UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
FORM 10-K
(Mark One)
X    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF     1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from  . . . . . . . .  to  . . . . . . . .

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

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

19300 Pacific Highway South, Seattle, Washington 98188
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (206) 431-7040

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class             Name of Each Exchange on Which Registered
Common Stock, $1.00 Par Value                         New York Stock Exchange
Rights to Purchase Series A Participating
Preferred Stock                                      New York Stock Exchange
6-1/2% Convertible Senior Debentures Due 2005         New York Stock Exchange
7-3/4% Convertible Subordinated Debentures Due 2010   Unlisted
6-7/8% Convertible Subordinated Debentures Due 2014   New York Stock Exchange
10.21% Series B Cumulative Redeemable
Preferred Stock Due 1997                         Unlisted

As  of  December 31, 1995, common shares outstanding totaled 13,565,076.
The  aggregate market value of the common shares of Alaska Air Group,  Inc.
held  by  nonaffiliates, 13,378,152 shares, was approximately $217  million
(based on the closing price of these shares, $16.25, on the New York  Stock
Exchange on such date).

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

Indicate  by check mark if disclosure of delinquent filers  pursuant  to
Item  405  of  Regulation  S-K is not contained herein,  and  will  not  be
contained,  to the best of registrant's knowledge, in definitive  proxy  or
information statements incorporated by reference in Part III of  this  Form
10-K or any amendment to this Form 10-K. ( X )

DOCUMENTS TO BE INCORPORATED BY REFERENCE
Title of Document           Part Hereof Into Which Document to be
Incorporated
Definitive Proxy Statement Relating to            Part III
1996 Annual Meeting of Shareholders

Exhibit Index begins on page 33.
PART I

ITEM 1.   BUSINESS

General
Alaska Air Group, Inc. (Air Group or the Company) is a holding company
which was incorporated in Delaware in 1985.  Its two principal subsidiaries
are Alaska Airlines, Inc. (Alaska) and Horizon Air Industries, Inc.
(Horizon).  Both subsidiaries operate as airlines.  However, each
subsidiary's business plan, competition and economic risks differ
substantially.  Alaska is a major airline, operates an all jet fleet, and
its average passenger trip length is 846 miles.  Horizon is a regional
airline, operates jet and turboprop aircraft, and its average passenger
trip is 221 miles. Business segment information is reported in the Notes to
Consolidated Financial Statements.  The Company's executive offices are
located at 19300 Pacific Highway South, Seattle, Washington 98188.

The business of the Company is somewhat seasonal.  Quarterly operating
income tends to peak during the third quarter.

Alaska
Alaska Airlines is an Alaska corporation, organized in 1937.  Alaska serves
37 cities in six states (Alaska, Washington, Oregon, California, Nevada and
Arizona), three cities in Mexico and four cities in Russia.  In each year
since 1973, Alaska has carried more passengers between Alaska and the U.S.
mainland than any other airline.    In 1995, Alaska carried 10.1 million
passengers.  Passenger traffic within Alaska and between Alaska and the
U.S. mainland accounted for 27% of Alaska's total revenue passenger miles,
while West Coast traffic accounted for 66% and the Mexico markets 7%.
Based on passenger enplanements, Alaska's leading airports are Seattle,
Portland, Anchorage and Los Angeles.  Based on revenues, its leading
nonstop routes were Seattle-Anchorage, Seattle-Los Angeles and Seattle-San
Francisco.  At December 31, 1995, Alaska's operating fleet consisted of 74
jet aircraft.

During 1995, Alaska entered into a marketing agreement with Northwest
Airlines whereby certain Alaska flights and certain Northwest flights are
dual-designated in airline computer reservation systems as Alaska Airlines
and Northwest Airlines.  Alaska Airlines also serves three smaller cities
in California, two in Washington, and many small communities in Alaska
through code share marketing agreements with local carriers.

Horizon
Horizon, a Washington corporation, began service in 1981 and was acquired
by Air Group in 1986.  It is the largest regional airline in the Pacific
Northwest, and serves 35 cities in five states (Washington, Oregon,
Montana, Idaho, and California) and four cities in Canada.  In 1995,
Horizon carried 3.8 million passengers.  Based on passenger enplanements,
Horizon's leading airports are Seattle, Portland, Spokane and Boise.  Based
on revenues, its leading nonstop routes were Seattle-Spokane, Seattle-
Portland, Seattle-Boise, and Portland-Boise.  At December 31, 1995,
Horizon's operating fleet consisted of 12 jet and 55 turboprop aircraft.

Horizon flights are listed under the Alaska Airlines designator code in
airline computer reservation systems.  Certain Horizon flights are dual-
designated in these reservation systems as Northwest Airlines and Alaska
Airlines.  Currently, 29% of Horizon's passengers connect to either Alaska
or Northwest.

Airline Regulation
United States Department of Transportation (DOT) - The DOT has the
authority to regulate certain airline economic functions including
financial and statistical reporting, consumer protection, computerized
reservations systems and essential air transportation.  The DOT is also
charged with determining which U.S. carriers will receive the authority to
provide service to international destinations.  International operating
authority is subject to bilateral agreements between the United States and
the respective countries.  The countries establish the number of carriers
to provide service, approve the carriers selected to provide such service
and the size of aircraft to be used.  The DOT reviews the carriers
authorized under bilateral agreements every five years.  Beginning in
February 1997, under the U.S.-Canada "open skies" agreement, all U.S. and
Canadian carriers will be able to operate between U.S. and Canadian cities
(except for Toronto), subject to availability of landing slots.  Alaska's
authorities to serve its various Mexico destinations are to be reviewed
during 1996.  The bilateral agreement with Russia will also be reviewed in
1996.  The Company expects to be granted authority to continue to operate
its international routes.

Federal Aviation Administration (FAA) - The FAA, an agency within the DOT,
has jurisdiction to regulate aviation safety generally, including: the
licensing of pilots and maintenance personnel; the establishment of minimum
standards for training and maintenance; and technical standards of flight,
communications and ground equipment.  All aircraft must have and maintain
certificates of airworthiness issued by the FAA.  Alaska and Horizon
aircraft, maintenance facilities and procedures are subject to inspection
by the FAA.  The FAA has the authority to suspend temporarily or revoke
permanently the authority of an air carrier or its licensed personnel for
failure to comply with Federal Aviation Regulations and to levy civil
penalties for such failure.

Labor Relations - The air transportation industry is regulated under the
Railway Labor Act, which vests in the National Mediation Board certain
regulatory powers with respect to disputes between airlines and labor
unions arising under collective bargaining agreements.

Environmental - Special noise ordinances or agreements restrict the type of
aircraft, the timing and the number of flights operated by Alaska and other
air carriers at four Los Angeles area airports plus San Diego, Palm
Springs, San Francisco and Seattle.

In 1990, Congress passed the Airport Noise and Capacity Act of 1990 (Act).
The Act addressed the need to establish a national aviation noise policy
and limit the ability of airports and local communities to implement
procedures that would interfere with interstate commerce or the national
air transportation system.  The Act also called for the phase out of Stage
II airplanes (generally older aircraft not meeting certain noise emission
standards) in the contiguous 48 states by December 31, 1999.  Alaska's only
Stage II aircraft are eight Boeing 737-200Cs, and the Company anticipates
it will modify or replace these aircraft to meet applicable noise
requirements.
Competition
Competition in the air transportation industry is intense.  Currently, any
domestic air carrier deemed fit by the DOT is allowed to operate scheduled
passenger service in the United States.  Together, Alaska and Horizon carry
2.2% of all U.S. passenger traffic.

Alaska and Horizon compete in the West Coast, Arizona and Nevada markets
with America West, Delta, Reno Air, Shuttle by United, Southwest Airlines,
United and United Express.  Alaska also competes with Continental, Delta,
Reno Air and United in the Lower 48-to-Alaska market.  Some of these
competitors are substantially larger than Alaska and Horizon, have greater
financial resources and have more extensive route systems.  Due to its
shorthaul markets, Horizon is also subject to competition from surface
transportation, particularly the private automobile.

