COVER - shares	6 Months Ended
COVER - shares	Jun. 30, 2019	Jul. 31, 2019
Cover page.
Document Type	10-Q
Document Transition Report	false
Document Period End Date	Jun. 30, 2019
Document Quarterly Report	true
Entity File Number	1-8957
Entity Registrant Name	ALASKA AIR GROUP, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	91-1292054
Title of 12(b) Security	Common stock, $0.01 par value
Security Exchange Name	NYSE
Trading Symbol	ALK
Entity Address, Address Line One	19300 International Boulevard,
Entity Address, City or Town	Seattle,
Entity Address, State or Province	WA
Entity Address, Postal Zip Code	98188
City Area Code	(206)
Local Phone Number	392-5040
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		123,272,253
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000766421
Current Fiscal Year End Date	--12-31

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Current Assets
Cash and cash equivalents	$ 244	$ 105
Marketable securities	1,383	1,131
Total cash and marketable securities	1,627	1,236
Receivables—net	389	366
Inventories and supplies—net	55	60
Prepaid expenses and other current assets	147	125
Total Current Assets	2,218	1,787
Property and Equipment
Aircraft and other flight equipment	8,417	8,221
Other property and equipment	1,238	1,363
Deposits for future flight equipment	396	439
Property and Equipment Total	10,051	10,023
Less accumulated depreciation and amortization	3,307	3,242
Total Property and Equipment - Net	6,744	6,781
Operating Lease, Right-of-Use Asset	1,696	0
Goodwill	1,943	1,943
Intangible assets - net	125	127
Other noncurrent assets	225	274
Other Assets	3,989	2,344
Total Assets	12,951	10,912
Current Liabilities
Accounts payable	156	132
Accrued wages, vacation and payroll taxes	371	415
Air traffic liability	1,173	788
Other accrued liabilities	505	416
Deferred revenue, current	768	705
Operating Lease, Liability, Current	273	0
Current portion of long-term debt	288	486
Total Current Liabilities	3,534	2,942
Long-Term Debt, Net of Current Portion	1,538	1,617
Noncurrent Liabilities
Operating Lease, Liability, Noncurrent	1,424	0
Deferred income taxes	582	512
Deferred revenue, noncurrent	1,181	1,169
Obligation for pension and postretirement medical benefits	522	503
Other liabilities	197	418
Other Liabilities and Credits Totals	3,906	2,602
Commitments and Contingencies
Shareholders' Equity
Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or outstanding	0	0
Common stock, $0.01 par value, Authorized: 400,000,000 shares, Issued: 2019 - 131,365,855 shares; 2018 - 130,813,476 shares, Outstanding: 2019 - 123,338,144 shares; 2018 - 123,194,430 shares	1	1
Capital in excess of par value	270	232
Treasury stock (common), at cost: 2019 - 8,027,711 shares; 2018 - 7,619,046 shares	(593)	(568)
Accumulated other comprehensive loss	(422)	(448)
Retained earnings	4,717	4,534
Total Shareholders' Equity	3,973	3,751
Total Liabilities and Shareholders' Equity	$ 12,951	$ 10,912

CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICALS) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Stockholders' Equity:
Preferred Stock, par value (usd per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares)	5,000,000	5,000,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	400,000,000	400,000,000
Common stock, shares issued (shares)	131,365,855	130,813,476
Common stock, shares outstanding (shares)	123,338,144	123,194,430
Treasury Stock, Shares (shares)	8,027,711	7,619,046

