in an increase of $29.3 million of equity
as of June 30, 2002 and modestly better results than those previously reported.
However, for the first and second quarters of 2001, operating expenses are
slightly higher than those previously reported and the operating result is
slightly lower. For future periods, these changes may affect the timing and
amounts of the Company's reported operating expenses. Additionally, the Company
changed its accounting for aircraft purchase commitments assumed by a third
party, and made a reclassification of deferred income taxes, both of which do
not impact equity or earnings

Leased Aircraft Return Costs

The Company leases many of its aircraft under relatively long-term operating
lease agreements. These aircraft are subject to periodic airframe and engine
overhauls based on the Company's maintenance program. The Company's previous
policy was to capitalize these overhauls and amortize the costs over the
estimated lives of the overhauls. Separately, many of the Company's lease
agreements contain provisions which require that at the end of the lease, either
certain minimum times remain until the next overhaul or the Company make a cash
payment to the lessor. At the inception of the lease, the Company does not know
the balance between actual time remaining to the next overhaul and cash payments
that will be used to satisfied its return commitments. Under the previous
method, the Company accrued for the costs of returning leased aircraft,
including any cash payments due to lessors and any unamortized overhauls, on a
straight-line basis over the lives of the leases. Airframe and engine overhauls
will now be capitalized and amortized over the remaining lease term, if shorter
than the life of the overhaul. Additionally, under our new method, since the
timing and amount of cash payments cannot be reasonably predicted at the
inception of the lease, the Company will be accruing cash payments expected to
be made to lessors over the last few years of the lease, versus over the entire
lease term.

Internally Developed Software

The Company also revised its accounting practices for certain costs of
internally developed software. These costs were previously charged to expense as
they were incurred, and they will now be capitalized and amortized over the
estimated lives of the software.

Aircraft Purchase Commitments

The Company has an aircraft purchase commitment, which may trigger a liability
under certain events of default. The Company previously recognized a portion of
this commitment which was funded by a third party as a liability, and related
aircraft purchase deposits, on its balance sheet.





Since the executory contract for the purchase commitment is not an obligation of
the Company until the aircraft is delivered, this commitment is now disclosed as
a purchase commitment and not included in long-term debt or deposits for future
flight equipment.

The Company expects to complete the revisions to its historical financial
statements and file appropriate amendments with the SEC as soon as practicable.
To the extent these revisions may involve the reaudit of historical financial
statements by the Company's new independent auditors, they could result in the
restatement of other items not described in this Exhibit, although I have no
knowledge of any such required restatements.