Alaska and Horizon integrate their flight schedules to provide the best
possible service between any two points served by their systems.  Both
airlines distinguish themselves from competitors by providing a higher
level of customer service.  The airlines' excellent service in the form of
attention to customer needs, high-quality food and beverage service,
legroom, well-maintained aircraft and other amenities has been recognized
by independent studies and surveys of air travelers.  Alaska and Horizon
offer competitive fares.

Most large U.S. carriers have developed, independently or in partnership
with others, large computerized reservation systems (CRS).  Due to
contractual requirements imposed by CRSs, most travel agencies contract
with a single CRS to sell tickets.  Airlines, including Alaska, and
Horizon, are charged industry-set fees to have their flight schedules
included in the various CRS displays.  These systems are currently the
predominant means of distributing airline tickets.  In order to reduce anti-
competitive practices, the DOT regulates the display of all airline
schedules and fares.  Alaska is exploring alternatives to existing
distribution methods.  American Airlines, owner of the SABRE CRS, has filed
suit against Alaska to prevent Alaska from reducing its level of display
purchased from SABRE without also doing so in all other CRSs.

Frequent Flyer Program
All major airlines have developed frequent flyer programs as a way of
increasing passenger loyalty.  Alaska's Mileage Plan allows members to earn
mileage by flying on Alaska, Horizon and other participating airlines, and
by using the services of non-airline partners which include a credit card,
telephone companies, hotels and car rental agencies.  Alaska is paid by non-
airline partners for the miles it credits to member accounts.  Alaska has
the ability to change the Mileage Plan terms, conditions, partners, mileage
credits and award levels.

Mileage can be redeemed for free or discounted travel and for other travel
industry awards.  Upon accumulating the necessary mileage, members notify
Alaska of their award selection.  Once selected, awards can be changed,
subject to a change fee.  Over 70% of the flight awards selected are
subject to blackout dates and capacity-controlled seating.  Prior to
January 1996, miles earned had to be redeemed within three years, otherwise
they expired.  Effective in January 1996, all miles currently accrued and
future mileage earned will accumulate indefinitely.

As of the year end 1995 and 1994, Alaska estimates that 481,000 and 662,000
roundtrip flight awards could have been redeemed by Mileage Plan members
who have mileage credits exceeding the 20,000 mile free round trip domestic
ticket award threshold.  At December 31, 1995, fewer than 24% of these
flight awards were issued and outstanding.  For the years 1995, 1994 and
1993, approximately 242,000, 226,000 and 188,000 round trip flight awards
were redeemed and flown on Alaska and Horizon.  These awards represent
approximately 7% for 1995, and 5% for 1994 and 1993, of the total passenger
miles flown for each period.

Alaska maintains a liability for its Mileage Plan obligation which is based
on its total miles outstanding, less an estimate for miles which will never
be redeemed.  The net miles outstanding are allocated between those
credited for travel on Alaska, Horizon or other airline partners and those
credited for using the services of non-airline partners.  Miles credited
for travel on Alaska, Horizon or other airline partners are accrued at
Alaska's incremental cost of providing the air travel.  The incremental
cost includes the cost of meals, fuel, reservations and insurance.  The
incremental cost does not include a contribution to overhead, aircraft cost
or profit.  A portion of the proceeds received from non-airline partners is
also deferred.  At December 31, 1995 and 1994, the total liability for
miles outstanding was  $17.5 million and $17.4 million, respectively.

Selected Quarterly Consolidated Financial Information (Unaudited)
Selected financial data for each quarter of 1995 and 1994 is as follows (in
millions, except per share):
1st Quarter     2nd Quarter     3rd Quarter    4th Quarter
1995     1994     1995   1994    1995    1994   1995    1994
Operating
revenues     $294.6   $280.4   $362.2 $330.5  $419.6  $386.8  $341.1 $318.0
Operating
income (loss) (18.3)    (2.9)    24.5   24.5    62.6    52.3     7.1    1.2
Net income
(loss)        (16.3)    (6.3)     7.0    9.7    27.4    24.3     (.8)  (5.1)

Earnings (loss) per share:
Primary      (1.22)    (.47)     .52    .72    2.01    1.81    (.06)  (.38)
Fully diluted    *        *      .48    .61    1.30    1.36     *       *

* Anti-dilutive

The total of the amounts shown as quarterly earnings per share may differ
from the amount shown on the Consolidated Statement of Income because the
annual computation is made separately and is based upon average number of
shares and equivalent shares outstanding for the year.

Employees
Alaska had 7,379 active full-time and part-time employees at December 31,
1995, of which approximately 87% are represented by labor unions.
The following is a summary of Alaska's union contracts as of December 31,
1995:
Number of
Union               Employee Group      Employees  Contract Status
International
Association            Mechanic, Rampservice 1,724    Amendable 9/1/97
of Machinists and      and related
Aerospace Workers      classifications

Clerical, Office and  2,397   Amendable 5/20/99
Passenger Service

Air Line Pilots        Pilots                  922   Amendable 12/1/97
Association International

Association of         Flight Attendants     1,333   Amendable 3/14/99
Flight Attendants

Mexico Workers         Mexico Airport           53    Amendable 4/1/96
Association            Personnel
of Air Transport

Transport Workers      Dispatchers              16   Amendable 2/9/02

Horizon had 3,088 active full-time and part-time employees at December 31,
1995, of which approximately 21% are represented by labor unions.  During
1995, the pilots voted to reject union representation by the International
Brotherhood of Teamsters.

The following is a summary of Horizon's union contracts as of December 31,
1995:

Number of
Union               Employee Group      Employees  Contract Status
Transport Workers      Mechanics and           315   Amendable 4/24/98
Union of America       related classifications

Dispatchers              27   Amendable 5/10/97

Association of         Flight Attendants       271   Amendable 6/15/96
Flight Attendants

National Automobile,   Station personnel        42  Amendable 12/21/97
Aerospace,             in Canada   
Transportation          
and General Workers

ITEM 2.    PROPERTIES

Aircraft
The following table describes the aircraft operated and their average age
at December 31, 1995.

Passenger                              Average Age
Aircraft Type         Capacity      Owned   Leased   Total     in Years

Alaska Airlines
Boeing 737-200C            111          4        4       8          15.4
Boeing 737-400             140          4       18      22           2.7
McDonnell Douglas MD-80    140         16       28      44           7.0
24       50      74           6.6

Horizon
Fairchild Metroliner III    18          5       17      22           9.5
Dornier 328                 31         --       10      10           1.4
de Havilland Dash 8         37         --       23      23           7.5
Fokker F-28                 62         --       12      12          22.0
5       62      67           9.8

Part II, Item 7., "Management's Discussion and Analysis of Results of
Operations and Financial Condition," discusses future orders and options
for additional aircraft.

Sixteen of the 24 aircraft owned by Alaska as of December 31, 1995 are
subject to liens securing long-term debt, and two are subject to liens
securing short-term borrowings.  Alaska's leased B737-200C, B737-400 and MD-
80 aircraft have lease expiration dates between 1996 and 1999, 2002 and
2013, and 1997 and 2013, respectively.  Horizon's leased Fairchild
Metroliner III, Dornier 328, de Havilland Dash 8 and Fokker F-28 aircraft
have expiration dates between 1996 and 2001, 2008 and 2011, 1999 and 2006,
and 1996 and 1998, respectively.  Alaska and Horizon have the option to
extend most of the leases for additional periods, or the right to purchase
the aircraft at the end of the lease term, usually at the then fair market
value of the aircraft.  For information regarding obligations under capital
leases and long-term operating leases, see Notes to Consolidated Financial
Statements.

Ground Facilities and Services
Alaska and Horizon lease ticket counters, gates, cargo and baggage, office
space and other support areas at the majority of the airports they serve.
Alaska also owns terminal buildings at various Alaska cities.

Alaska has centralized operations in several buildings located at or near
Seattle-Tacoma International Airport (Sea-Tac) in Seattle, Washington.  The
owned buildings, including land unless located on leased airport property,
include: a three-bay hangar facility with maintenance shops; a flight
operations and training center; an air cargo facility; a reservation and
office facility; a four-story office building; its corporate headquarters;
and two storage warehouses.  Alaska also leases a two-bay hangar/office
facility at Sea-Tac.