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Operating Revenues
Total Operating Revenues	$ 2,288	$ 2,156	$ 4,164	$ 3,988
Operating Expenses
Wages and benefits	567	544	1,124	1,080
Variable incentive pay	44	38	79	77
Aircraft fuel, including hedging gains and losses	502	475	922	884
Aircraft maintenance	115	106	235	213
Aircraft rent	82	77	165	151
Landing fees and other rentals	113	110	245	236
Contracted services	70	76	142	157
Selling expenses	87	88	159	166
Depreciation and amortization	105	97	211	191
Food and beverage service	53	55	102	105
Third-party regional carrier expense	42	39	83	76
Other	136	141	274	282
Special items - merger-related costs	8	39	34	45
Special items—other	0	0	0	25
Total Operating Expenses	1,924	1,885	3,775	3,688
Operating Income	364	271	389	300
Nonoperating Income (Expense)
Interest income	11	10	20	18
Interest expense	(20)	(25)	(42)	(49)
Interest capitalized	3	4	7	9
Other—net	(7)	(1)	(17)	(13)
Nonoperating Income (Expense) Total	(13)	(12)	(32)	(35)
Income Before Income Tax	351	259	357	265
Income tax expense	89	66	91	68
Net Income	$ 262	$ 193	$ 266	$ 197
Basic Earnings Per Share (usd per share)	$ 2.12	$ 1.57	$ 2.15	$ 1.60
Diluted Earnings Per Share (usd per share)	$ 2.11	$ 1.56	$ 2.14	$ 1.59
Shares used for computation:
Basic shares (shares)	123,418	123,268	123,355	123,212
Diluted shares (shares)	124,301	124,036	124,179	123,953
Passenger Revenue [Member]
Operating Revenues
Revenue from Contract with Customer, Excluding Assessed Tax	$ 2,111	$ 1,997	$ 3,827	$ 3,681
Passenger Revenue [Member] \| Passenger [Member]
Operating Revenues
Revenue from Contract with Customer, Excluding Assessed Tax	2,111	1,997	3,827	3,681
Mileage Plan Revenue [Member]
Operating Revenues
Revenue from Contract with Customer, Excluding Assessed Tax	290	275	553	521
Mileage Plan Revenue [Member] \| Passenger [Member]
Operating Revenues
Revenue from Contract with Customer, Excluding Assessed Tax	172	167	325	306
Mileage Plan Revenue [Member] \| Mileage plan other revenue [Member]
Operating Revenues
Revenue from Contract with Customer, Excluding Assessed Tax	118	108	228	215
Cargo and Other Revenue [Member]
Operating Revenues
Revenue from Contract with Customer, Excluding Assessed Tax	59	51	109	92
Cargo and Other Revenue [Member] \| Cargo and Freight [Member]
Operating Revenues
Revenue from Contract with Customer, Excluding Assessed Tax	$ 59	$ 51	$ 109	$ 92

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net Income	$ 262	$ 193	$ 266	$ 197
Related to marketable securities:
Unrealized holding gain (loss) arising during the period	13	(4)	27	(17)
Reclassification of (gain) loss into Other - net nonoperating income (expense)	0	1	2	3
Income tax effect	(3)	0	(7)	3
Total	10	(3)	22	(11)
Related to employee benefit plans:
Reclassification of net pension expense into Wages and benefits and Other - net nonoperating income (expense)	8	7	16	14
Income tax effect	(2)	(1)	(4)	(3)
Total	6	6	12	11
Related to interest rate derivative instruments:
Unrealized holding gain (loss) arising during the period	(7)	2	(12)	8
Reclassification of (gain) loss into Aircraft rent	0	0	1	1
Income tax effect	2	0	3	(2)
Total	(5)	2	(8)	7
Other Comprehensive Income	11	5	26	7
Comprehensive Income	$ 273	$ 198	$ 292	$ 204