Alaska's other major facilities include: its Anchorage regional
headquarters building and Phoenix reservations center; a leased two-bay
maintenance facility in Oakland; and a leased hangar/office facility in
Anchorage.

Horizon owns its Seattle corporate headquarters building and leases
maintenance facilities at the Portland and Boise airports.

ITEM 3.   LEGAL PROCEEDINGS

In October 1991, Alaska gave notice of termination of its code sharing and
frequent flyer relationship with MarkAir, an airline based in the state of
Alaska.  Both companies have filed suit against one another in connection
with that termination alleging breach of contract and other causes of
action under state law.  In addition, MarkAir claimed that the termination
was in violation of Federal Antitrust Laws.  MarkAir filed for protection
under Chapter 11 of the U.S. Bankruptcy Code in June 1992.  In December
1993, MarkAir agreed to dismiss all antitrust claims against the Company.
In 1994, the U.S. District Court which had jurisdiction over the case
approved the settlement.  Discovery continues in a related Alaska state
court case pertaining to breach of contract and other state law claims.
The Company believes the ultimate resolution of this legal proceeding will
not result in a material adverse impact on the financial position or
results of operations of the Company.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of Alaska Air Group, Inc., their positions and their
respective ages (as of March 1, 1996) are as follows:
Officer
Name                      Position               Age     Since

John F. Kelly     Chairman, President and Chief      51       1981
Executive Officer of Alaska
Air Group, Inc. and Alaska
Airlines, Inc.

Marjorie E. Laws  Vice President/Corporate Affairs   55       1983
and Corporate Secretary of Alaska
Air Group, Inc. and Alaska
Airlines, Inc.

Steven G. Hamilton    Vice President/Legal and General  56    1988
Counsel of Alaska Air Group, Inc.
and Alaska Airlines, Inc.

Harry G. Lehr     Senior Vice President/Finance      55       1986
of Alaska Air Group, Inc.
and Alaska Airlines, Inc.

ITEM 5.       MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

As of December 31, 1995, there were 13,565,076 shares of common stock
issued and outstanding and 5,747 shareholders of record.  The Company also
held 3,153,608 treasury shares at a cost of $71.8 million.  In December
1992, the Company suspended the quarterly dividend on the common stock due
to the 1992 net loss and the difficult economic environment.  Although the
Company has returned to profitability, it has no plans to pay dividends in
the forseeable future.  Air Group's common stock is listed on the New York
Stock Exchange (symbol: ALK).

The following table shows the trading range of Alaska Air Group common
stock on the New York Stock Exchange for 1995 and 1994.

1995                      1994
High        Low            High       Low

First Quarter    16-3/4     13-1/2          18-7/8     13-5/8
Second Quarter   18-3/8     14-1/2          16-1/8     13-3/4
Third Quarter    21-3/8     14-3/8          17-7/8     14-3/8
Fourth Quarter   18-7/8     13-5/8          18         13-1/8

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

1995        1994         1993         1992         1991  

Consolidated Financial Data:                                                                                             
Year Ended December 31 (in millions, except per share amounts):
Operating Revenues                                          $1,417.5    $1,315.6     $1,128.3     $1,115.4     $1,104.0  
Operating Expenses                                           1,341.6     1,240.6      1,145.1      1,210.2      1,069.4  
Operating Income (Loss)                                         75.9        75.0        (16.8)       (94.8)        34.6  
Nonoperating expense, net (a)                                  (41.9)      (34.0)       (29.0)       (30.9)       (18.4) 
Income (loss) before income tax                                                                                          
and accounting change                                          34.0        41.0        (45.8)      (125.7)        16.2  
Net Income (Loss)                                              $17.3       $22.5       $(30.9)      $(84.8)       $10.3  

Average primary shares outstanding                              13.5        13.4         13.3         13.3         13.4  
Primary earnings (loss) per share (b)                          $1.28       $1.68       $(2.51)      $(6.87)       $0.27  
Fully diluted earnings (loss) per share                         1.26        1.62           (c)          (c)          (c) 
Cash dividends per share                                          --          --           --        $0.15        $0.20  

At End of Period (in millions, except ratio):                                                                            
Total assets                                                $1,313.4    $1,315.8     $1,135.0     $1,208.4     $1,225.5  
Long-term debt and capital lease obligations                   522.4       589.9        525.4        487.8        500.0  
Redeemable preferred stock                                        --          --           --         61.2         60.9  
Shareholders' equity                                           212.5       191.3        166.8        196.7        284.4  
Ratio of earnings to fixed charges                              1.28        1.36           (d)          (d)        1.10  

Alaska Airlines Operating Data:                                                                                          
Revenue passenger miles (000,000)                              8,584       7,587        5,514        5,537        4,948  
Available seat miles (000,000)                                13,885      12,082        9,426        9,617        8,789  
Revenue passenger load factor                                   61.8%       62.8%        58.5%        57.6%        56.3% 
Yield per passenger mile                                       11.59c      12.20c       14.32c       14.50c       16.70c 
Operating expenses per available seat mile                      7.71c       8.27c        9.88c       10.49c       10.16c 
Average number of employees (e)                                6,993       6,486        6,191        6,514        6,127  

Horizon Air Operating Data:                                                                                              
Revenue passenger miles (000,000)                                841         733          560          486          405  
Available seat miles (000,000)                                 1,414       1,165          986          905          786  
Revenue passenger load factor                                   59.5%       62.9%        56.8%        53.7%        51.5% 
Yield per passenger mile                                       31.48c      33.35c       37.93c       40.69c       42.88c 
Operating expenses per available seat mile                     19.47c      20.95c       21.76c       22.19c       22.30c 
Average number of employees (e)                                2,864       2,557        2,267        2,152        1,953  
c = cents                                                                                                                

(a) Includes capitalized interest of  $.2 million, $.4 million, $.4 million, $6.1 million
and $8.3 million for 1995, 1994, 1993, 1992, and 1991, respectively.

(b) For 1992, primary earnings per share includes ($.34) for the $4.6 million cululative
effect of the postretirement benefits accounting change as of January 1, 1992.

(c) Anti-dilutive.                                                                                                       

(d) For 1993 and 1992, earnings are inadequate to cover fixed charges
by $50.0 million and $142.1 million, respectively.                                                                 

(e) Full-time equivalents.                                                                                               

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

Industry Conditions
During 1994, the character of competition changed on the West Coast due to
the December 1993 purchase of Morris Air by Southwest Airlines, and the
October start-up of Shuttle by United.  Low air fares are now a permanent
part of the fare structure on the West Coast.  During April 1995, MarkAir,
a significant competitor in the Alaska marketplace since 1992, withdrew
from all Alaska markets and subsequently ceased operations.

The Company has responded to the changing industry environment by
implementing a new advertising campaign, aggressively matching competitors'
air fares, increasing flight frequency, and improving utilization of
aircraft, facilities, equipment and people.  From 1992 to 1994, Alaska
reduced its unit costs by 20%, which is believed to be the sharpest drop in
the airline industry.  From 1994 to 1995, Alaska's unit costs dropped 7%.

Results of Operations
1995 COMPARED WITH 1994  Consolidated net income in 1995 was $17.3 million,
or $1.28 per share (primary) and $1.26 per share (fully diluted), compared
with net income of $22.5 million, or $1.68 per share (primary) and $1.62
per share (fully diluted) in 1994.  Consolidated operating income was $75.9
million compared to $75.0 million in 1994.  Alaska's operating income
improved by $9.5 million, but it was offset by significantly lower
operating results at Horizon.  A discussion of operating revenues and
expenses for the two airlines follows.

Alaska Airlines  Operating revenues increased 7.6% to $1.142 billion.
Passenger revenues, which accounted for 87% of total operating revenues,
increased 7.4% on a 13.1% rise in passenger traffic.  Capacity increased
14.9%, primarily due to increases in the Pacific Northwest to California
markets.  The load factor dropped from 62.8% in 1994 to 61.8% in 1995.
Passenger yields declined 5.0% to 11.59 cents in 1995, reflecting increased
competition on the West Coast.  The static value of a one cent movement in
yield is approximately $86 million per year.  However, in a dynamic, price-
sensitive business, a one cent increase will not necessarily result in a
revenue improvement of this magnitude.