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY Statement - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, shares outstanding (shares)		123.061
Stockholders' Equity Attributable to Parent at Dec. 31, 2017	$ 3,460,000	$ 1,000	$ 164,000	$ (518,000)	$ (380,000)	$ 4,193,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	4,000					4,000
Other Comprehensive Income (Loss), Net of Tax	2,000				2,000
Stock repurchased during period (shares)		(0.186)
Stock Repurchased During Period, Value	(13,000)		0	(13,000)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	12,000		12,000
Dividends, Cash	(40,000)					(40,000)
Stock Issued During Period, Shares, Employee Stock Purchase Plans		0.312
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures		0.163
Stock Issued During Period, Value, Employee Stock Purchase Plan	17,000		17,000
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	(3,000)		(3,000)
Stockholders' Equity Attributable to Parent at Mar. 31, 2018	3,439,000	$ 1,000	190,000	(531,000)	(440,000)	4,219,000
Stockholders' Equity Attributable to Parent at Dec. 31, 2017	3,460,000	1,000	164,000	(518,000)	(380,000)	4,193,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	197,000
Other Comprehensive Income (Loss), Net of Tax	7,000
Stockholders' Equity Attributable to Parent at Jun. 30, 2018	3,593,000	$ 1,000	198,000	(544,000)	(435,000)	4,373,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, shares outstanding (shares)		123.350
Stockholders' Equity Attributable to Parent at Mar. 31, 2018	3,439,000	$ 1,000	190,000	(531,000)	(440,000)	4,219,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	193,000					193,000
Other Comprehensive Income (Loss), Net of Tax	5,000				5,000
Stock repurchased during period (shares)		(0.204)
Stock Repurchased During Period, Value	(13,000)			(13,000)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	9,000		9,000
Dividends, Cash	$ (39,000)					(39,000)
Cash dividend declared per share (usd per share)	$ 0.32
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures		0.058
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	$ (1,000)		(1,000)
Stockholders' Equity Attributable to Parent at Jun. 30, 2018	$ 3,593,000	$ 1,000	198,000	(544,000)	(435,000)	4,373,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, shares outstanding (shares)		123.204
Common stock, shares outstanding (shares)	123,194,430	123.194
Stockholders' Equity Attributable to Parent at Dec. 31, 2018	$ 3,751,000	$ 1,000	232,000	(568,000)	(448,000)	4,534,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	4,000					4,000
Other Comprehensive Income (Loss), Net of Tax	15,000				15,000
Stock repurchased during period (shares)		(0.215)
Stock Repurchased During Period, Value	(13,000)		0	(13,000)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	12,000		12,000
Dividends, Cash	(43,000)					(43,000)
Stock Issued During Period, Shares, Employee Stock Purchase Plans		0.391
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures		0.134
Stock Issued During Period, Value, Employee Stock Purchase Plan	20,000		20,000
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	(3,000)		(3,000)
Stockholders' Equity Attributable to Parent at Mar. 31, 2019	3,746,000	$ 1,000	261,000	(581,000)	(433,000)	4,498,000
Stockholders' Equity Attributable to Parent at Dec. 31, 2018	3,751,000	1,000	232,000	(568,000)	(448,000)	4,534,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	266,000
Other Comprehensive Income (Loss), Net of Tax	26,000
Stockholders' Equity Attributable to Parent at Jun. 30, 2019	3,973,000	$ 1,000	270,000	(593,000)	(422,000)	4,717,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative Effect of New Accounting Principle in Period of Adoption	3,000					3,000
Common stock, shares outstanding (shares)		123.504
Stockholders' Equity Attributable to Parent at Mar. 31, 2019	3,746,000	$ 1,000	261,000	(581,000)	(433,000)	4,498,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	262,000					262,000
Other Comprehensive Income (Loss), Net of Tax	11,000				11,000
Stock repurchased during period (shares)		(0.194)
Stock Repurchased During Period, Value	(12,000)		0	(12,000)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	9,000		9,000
Dividends, Cash	$ (43,000)					(43,000)
Cash dividend declared per share (usd per share)	$ 0.35
Stock Issued During Period, Shares, Employee Stock Purchase Plans		0.028
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	$ 0
Stockholders' Equity Attributable to Parent at Jun. 30, 2019	$ 3,973,000	$ 1,000	$ 270,000	$ (593,000)	$ (422,000)	$ 4,717,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, shares outstanding (shares)	123,338,144	123.338

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net Income	$ 266	$ 197
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	211	191
Stock-based compensation and other	16	17
Changes in certain assets and liabilities:
Changes in deferred tax provision	62	67
Increase in air traffic liability	385	306
Increase in deferred revenue	75	52
Other—net	18	(104)
Net cash provided by operating activities	1,033	726
Property and equipment additions:
Aircraft and aircraft purchase deposits	(172)	(271)
Other flight equipment	(83)	(56)
Other property and equipment	(78)	(96)
Total property and equipment additions, including capitalized interest	(333)	(423)
Purchases of marketable securities	(885)	(529)
Sales and maturities of marketable securities	663	474
Other investing activities	25	10
Net cash used in investing activities	(530)	(468)
Cash flows from financing activities:
Proceeds from issuance of debt	254	0
Long-term debt payments	(532)	(258)
Common stock repurchases	(25)	(25)
Dividends paid	(86)	(79)
Other financing activities	26	15
Net cash used in financing activities	(363)	(347)
Net increase (decrease) in cash, cash equivalents, and restricted cash	140	(89)
Cash, cash equivalents, and restricted cash at beginning of year	114	197
Cash, cash equivalents, and restricted cash at end of the period	254	108
Cash paid during the period for:
Interest (net of amount capitalized)	34	39
Income taxes	$ 0	$ 0