Freight and mail revenues increased 2.9% due to higher freight and mail
volumes, resulting in part from the withdrawal of MarkAir from all Alaska
markets.  Other-net revenues rose 17.6% primarily due to increased revenues
from partners in Alaska's frequent flyer program.
The table below shows the major operating expense elements on a cost per
available seat mile (ASM) basis in 1995 and 1994.

Alaska Airlines                   Operating Expenses Per ASM (In Cents)
%
1995      1994         Change    Change
Wages and benefits                2.46      2.67         (.21)      (8)
Aircraft fuel                     1.11      1.08          .03        3
Aircraft maintenance               .33       .34         (.01)      (3)
Aircraft rent                      .99      1.13         (.14)     (12)
Commissions                        .54       .61         (.07)     (11)
Depreciation & amortization        .42       .39          .03        8
Other                             1.86      2.05         (.19)      (9)
Alaska Airlines Total             7.71      8.27         (.56)      (7)

Alaska's lower unit costs were due to continuing cost reduction efforts and
better utilization of aircraft.  Average daily aircraft utilization
increased 5% from 10.3 block hours to 10.8 block hours.  Wages and benefits
per ASM decreased 8% primarily due to improved productivity.  The number of
full-time equivalent employees increased 8% while capacity increased 15%
and traffic increased 13%.

Fuel expense per ASM increased 3%, due to a 5% increase in the price of
fuel, offset by a lower consumption rate resulting from a longer average
aircraft hop length.  The average cost per gallon rose 3.0 cents to 62.9
cents in 1995.  Currently, a 1 cent change in fuel prices affects annual
fuel costs by approximately $2.5 million.  In October 1995, Alaska (as well
as Horizon and other airlines) began paying a 4.3 cent Federal excise tax
on domestic fuel consumption.  The annual fuel expense impact of this tax
on Alaska is approximately $10 million or .07 cents per ASM.  The annual
fuel expense impact on both Alaska and Horizon is $12 million.  There is
pending legislation in Congress to extend the exemption from this tax for
17 to 24 months.

Aircraft maintenance per ASM decreased 3% due to increased aircraft
utilization.  Aircraft rent per ASM decreased 12% due to an increase in
aircraft utilization, and a restructuring (in the fourth quarter of 1994)
of B737-400 aircraft leases.

Commission expense per ASM decreased 11% because passenger revenues, upon
which commissions are paid, did not keep pace with ASM growth.  In
addition, a greater percentage of tickets were sold without commissions
through tour operators and other wholesalers.

Depreciation and amortization expense per ASM increased 8%, in spite of a
15% increase in ASMs, primarily due to: (a) the reduction in estimated
salvage value from 20% to 5% (effective January 1, 1995) for all MD-80
aircraft; and (b) depreciation on three B737-400 aircraft that were treated as
operating leases for most of 1994.

Other expense per ASM decreased 9% due to lower unit costs for building
rentals, food, landing fees and outside services expenses.
Horizon Air  Operating revenues increased 8.8% to $279.5 million.
Passenger revenues, which accounted for 95% of total operating revenues,
increased 8.3% on a 14.8% rise in passenger traffic.  Capacity increased
21.4% due to the increased use of larger capacity Fokker F-28 jets and
Dornier 328 turboprop aircraft.  The load factor dropped from 62.9% in 1994
to 59.5% in 1995.  Passenger yields declined 5.6% to 31.5 cents in 1995,
reflecting increased competition and longer passenger trips.

Freight, mail and other revenues increased 18.0% due to increased freight
and mail volumes as well as increased revenues from providing services to
other airlines.

The table below shows the major operating expense elements on cost per ASM
basis for Horizon in 1995 and 1994.

Horizon Air                       Operating Expenses Per ASM (In Cents)
%
1995      1994         Change    Change
Wages and benefits                6.06      6.75         (.69)     (10)
Aircraft fuel                     1.95      1.84          .11        6
Aircraft maintenance              2.41      2.33          .08        3
Aircraft rent                     2.44      2.73         (.29)     (11)
Commissions                       1.34      1.56         (.22)     (14)
Depreciation & amortization        .70       .75         (.05)      (7)
Other                             4.57      4.99         (.42)      (8)
Horizon Air Total                19.47     20.95        (1.48)      (7)

Horizon's cost per ASM declined 7% to 19.47 cents due to: (a) greater use
of higher capacity aircraft; (b) no profit sharing accrual in 1995; and (c)
cost reduction efforts.

Consolidated Other Income (Expense)  Non-operating expense increased $7.9
million to $41.9 million expense primarily due to: (a) $4.5 million more
interest expense resulting from higher interest rates on variable debt and
higher average debt balances; (b) $2.2 million of amortization of issue
costs for the 7-1/4% zero coupon notes that were repurchased in August
1995; (c) $1.8 million of vendor credits included in 1994; and (d) $1.6
million more gains on debt retirements included in 1994.

1994 COMPARED WITH 1993  Consolidated net income for 1994 was $22.5
million, or $1.68 per share (primary) and $1.62 per share (fully diluted),
compared with a net loss of $30.9 million, or $2.51 per share, in 1993.
The results for 1993 include an after-tax charge of $9.8 million for the
early retirement of the 727 fleet.  Operating income for 1994 was $75.0
million, compared to an operating loss of $16.8 million for 1993.  The
improved operating results reflect higher operating revenues and the
effects of cost reductions and productivity improvements.

Consolidated operating revenues increased 17% to $1.316 billion.  Passenger
revenues increased 17% on a 37% increase in passenger traffic.  Traffic
gains were due to a 27% increase in system capacity, lower fares that
stimulated traffic, and increased market share.  Yields declined 15% to
14.1 cents in 1994.  Freight and mail revenues increased 9% due to a
military charter contract in the state of Alaska, increased freight
volumes, and increased freight rates, offset by lower mail volumes.  The
lower mail volumes resulted from Alaska's decision to not bid on certain
U.S. mail contracts so that capacity could be made available for higher
yielding freight.  Other-net revenues rose by $11.6 million or 27% due to
increased revenues from Alaska's frequent flyer program, maintenance
contracts and inflight liquor sales.

Consolidated operating expenses increased 8% to $1.241 billion.  Alaska's
operating expenses increased 7% to $998.7 million on a 28% increase in
capacity, resulting in a 16% decline in its cost per ASM.  The lower unit
costs were due to an extensive cost reduction effort and better utilization
of aircraft, facilities, equipment and people, as well as a 2% increase in
average seats per aircraft.  Average daily aircraft utilization increased
26% from 8.2 block hours to 10.3 block hours.  Horizon's operating expenses
increased 14% to $244.0 million on an 18% increase in capacity, resulting
in a 4% decline in its cost per ASM.  The lower unit costs were due to the
acquisition of higher capacity aircraft and cost reduction efforts.

Consilidated Other Income (Expense) was $34.0 million expense in 1994 compared
to $29.0 million expense in 1993.  The increase was primarily due to higher
interest rates on debt and higher average debt balances, offset by gains on
debt retirement and vendor credits.

Liquidity and Capital Resources
The table below presents the major indicators of financial condition and
liquidity.

December 31, 1995   December 31, 1994       Change
(In millions, except ratios and per share amounts)

Cash and marketable securities   $135.1              $104.9       $ 30.2
Working capital (deficit)        (106.4)            (147.1)         40.7
Total assets                    1,313.4            1,315.8          (2.4)
Long-term debt
and capital lease obligations     522.4              589.9         (67.5)
Shareholders' equity              212.5              191.3          21.2

Book value per common share      $15.67              $14.27       $1.40

Debt/equity ratio              71%:29%             76%:24%           NA

1995 FINANCIAL CHANGES  The Company's cash and marketable securities
portfolio increased by $30 million during 1995.  Operating activities
provided $126 million of cash in 1995.  Additional cash was provided by
flight equipment deposits returned ($11 million), net short-term borrowings
($41 million), the sale and leaseback of two B737-400 aircraft ($56
million) and new long-term debt proceeds ($129 million).  Cash was used for
the purchase of one previously leased B737-400 aircraft, airframe and
engine overhauls and other capital expenditures ($103 million) and the
repayment of debt and capital lease obligations ($237 million).