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2019	Jun. 30, 2018
Statement of Cash Flows [Abstract]
Cash and cash equivalents	$ 244	$ 102
Restricted cash included in Prepaid expenses and other current assets	10	6
Total cash, cash equivalents, and restricted cash at end of the period	$ 254	$ 108

REVENUE FROM CONTRACTS WITH CUSTOMERS

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

Ticket revenue is recorded as Passenger revenue, and represents the primary source of the Company's revenue. Also included in Passenger revenue are passenger ancillary revenues, such as bag fees, on-board food and beverage, ticket change fees, and certain revenue from the frequent flyer program. Mileage Plan other revenue includes brand and marketing revenue from our co-branded credit card and other partners and certain interline frequent flyer revenue, net of commissions. Cargo and other revenue includes freight and mail revenue, and to a lesser extent, other ancillary revenue products such as lounge membership and certain commissions.

The Company disaggregates revenue by segment in Note 9. The details within the Company’s statements of operations, segment disclosures, and in this footnote depict the nature, amount, timing and uncertainty of revenue and how cash flows are affected by economic and other factors.

Passenger Ticket and Ancillary Services Revenue

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Passenger ticket revenue, including ticket breakage and net of taxes and fees	$	1,792	$	1,693	$	3,231	$	3,121
Passenger ancillary revenue	147		137		271		254
Mileage Plan passenger revenue	172		167		325		306
Total Passenger revenue	$	2,111	$	1,997	$	3,827	$	3,681

Mileage Plan™ Loyalty Program

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Passenger revenue	$	172	$	167	$	325	$	306
Mileage Plan other revenue	118		108		228		215
Total Mileage Plan revenue	$	290	$	275	$	553	$	521

Cargo and Other

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Cargo revenue	$	38	$	34	$	68	$	60
Other revenue	21		17		41		32
Total Cargo and other revenue	$	59	$	51	$	109	$	92

Air Traffic Liability and Deferred Revenue

Passenger ticket and ancillary services liabilities

The Company recognized Passenger revenue of $89 million and $79 million from the prior year-end air traffic liability balance for the three months ended June 30, 2019 and 2018, and $563 million and $513 million for the six months ended June 30, 2019 and 2018.

Mileage Plan^TM liabilities

The Company records a receivable for amounts due from the bank partner and from other partners as mileage credits are sold until the payments are collected. The Company had $122 million of such receivables as of June 30, 2019 and $119 million as of December 31, 2018.

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



	Six Months Ended June 30,
	2019			2018
Total Deferred Revenue balance at January 1	$	1,874		$	1,725
Travel miles and companion certificate redemption - Passenger revenue	(325		)	(306		)
Miles redeemed on partner airlines - Other revenue	(51		)	(44		)
Increase in liability for mileage credits issued	451			402
Total Deferred Revenue balance at June 30	$	1,949		$	1,777

FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

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

Fair Value of Financial Instruments on a Recurring Basis

As of June 30, 2019, total cost basis for all marketable securities was $1.4 billion. There were no significant differences between the cost basis and fair value of any individual class of marketable securities.

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



	June 30, 2019								December 31, 2018
	Level 1		Level 2			Total			Level 1		Level 2			Total
Assets
Marketable securities
U.S. government and agency securities	$	409	$	—		$	409		$	293	$	—		$	293
Foreign government bonds	—		25			25			—		26			26
Asset-backed securities	—		189			189			—		190			190
Mortgage-backed securities	—		120			120			—		92			92
Corporate notes and bonds	—		623			623			—		520			520
Municipal securities	—		17			17			—		10			10
Total Marketable securities	409		974			1,383			293		838			1,131
Derivative instruments
Fuel hedge—call options	—		7			7			—		4			4
Interest rate swap agreements	—		4			4			—		10			10
Total Assets	$	409	$	985		$	1,394		$	293	$	852		$	1,145

Liabilities
Derivative instruments
Interest rate swap agreements	—		(10		)	(10		)	—		(7		)	(7		)
Total Liabilities	$	—	$	(10	)	$	(10	)	$	—	$	(7	)	$	(7	)

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

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

Activity and Maturities for Marketable Securities

Unrealized losses from marketable securities are primarily attributable to changes in interest rates. Management does not believe any unrealized losses represent other-than-temporary impairments based on its evaluation of available information as of June 30, 2019.