Like many airlines, the Company has a working capital deficit.  The deficit
decreased during 1995 for a variety of factors including the sale and
leaseback of two B737-400 aircraft and the reclassification of an $18
million receivable from other assets to current assets.  The existence of a
working capital deficit has not in the past impaired the Company's ability
to meet its obligations as they become due and it is not expected to do so
in the future.

Financing Arrangements  In June 1995, the Company issued $132.3 million of
6-1/2% convertible senior debentures due 2005.  In August 1995, the Company
redeemed all of its 7-1/4% zero coupon, convertible subordinated notes for
$127.7 million.  In December 1995, Alaska: (a) sold and leased back one
B737-400 aircraft for 18 years; (b) extinguished capital lease obligations
of $27.4 million and subsequently sold and leased back one B737-400
aircraft for 18 years; (c) purchased one B737-400 aircraft that had been
treated as a capital lease; and (d) purchased another B737-400 aircraft that had
been treated as an operating lease.  Short-term borrowings of $46 million were
incurred to purchase the two B737-400 aircraft.  Alaska intends to repay
the short-term borrowings in 1996 when long-term financing is arranged for
these aircraft.

In August 1995, Standard & Poors lowered its corporate credit rating on Air
Group and Alaska to single B plus from double B minus, citing increased
competition in Alaska's West coast markets.

Commitments  During 1995, Alaska took delivery of two new MD-83 aircraft
under 16-year operating leases, and Horizon took delivery of three new
Dornier 328 aircraft (two of which are not in the operating fleet at
December 31, 1995) under 15-year operating leases.  In addition, Alaska
extended operating leases on four of its MD-80 aircraft for an average of
two years and agreed to lease two new B737-400 aircraft.

At December 31, 1995, the Company had firm orders for 14 aircraft with a
total cost of approximately $270 million as set forth below.
Delivery Period - Firm Orders
Aircraft                                  1996     1997   1998    Total
Boeing B737-400                              1        1     --        2
Dornier 328                                  2        2      4        8
McDonnell Douglas MD-83                      2        2     --        4
Total                                        5        5      4       14

Cost (Millions)                           $120     $120    $30     $270

Operating leases have been completed for the B737-400 and Dornier 328
orders.  The Company expects to finance the MD-83s with either leases, long-
term debt or internally generated cash.

The Company accrues the costs associated with returning leased aircraft
over the lease period.  At December 31, 1995, $33 million was reserved for
leased aircraft returns.

Deferred Taxes  At December 31, 1995, net deferred tax liabilities were $30
million, which includes $101 million of net temporary differences, offset
by $42 million of net operating loss (NOL) carryforwards and $29 million of
Alternative Minimum Tax (AMT) credits.  The Company believes that all of
its deferred tax assets, including the NOL and AMT credits, will be
realized through the reversal of existing temporary differences or tax
planning strategies such as the sale of aircraft.

New Accounting Standards  During 1995, the Financial Accounting Standards
Board issued FAS 121, Accounting for the Impairment of Long-Lived Assets,
and FAS 123, Accounting for Stock-Based Compensation.  FAS 121 will be
adopted in 1996 and is not expected to have a material impact on the
Company's financial position or results of operations.  The Company plans
to continue to measure compensation cost of employee stock option plans
using the intrinsic value method prescribed by APB Opinion No. 25 and,
starting in 1996, to make pro forma disclosures of net income and earnings
per share as if the fair value method prescribed by FAS 123 had been
applied.

1994 FINANCIAL CHANGES  Cash and marketable securities increased by $4
million in 1994.  Operations generated $144 million, proceeds from
financing four new MD-83 aircraft were $104 million, and net short-term
borrowings added $5 million.  Cash was used for the repayment of debt ($71
million), and capital expenditures ($189 million).  During 1994, Alaska
restructured its 20 B737-400 aircraft leases.  The fixed term of the leases
was increased from eight years to ten years.  As a result of the
restructuring, Alaska expects to save more than $6 million per year over
the term of the leases.  As part of the restructuring, Alaska purchased one
of the leased aircraft in 1994, agreed to purchase one each in 1995 and
1996, and received options to purchase up to four more of the 20 between
1997 and 1999.  Capital lease obligations increased $57.9 million due to
changes in the lease agreements for two B737-400 aircraft that were
previously classified as operating leases.  Also during 1994, Alaska
further restructured its aircraft orders with McDonnell Douglas, replacing
an order for ten MD-90s plus options with an order for four MD-83s.  This
restructuring will reduce future capital spending by $360 million.

1993 FINANCIAL CHANGES  Cash and marketable securities increased by $18
million in 1993.  Operations generated $49 million, proceeds from aircraft
financing were $84 million, and short-term borrowings added $20 million.
Cash was used for the repayment of debt ($79 million), the repurchase of
preferred stock ($33 million), and capital expenditures ($30 million).
During 1993, the Company repurchased all of its outstanding redeemable
preferred stock for $60 million, saving the Company more than $4 million
annually after taxes.  The seller provided a $27 million loan to assist
with the stock purchase.

EFFECT OF INFLATION  Inflation and specific price changes do not have a
significant effect on the Company's operating revenues, operating expenses
and operating income, because such revenues and expenses generally reflect
current price levels.

ITEM 8.     CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14.

ITEM 9.     DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

PART III
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See "Election of Directors," incorporated herein by reference from the
definitive Proxy Statement for Air Group's Annual Meeting of Shareholders
to be held on May 21, 1996.  See "Executive Officers of the Registrant" in
Part I following Item 4 for information relating to executive officers.

ITEM 11.  EXECUTIVE COMPENSATION
See "Executive Compensation," incorporated herein by reference from the
definitive Proxy Statement for Air Group's Annual Meeting of Shareholders
to be held on May 21, 1996.

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
See "Security Ownership of Certain Beneficial Owners and Management,"
incorporated herein by reference from the definitive Proxy Statement for
Air Group's Annual Meeting of Shareholders to be held on May 21, 1996.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Transactions with Management and Others," incorporated herein by
reference from the definitive Proxy Statement for Air Group's Annual
Meeting of Shareholders to be held on May 21, 1996.

PART IV
ITEM 14.  EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a)  Consolidated Financial Statements:                      Page(s)
Selected Quarterly Consolidated Financial Information (Unaudited)  4
Consolidated Balance Sheet as of December 31, 1995 and 1994    18-19
Consolidated Statement of Income for the years ended
December 31, 1995, 1994 and 1993                               20
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993                               21
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993                               22
Notes to Consolidated Financial Statements                     23-30
Report of Independent Public Accountants                          31

Consolidated Financial Statement Schedule II, Valuation and
Qualifying Accounts, for the years ended
December 31, 1995, 1994 and 1993                                 32

See Exhibit Index on page 33.

(b)  Alaska Air Group did not file any reports on Form 8-K during the
fourth quarter of 1995.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

By:  /s/ John F. Kelly                                  Date: February 8, 1996
John F. Kelly, Chairman, Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on February 8, 1996
on behalf of the registrant and in the capacities indicated.

/s/ John F. Kelly   Chairman, Chief Executive Officer,
President and Director
John F. Kelly

/s/ Harry G. Lehr   Senior Vice President/Finance
Harry G. Lehr     (Principal Financial Officer)

/s/ Bradley D. Tilden            Controller
Bradley D. Tilden   (Principal Accounting Officer)

/s/ William H. Clapp             Director
William H. Clapp

/s/ Ronald F. Cosgrave           Director
Ronald F. Cosgrave

/s/ Mary Jane Fate               Director
Mary Jane Fate

/s/ Bruce R. Kennedy             Director
Bruce R. Kennedy

/s/ R. Marc Langland             Director
R. Marc Langland

Not available                    Director
Byron I. Mallott

/s/ Robert L. Parker, Jr.        Director
Robert L. Parker, Jr.