Maturities for marketable securities (in millions):



June 30, 2019	Cost Basis		Fair Value
Due in one year or less	$	298	$	299
Due after one year through five years	1,065		1,080
Due after five years through 10 years	4		4
Total	$	1,367	$	1,383

Fair Value of Other Financial Instruments

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

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

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

Debt: Debt assumed in the acquisition of Virgin America was subject to a non-recurring fair valuation adjustment as part of purchase price accounting. The adjustment is amortized over the life of the associated debt. All other fixed-rate debt is carried at cost. To estimate the fair value of all fixed-rate debt as of June 30, 2019, the Company uses the income approach by discounting cash flows using borrowing rates for comparable debt over the remaining life of the outstanding debt. The estimated fair value of the fixed-rate debt is Level 3 as certain inputs used are unobservable.

Fixed-rate debt on the consolidated balance sheet and the estimated fair value of long-term fixed-rate debt is as follows (in millions):



	June 30, 2019		December 31, 2018
Fixed-rate debt at cost	$	580	$	639
Non-recurring purchase price accounting fair value adjustment	2		3
Total fixed-rate debt	$	582	$	642

Estimated fair value	$	595	$	641

Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property, plant and equipment, operating lease assets, goodwill, and intangible assets. These assets are subject to fair valuation when there is evidence of impairment. No material impairment charges were taken in the three and six months ended June 30, 2019 and June 30, 2018.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

LEASES (Notes)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

LEASES

In 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," which requires lessees to recognize assets and liabilities for certain operating leases. Under the new standard, a lessee must recognize a liability on the balance sheet representing the lease payments owed, and a lease asset representing its right to use the underlying asset for the lease term. In 2018, the FASB issued ASU 2018-11, "Targeted Improvements - Leases (Topic 842)," which amended Topic 842 to provide a transition method that would not require adjusting comparative period financial information.

The Company transitioned to the new lease accounting standard effective January 1, 2019 utilizing the alternative transition method. Upon transition, the Company recorded a cumulative-effect adjustment to the opening balance of retained earnings of $3 million. The new standard eliminated build-to-suit lease accounting guidance and resulted in the derecognition of build-to-suit assets and liabilities of approximately $150 million each.

The Company elected certain practical expedients under the standard, including the practical expedient allowing a policy election to exclude from recognition short-term lease assets and lease liabilities for leases with an initial term of 12 months or less. Such expense was not material for the six months ended June 30, 2019. Additionally, the Company elected the available package of practical expedients allowing for no reassessment of lease classification for existing leases, no reassessment of expired contracts, and no reassessments of initial direct costs for existing leases.

The Company has five asset classes for operating leases: aircraft, capacity purchase arrangements with aircraft (CPA aircraft), airport and terminal facilities, corporate real estate and other equipment. All capitalized lease assets have been recorded on the condensed consolidated balance sheet as of June 30, 2019 as Operating lease assets, with the corresponding liabilities recorded as Operating lease liabilities. Consistent with past accounting, operating rent expense is recognized on a straight-line basis over the term of the lease.

At June 30, 2019, the Operating lease assets balance by asset class was as follows (in millions):



	Operating lease assets
Aircraft	$	1,012
CPA aircraft	622
Airport and terminal facilities	19
Corporate real estate and other	43
Total Operating lease assets	$	1,696

Aircraft

At June 30, 2019, the Company had operating leases for 10 Boeing 737 (B737), 62 Airbus, and 9 Bombardier Q400 aircraft. Additionally, the Company operates 32 Embraer 175 (E175) aircraft through its capacity purchase arrangement with SkyWest Airlines, Inc. (SkyWest). Remaining lease terms for these aircraft extend up to 12 years, with options to extend, subject to negotiation at the end of the term. As extension is not certain, and rates are highly likely to be renegotiated, the extended term is only capitalized when it is reasonably determinable. While aircraft rent is primarily fixed, certain leases contain rental adjustments throughout the lease term which would be recognized as variable expense as incurred. Variable lease expense for aircraft was $1 million and $2 million for the three and six months ended June 30, 2019, respectively.

Capacity purchase agreements with aircraft (CPA aircraft)

At June 30, 2019, Alaska had CPAs with three carriers, including the Company’s wholly-owned subsidiary, Horizon. Horizon sells 100% of its capacity under a CPA with Alaska. Alaska also has CPAs with SkyWest to fly certain routes in the Lower 48 and Canada, and with Peninsula Aviation Services, Inc., (PenAir) to fly certain routes in the state of Alaska. Under these agreements, Alaska pays the carriers an amount which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services. As Horizon is a wholly-owned subsidiary, intercompany leases between Alaska and Horizon have not been recognized under the standard. The agreement with PenAir does not contain a leasing arrangement, resulting in no asset or liability recognized.

Remaining lease terms for CPA aircraft range from 8 years to 11 years. Financial arrangements of the CPAs include a fixed component, representing the costs to operate each aircraft and is capitalized under the new lease accounting standard. CPAs also include variable rent based on actual levels of flying, which is expensed as incurred. Variable lease expense for CPA aircraft for the three and six months ended June 30, 2019 was not material.

Airport and terminal facilities

The Company leases ticket counters, gates, cargo and baggage space, ground equipment, office space and other support areas at numerous airports. For this asset class, the Company has elected to combine lease and non-lease components. The majority of airport and terminal facility leases are not capitalized because they do not meet the definition of controlled assets under the standard, or because the lease payments are entirely variable. For airports where leased assets are identified, and where the contract includes fixed lease payments, operating lease assets and lease liabilities have been recorded. The Company is also commonly responsible for maintenance, insurance and other facility-related expenses and services under these agreements. These costs are recognized as variable expense in the period incurred. Airport and terminal facilities variable lease expense was $61 million and $145 million for the three and six months ended June 30, 2019, respectively.

In 2018, the Company leased 12 airport slots at LaGuardia Airport and eight airport slots at Reagan National Airport to a third party. For these leases, the Company recorded $3 million and $6 million of lease income during the three and six months ended June 30, 2019, respectively.

Corporate real estate and other leases

Leased corporate real estate is primarily for office space in hub cities, land leases, and reservation centers. For this asset class, the Company has elected to combine lease and non-lease components under the standard. Other leased assets are comprised of other ancillary contracts and items including leased flight simulators and spare engines. Variable lease expense related to corporate real estate and other leases for the six months ended June 30, 2019 was $5 million.

Components of Lease Expense

The impact of leases, including variable lease cost, on earnings for the three and six months ended June 30, 2019 was as follows (in millions):



	Classification	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Expense
Aircraft	Aircraft rent	$	62		$	123
CPA aircraft	Aircraft rent	20			40
Airport and terminal facilities	Landing fees and other rentals	62			146
Corporate real estate and other	Landing fees and other rentals	4			9
Total lease expense		$	148		$	318
Revenue
Lease income	Cargo and other revenues	(3		)	(6		)
Net lease impact		$	145		$	312

Total rent expense for the three and six months ended June 30, 2018 was $137 million and $290 million, respectively.

Supplemental Cash Flow Information

Supplemental cash flow information related to leases was as follows (in millions):



	Six Months Ended June 30, 2019
Cash paid for capitalized operating leases	$	177
Operating lease assets obtained in exchange for lease obligations	47

Lease Term and Discount Rate

As most leases do not provide an implicit interest rate, the Company generally utilizes the incremental borrowing rate (IBR) based on information available at the commencement date of the lease to determine the present value of lease payments. The weighted average IBR and weighted average remaining lease term (in years) for all asset classes were as follows at June 30, 2019:



	Weighted Average IBR		Weighted Average Remaining Lease Term
Aircraft	4.2	%	6.8
CPA aircraft	4.3	%	9.7
Airports and terminal facilities	4.1	%	10.4
Corporate real estate and other	4.4	%	37.7

Maturities of Lease Liabilities

Future minimum lease payments under non-cancellable leases as of June 30, 2019 (in millions):



	Aircraft			CPA Aircraft			Airport and Terminal Facilities			Corporate Real Estate & Other
Remainder of 2019	$	128		$	40		1			$	5
2020	233			79			3			8
2021	194			79			3			6
2022	169			79			2			3
2023	115			79			2			2
Thereafter	324			408			12			74
Total lease payments	$	1,163		$	764		$	23		$	98
Less: Imputed interest	(151		)	(142		)	(4		)	(54		)
Total operating lease liabilities	$	1,012		$	622		$	19		$	44

As of June 30, 2019, the Company has one scheduled lease delivery of an A321neo aircraft remaining in 2019, valued at $52 million. We also had three scheduled lease deliveries of E175 aircraft in 2021 to be operated by SkyWest. Subsequent to June 30, 2019, the Company canceled these aircraft deliveries through an amendment to the capacity purchase agreement. All future lease contracts have remaining non-cancelable lease terms ranging from 2019 to 2033.