/s/ Richard A. Wien              Director
Richard A. Wien

CONSOLIDATED BALANCE SHEET                                                                  
Alaska Air Group, Inc.                                                                      

ASSETS                                                                                      
As of December 31  (In Millions)                            1995         1994               

Current Assets                                                                              
Cash and cash equivalents                                  $25.8        $11.6               
Marketable securities                                      109.3         93.3               
Receivables - less allowance for doubtful                                                   
accounts (1995 - $1.6; 1994 - $2.3)                       88.5         70.1               
Inventories and supplies                                    44.8         40.3               
Prepaid expenses and other assets                           70.0         57.3               
Total Current Assets                                       338.4        272.6               

Property and Equipment                                                                      
Flight equipment                                           845.9        776.6               
Other property and equipment                               219.1        208.5               
Deposits for future flight equipment                        40.7         52.8               
1,105.7      1,037.9               
Less accumulated depreciation and amortization             312.8        260.0               
792.9        777.9               
Capital leases                                                                              
Flight and other equipment                                  44.4        103.1               
Less accumulated amortization                               23.3         21.7               
21.1         81.4               
Total Property and Equipment - Net                         814.0        859.3               

Intangible Assets - Subsidiaries                            63.6         65.7               

Other Assets                                                97.4        118.2               

Total Assets                                            $1,313.4     $1,315.8               

See accompanying notes to consolidated financial statements.

CONSOLIDATED BALANCE SHEET                                                                  
Alaska Air Group, Inc.                                                                      

LIABILITIES AND SHAREHOLDERS' EQUITY                                                        
As of December 31  (In Millions)                            1995         1994               
Current Liabilities                                                                         
Accounts payable                                           $69.2        $48.6               
Accrued aircraft rent                                       44.1         43.8               
Accrued wages, vacation and payroll taxes                   45.8         47.4               
Other accrued liabilities                                   55.7         59.6               
Short-term borrowings                                                                       
(Interest rate: 1995 - 6.2%; 1994 - 6.0%)                   65.9         25.0               
Air traffic liability                                      124.4        123.3               
Current portion of long-term debt and                                                       
capital lease obligations                                 39.7         72.0               
Total Current Liabilities                                  444.8        419.7               

Long-Term Debt and Capital Lease Obligations               522.4        589.9               
Other Liabilities and Credits                                                               
Deferred income taxes                                       41.0         28.6               
Deferred income                                             20.0         23.0               
Other liabilities                                           72.7         63.3               
133.7        114.9               
Commitments                                                                                 
Shareholders' Equity                                                                        
Preferred stock, $1 par value                                                               
Authorized:       5,000,000 shares                           -            -               
Common stock, $1 par value                                                                  
Authorized:      30,000,000 shares                                                        
Issued: 1995 -  16,718,684 shares                                                         
1994 -  16,553,679 shares                    16.7         16.6               
Capital in excess of par value                           155.4        152.8               
Treasury stock, at cost: 1995 - 3,153,608 shares                                          
1994 - 3,153,589 shares                  (71.8)       (71.8)              
Deferred compensation                                       (3.6)        (4.8)              
Retained earnings                                          115.8         98.5               
212.5        191.3               
Total Liabilities and Shareholders' Equity              $1,313.4     $1,315.8               

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF INCOME                                                            
Alaska Air Group, Inc.                                                                      

Year Ended December 31                                                                      
(In Millions except Per share Amounts)                      1995         1994         1993  

Operating Revenues                                                                          
Passenger                                               $1,258.2     $1,170.2     $1,002.0  
Freight and mail                                            95.2         91.5         84.0  
Other - net                                                 64.1         53.9         42.3  
Total Operating Revenues                                 1,417.5      1,315.6      1,128.3  
Operating Expenses                                                                          
Wages and benefits                                         427.8        401.7        368.2  
Aircraft fuel                                              181.2        152.3        142.6  
Aircraft maintenance                                        79.2         68.3         67.4  
Aircraft rent                                              172.1        168.5        154.9  
Commissions                                                 93.1         91.9         80.1  
Depreciation and amortization                               68.3         56.6         58.4  
Special charges                                               -            -          15.0  
Other                                                      319.9        301.3        258.5  
Total Operating Expenses                                 1,341.6      1,240.6      1,145.1  
Operating Income (Loss)                                     75.9         75.0        (16.8) 
Other Income (Expense)                                                                      
Interest income                                             10.4          7.8          7.1  
Interest expense                                           (51.5)       (47.0)       (37.6) 
Interest capitalized                                         0.2          0.4          0.4  
Loss on sale of assets                                      (0.2)        (1.0)        (0.6) 
Other - net                                                 (0.8)         5.8          1.7  
(41.9)       (34.0)       (29.0) 
Income (loss) before income tax                             34.0         41.0        (45.8) 
Income tax expense (credit)                                 16.7         18.5        (14.9) 
Net Income (Loss)                                          $17.3        $22.5       $(30.9) 

Primary Earnings (Loss) Per Share                          $1.28        $1.68       $(2.51) 
Fully Diluted Earnings Per Share                           $1.26        $1.62            AD 
Shares used for computation:                                                                
Primary                                                    13.5         13.4         13.3  
Fully diluted                                              20.8         19.6            AD 
AD = Anti-dilutive                                                                          
See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Alaska Air Group, Inc.                                                                                                   

Common Stock                                                          
Capital in     Treasury     Deferred                             
$1 Par        Excess of        Stock      Compen-      Retained               
(In Millions)                               Value        Par Value      at Cost       sation      Earnings        Total  

Balances at December 31, 1992               $16.5           $151.8       $(71.8)      $(10.2)       $110.4       $196.7  
1993 net loss                                                                                        (30.9)       (30.9) 
Preferred stock dividends and                                                                                            
early redemption premium                                                                            (3.6)        (3.6) 
Stock issued under stock plans                                 0.2                                                  0.2  
Employee Stock Ownership Plans                                                                                           
shares allocated                                                                       4.4                        4.4  
Balances at December 31, 1993                16.5            152.0        (71.8)        (5.8)         75.9        166.8  
1994 net income                                                                                       22.6         22.6  
Stock issued under stock plans                0.1              0.8                                                  0.9  
Employee Stock Ownership Plans                                                                                           
shares allocated                                                                       1.0                        1.0  
Balances at December 31, 1994                16.6            152.8        (71.8)        (4.8)         98.5        191.3  
1995 net income                                                                                       17.3         17.3  
Stock issued under stock plans                0.1              2.6                                                  2.7  
Employee Stock Ownership Plan                                                                                            
shares allocated                                                                       1.2                        1.2  
Balances at December 31, 1995               $16.7           $155.4       $(71.8)       $(3.6)       $115.8       $212.5  

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS                                                                   
Alaska Air Group, Inc.                                                                                 

Year Ended December 31  (In Millions)                                     1995        1994        1993 

Cash and cash equivalents at beginning of year                           $11.6       $27.2       $6.9  
Cash flows from operating activities:                                                                  
Net income (loss)                                                         17.3        22.5      (30.9) 
Adjustments to reconcile net income to cash:                                                           
Depreciation and amortization                                          68.3        56.6       58.4  
Amortization of airframe and engine overhauls                          24.3        21.0       29.4  
Special charges                                                          -           -        15.0  
Loss (gain) on disposal of assets and debt retired                      1.9        (1.1)      (0.3) 
Increase (decrease) in deferred income taxes                           12.4         7.6       (8.1) 
Decrease (increase) in accounts receivable                            (18.5)        5.2        9.1  
Decrease (increase) in other current assets                           (17.2)        0.1      (15.1) 
Increase in air traffic liability                                       1.0        15.1       11.6  
Increase in other current liabilities                                  15.5        27.7        1.1  
Interest on zero coupon notes                                           5.4         9.9        9.9  
Leased aircraft return payments and other-net                          15.1       (20.5)     (31.6) 
Net cash provided by operating activities                                125.5       144.1       48.5  