COMMITMENTS

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS

COMMITMENTS AND CONTINGENCIES

Future minimum payments for commitments, excluding operating leases, as of June 30, 2019 (in millions):



	Aircraft Commitments^(a)		Capacity Purchase Agreements ^(b)		Aircraft Maintenance Deposits
Remainder of 2019	$	255	$	69	$	33
2020	542		145		73
2021	553		166		62
2022	303		174		51
2023	103		179		27
Thereafter	32		1,065		9
Total	$	1,788	$	1,798	$	255


(a)	Includes non-cancelable contractual commitments for aircraft and engines, buyer furnished equipment, and aircraft maintenance and parts management.


(b)	Includes all non-aircraft lease costs associated with capacity purchase agreements.

Aircraft Commitments

Aircraft purchase commitments include non-cancelable contractual commitments for aircraft and engines. As of June 30, 2019, the Company had commitments to purchase 32 B737 MAX9 aircraft, with deliveries in the remainder of 2019 through 2023. Future minimum contractual payments for these aircraft have been updated to reflect the most current anticipated delivery timing for B737 MAX9 aircraft, which has been delayed as a result of the grounding order mandated by the FAA on March 13, 2019. The Company also has commitments to purchase five E175 aircraft with deliveries in the remainder of 2019 through 2021 and has cancelable purchase commitments for 30 Airbus A320neo aircraft with deliveries from 2023 through 2025. In addition, the Company has options to purchase 37 B737 MAX aircraft from 2021 through 2024 and 30 E175 aircraft from 2021 through 2023. The Company also has the option to increase capacity flown by SkyWest with eight additional E175 aircraft with deliveries from 2021 to 2022. The cancelable purchase commitments and option payments are not reflected in the table above.

Contingencies

The Company is a party to routine litigation matters incidental to its business and with respect to which no material liability is expected. Liabilities for litigation related contingencies are recorded when a loss is determined to be probable and estimable.

In 2015, three flight attendants filed a class action lawsuit seeking to represent all Virgin America flight attendants for damages based on alleged violations of California and City of San Francisco wage and hour laws. The court certified a class of approximately 1,800 flight attendants in November 2016. The Company believes the claims in this case are without factual and legal merit.

In July 2018, the Court granted in part Plaintiffs' motion for summary judgment, finding Virgin America, and Alaska Airlines, as a successor-in-interest to Virgin America, responsible for various damages and penalties sought by the class members. On February 4, 2019, the Court entered final judgment against Virgin America and Alaska Airlines in the amount of approximately $78 million. It did not award injunctive relief against Alaska Airlines.

The Company is seeking an appellate court ruling that the California laws on which the judgment is based are invalid as applied to national airlines pursuant to the U.S. Constitution and federal law and for other employment law and improper class certification reasons. The Company remains confident that a higher court will respect the federal preemption principles that were enacted to shield inter-state common carriers from a patchwork of state and local wage and hour regulations such as those at issue in this case and agree with the Company's other bases for appeal. For these reasons, no loss has been accrued.

This forward-looking statement is based on management's current understanding of the relevant law and facts, and it is subject to various contingencies, including the potential costs and risks associated with litigation and the actions of judges and juries.

GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Jun. 30, 2019
Accounting Policies [Abstract]
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Basis of Presentation The condensed consolidated financial statements include the accounts of Air Group, or the Company, and its primary subsidiaries, Alaska (including Virgin America in 2018) and Horizon. The condensed consolidated financial statements also include McGee Air Services, a ground services subsidiary of Alaska. The Company conducts substantially all of its operations through these subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. It should be read in conjunction with the consolidated financial statements and accompanying notes in the Form 10-K for the year ended December 31, 2018. In the opinion of management, all adjustments have been made that are necessary to fairly present the Company’s financial position as of June 30, 2019 and the results of operations for the three and six months ended June 30, 2019 and 2018. Such adjustments were of a normal recurring nature. Certain reclassifications and rounding adjustments have been made to prior year financial statements to conform to classifications used in the current year. In preparing these statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities, as well as the reported amounts of revenues and expenses. Due to seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, changes in global economic conditions, changes in the competitive environment and other factors, operating results for the three and six months ended June 30, 2019 are not necessarily indicative of operating results for the entire year.