Cash flows from investing activities:                                                                  
Proceeds from disposition of assets                                        3.8         6.5        7.2  
Purchases of marketable securities                                      (169.4)      (76.1)    (150.6) 
Sales and maturities of marketable securities                            153.5        56.8      153.2  
Flight equipment deposits returned                                        10.8         5.5        2.7  
Additions to flight equipment deposits                                    (0.5)       (1.1)      (0.8) 
Additions to property and equipment                                     (102.8)     (187.5)     (29.6) 
Restricted deposits and other                                              3.9        (4.8)       0.1  
Net cash used in investing activities                                   (100.7)     (200.7)     (17.8) 

Cash flows from financing activities:                                                                  
Proceeds from short-term borrowings                                       69.9        25.0       20.0  
Repayment of short-term borrowings                                       (29.0)      (20.0)        -   
Proceeds from sale and leaseback transactions                             56.0          -        36.5  
Proceeds from issuance of long-term debt                                 128.8       104.0       47.2  
Long-term debt and capital lease payments                               (237.4)      (70.9)     (79.4) 
Proceeds from issuance of common stock                                     2.8         0.8        0.2  
Repurchase of preferred stock                                               -           -       (33.4) 
Cash dividends                                                              -           -        (2.4) 
Gain (loss) on debt retirement                                            (1.7)        2.1        0.9  
Net cash provided by (used in) financing activities                      (10.6)       41.0      (10.4) 

Net increase (decrease) in cash and cash equivalents                      14.2       (15.6)      20.3  
Cash and cash equivalents at end of year                                 $25.8       $11.6      $27.2  

Supplemental disclosure of cash paid (received) during the year for:                                   
Interest (net of amount capitalized)                                   $52.6       $44.8      $33.6  
Income taxes (refunds)                                                   5.0         2.2      (18.6) 
Noncash investing and financing activities:                                                            
1995 - None                                                                                          
1994 - Capital lease obligations of $57.9 million
were incurred due to changes in lease agreements.                                                    
1993 - The preferred stock was repurchased in exchange for a $27 million note
payable and a $33.4 million cash payment.                                                            

See accompanying notes to consolidated financial statements.                                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alaska Air Group, Inc.
December 31, 1995

Note 1.     Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Alaska Air
Group, Inc. (Company or Air Group) and its subsidiaries, the principal
subsidiaries being Alaska Airlines, Inc. (Alaska) and Horizon Air
Industries, Inc. (Horizon).  All significant intercompany transactions are
eliminated.  Preparation of financial statements requires the use of
management's estimates.  Actual results could differ from those estimates.
Certain reclassifications have been made in prior years' financial
statements to conform to the 1995 presentation.

Both subsidiaries operate as airlines.  However, each subsidiary's business
plan, competition and economic risks differ substantially due to the
passenger capacity and range of aircraft operated.  Alaska is a major
airline serving Alaska, the West Coast, Mexico and Eastern Russia.  It
operates an all jet fleet and its average passenger trip is 846 miles.
Horizon is a regional airline serving the Pacific Northwest, Northern
California and Western Canada.  It operates both jet and turboprop
aircraft, and its average passenger trip is 221 miles.  See Note 10 for
business segment information.

Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with original
maturities of three months or less. They are carried at cost, which
approximates market.

Inventories and Supplies
Expendable and repairable aircraft parts, as well as materials and
supplies, are stated at average cost.  An allowance for obsolescence is
accrued on a straight-line basis over the estimated useful lives of the
aircraft.  Inventories related to the retired B727 fleet and other surplus
items are carried at their net realizable value.  The allowance at December
31, 1995 and 1994 for all inventories was $13.5 million and $12.1 million,
respectively.

Property, Equipment and Depreciation
Property and equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives, which are as
follows:
Aircraft and other
flight equipment        8-20 years
Buildings                10-30 years
Capitalized leases and
leasehold improvements  Term of lease
Other equipment          3-15 years

Effective January 1, 1995, the estimated salvage value of MD-80 flight
equipment was changed to 5% from 20%.  The new estimate was adopted to
recognize the lower expected salvage values for this aircraft type.  The
effect of the change on the year ended December 31, 1995 was to increase
depreciation expense by $4.9 million and decrease net income by $3.0
million ($.22 per share).

Assets and related obligations for items financed under capital leases are
initially recorded at an amount equal to the present value of the future
minimum lease payments.  The cost of major airframe overhauls, engine
overhauls, and other modifications which extend the life or improve the
usefulness of aircraft are capitalized and amortized over their estimated
period of use.  Other repair and maintenance costs are expensed when
incurred.

Capitalized Interest
Interest is capitalized on flight equipment purchase deposits and ground
facilities progress payments as a cost of the related asset and is
depreciated over the estimated useful life of the asset.  Interest
capitalization is suspended when there is a substantial delay in aircraft
deliveries.

Intangible Assets-Subsidiaries
The excess of purchase price over the fair value of net assets acquired is
recorded as an intangible asset and is amortized over 40 years.
Accumulated amortization at December 31, 1995 and 1994 was $19.1 million
and $17.0 million, respectively.

Deferred Income
Deferred income results from the sale and leaseback of aircraft, the
receipt of manufacturer or vendor credits, and from the sale of foreign tax
benefits.  This income is recognized over the term of the applicable
agreements.

Passenger Revenues
Passenger revenues are considered earned at the time transportation service
is provided.  Tickets sold but not yet used are reported as air traffic
liability.

Frequent Flyer Awards
Alaska operates a frequent flyer award program that provides travel awards
to members based on accumulated mileage.  The estimated incremental cost of
providing free travel is recognized as an expense and accrued as a
liability as miles are accumulated.  Alaska also defers recognition of
income on a portion of the payments it receives from travel partners
associated with its frequent flyer program.  The frequent flyer liability
is relieved as travel awards are used.

Advertising
The costs of advertising are expensed the first time the advertising takes
place.  Advertising expense was $15.2 million, $13.0 million, and $16.8
million, respectively, in 1995, 1994 and 1993

Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or
tax returns.

Earnings Per Share
Primary earnings per share is calculated by dividing net income after
reduction for any preferred stock dividends by the average number of common
shares and dilutive common stock equivalents outstanding.  Common stock
equivalents result from the assumed exercise of stock options.  Fully
diluted earnings per share gives effect to the conversion of convertible
debt (after elimination of related interest expense, net of income tax
effect).

Derivative Financial Instruments
The Company enters into interest rate swap agreements to hedge interest
rate risk.  The differential to be paid or received from these agreements
is accrued as interest rates change and is recognized currently in the
income statement.  The Company enters into hedge agreements to reduce its
exposure to fluctuations in the price of jet fuel.  A gain or loss is
recorded quarterly if the fuel index average exceeds the ceiling price or
falls below the floor price.

Note 2.       Marketable Securities
Marketable securities are investments that are readily convertible to cash
and have original maturity dates that exceed three months.  They are
classified as available for sale and consisted of the following at December
31 (in millions):
1995    1994
Cost:
U.S. govt. sec.    $102.8   $78.0
Other                 6.5    15.3
$109.3   $93.3
Fair value:
U.S. govt. sec.    $103.1   $76.6
Other                 6.6    15.0
$109.7   $91.6
Gross unrealized holding gains:
U.S. govt. sec.      $ .4    $ --
Other                  --      --
$ .4    $ --
Gross unrealized holding losses:
U.S. govt. sec.      $ --    $1.5
Other                  --      .2
$ --    $1.7

Of the marketable securities on hand at December 31, 1995, all will mature
during 1997.  Based on specific identification of securities sold, the
following occurred in 1995 and 1994 (in millions):
1995    1994
Proceeds from sales        $153.5   $56.8
Gross realized gains           .3      --
Gross realized losses          .5      .5

The above realized gains and losses are included in 1995 interest income of
$10.4 million.

Note 3. Other Assets
Other assets consisted of the following at December 31 (in millions):
1995    1994
Restricted deposits $64.2   $66.9
Leasehold rights     11.2    14.1
Deferred costs       18.2    16.0
Receivables           3.8    21.2
$97.4  $118.2

Leasehold rights and deferred costs are amortized over the term of the
related lease or contract.  At December 31, 1995, deferred costs include
$4.2 million of capitalized training costs associated with the B737-400
aircraft.  These costs are being amortized over a five-year period which
began in April 1992.

Note 4.    Long-Term Debt and Capital Lease Obligations
At December 31, 1995 and 1994, long-term debt and capital lease
obligations were as follows (in millions):
1995      1994
8.2%* notes payable due
through 2009                       $335.1    $375.9
6-1/2% convertible senior
debentures due 2005                 132.3      --
7-3/4% convertible subordinated
debentures due 2006-2010             10.8      14.4
6-7/8% convertible subordinated
debentures due 2004-2014             54.0      54.0
7-1/4% zero coupon,
convertible subordinated
notes due 2006                       --       129.4
Long-term debt                       532.2     573.7
Capital lease obligations             29.9      88.2
Less current portion                 (39.7)    (72.0)
$522.4    $589.9
* weighted average for 1995

During 1995, the Company issued $132.3 million of 6-1/2% convertible
senior debentures due 2005.  Each debenture is convertible into common
stock at $21.50 per share.  In addition, the Company redeemed all of its 7-
1/4% zero coupon, convertible subordinated notes for $127.7 million.

At December 31, 1995, borrowings of $330.7 million are secured by flight
equipment and real property.  The 7-3/4% and 6-7/8% debentures are
convertible into common stock at $28.25 and $33.60 per share, respectively,
subject to adjustments in certain events.

At December 31, 1995, Alaska had a $75 million credit facility with
commercial banks.  Advances under this facility may either be for up to a
364-day term, or up to a maximum maturity of three years.  Borrowings may
be used for aircraft acquisitions or other corporate purposes, and they
bear interest at a rate which varies based on LIBOR.  Certain Alaska loan
agreements contain provisions that require maintenance of specific levels
of net worth, leverage and fixed charge coverage, and limit investments,
lease obligations, sales of assets and additional indebtedness.  At
December 31, 1995, the Company was in compliance with all loan provisions,
and under the most restrictive loan provisions, Alaska had $30.8 million of
net worth above the minimum.

At December 31, 1995, long-term debt principal payments for the next five
years were (in millions):
1996                        $37.6
1997                        $34.7
1998                        $35.7
1999                        $53.5
2000                        $59.8

Note 5. Commitments
Lease Commitments
Lease contracts for 114 aircraft have remaining lease terms of one to 17
years.  The majority of airport and terminal facilities are also leased.
Total rent expense was $201.9 million, $196.9 million and $180.4 million,
in 1995, 1994 and 1993, respectively.  Future minimum lease payments under
capital leases and long-term operating leases as of December 31, 1995 are
shown below (in millions):
Capital
Leases   Operating Leases              Total
Aircraft     Facilities
1996           $ 4.1      $173.8          $15.2       $193.1
1997             4.1       165.1           14.0        183.2
1998             4.1       153.7           13.7        171.5
1999             4.1       142.0           13.6        159.7
2000             4.1       132.8           11.9        148.8
Thereafter      15.1       717.5           30.2        762.8
Total lease
payments        35.6    $1,484.9          $98.6     $1,619.1
Less amount
representing
interest         5.7
Present value
of capital lease
payments       $29.9

Aircraft Commitments
The Company has firm orders for 8 Dornier 328s to be delivered between 1996
and 1998, and four MD-83s and two B737-400s to be delivered in 1996 and
1997.  The total amount of these commitments is approximately $270 million.
As of December 31, 1995, deposits related to the future equipment
deliveries were $33.0 million.  In addition to the ordered aircraft, the
Company holds purchase options on 40 Dornier 328s.

Note 6. Stock Plans
Air Group has two stock option plans, which provide for the purchase of Air
Group common stock at its market price on the date of grant by certain
officers and key employees of Air Group and its subsidiaries.  Under the
plans, the incentive and non qualified stock options granted have terms of
up to approximately ten years.  Up to half of the options provide for stock
appreciation rights.  Changes in the number of shares subject to option are
summarized as follows:
1995           1994           1993
Outstanding, beginning
of year            1,044,143        861,362        770,420
Granted(a)             425,500        330,200        172,200
Exercised            (165,005)       (58,469)       (12,600)
Canceled             (143,050)       (88,950)       (68,658)
Outstanding, end
of year            1,161,588      1,044,143        861,362

Exercisable, end
of year(b)           596,338        644,843        542,012

Available for granting
in future periods    102,250        409,000        701,867

Average price of options:
Exercised
during the year        $16.11         $13.65         $14.65
Outstanding
at year-end            $16.56         $17.15         $17.06

(a) The average price of the options granted in 1995 was $15.37
(b) Options exercisable at year-end 1995 expire between June 1996 and June
2004.

In addition, 2,273,700 shares of common stock are subject to
nontransferable investment options held by management employees, for which
the Company received $3.1 million, which is included with other liabilities
on the Balance Sheet.  These options are subject to mandatory redemption at
$3.1 million in February 1997, and they allow the holder to purchase common
stock at $27 per share until that date.

Note 7. Employee Benefit Plans
Pension Plans
Four defined benefit and five defined contribution retirement plans cover
various employee groups of Alaska and Horizon.  The defined benefit plans
provide benefits based on an employee's term of service and average
compensation for a specified period of time before retirement.  Pension
plans are funded as required by the Employee Retirement Income Security Act
of 1974 (ERISA).

The defined benefit plan assets are primarily invested in common stocks and
fixed income securities.  Plan assets exceeded the accumulated benefit
obligation at December 31, 1995 and 1994.  The following table sets forth
the funded status of the plans at December 31, 1995 and 1994 (in millions):
1995   1994
Benefit obligation -
Vested              $155.8 $114.9
Nonvested             22.0   15.8
Accumulated benefit
obligation         $177.8 $130.7

Plan assets
at fair value        $184.4 $144.1
Projected benefit
obligation            199.9  147.2
Plan assets less
projected benefit
obligation          (15.5)  (3.1)
Unrecognized
transition asset     (1.1)  (1.4)
Unrecognized prior
service cost           2.8    3.5
Unrecognized loss      32.6   15.9

Prepaid pension cost  $18.8  $14.9

The weighted average discount rate used to determine the projected benefit
obligation was 7.5% and 9.0% as of December 31, 1995 and 1994,
respectively.  The calculation assumed a weighted average rate of increase
for future compensation levels of 5.1% and 5.2% for 1995 and 1994,
respectively.  The expected long-term rate of return on plan assets used in
1995 and 1994 was 10%.

Net pension expense for the defined benefit plans included the following
components for 1995, 1994 and 1993 (in millions):
1995         1994        1993
Service cost (benefits
earned during the
period)                       $11.4       $12.4        $10.0
Interest cost on projected
benefit obligation             12.9        11.9         10.4
Actual return on  assets        (37.0)       (2.1)       (14.1)
Net amortization
and deferral                    23.3       (10.9)         2.3

Net pension expense             $10.6        $11.3        $8.6

The defined contribution plans are deferred compensation plans under
section 401(k) of the Internal Revenue Code.  Some of these plans require
Company matching contributions based on a percentage of participants'
contributions.  One plan has an Employee Stock Ownership Plan (ESOP)
feature.  The ESOP owns Air Group common shares which are held in trust for
eligible employees.  The Company has recorded deferred compensation to
reflect the value of the shares not yet allocated to eligible employees'
accounts.  As these shares are allocated to employees, compensation expense
is recorded and deferred compensation is reduced.

Alaska and Horizon also maintain an unfunded, noncontributory benefit plan
for certain elected officers.  The present value of unfunded benefits for
this plan was accrued as of December 31, 1995 and 1994.

Total expense for all pension plans was $22.2 million, $22.5 million and
$19.8 million,  respectively, in 1995, 1994 and 1993.
Profit Sharing Plans
Alaska and Horizon have employee profit sharing plans.  Profit sharing
expense for 1995, 1994 and 1993 was $-0- million, $3.6 million and $2.3
million, respectively.

Other Postretirement Benefits
The Company allows retirees to continue their medical, dental and vision
benefits by paying the respective active employee plan premium until age
65.  This results in a subsidy to retirees because the premiums received by
the Company are less than the actual cost of the retirees' claims.

The following table sets forth the status of the postretirement benefit
obligation at December 31, 1995 and 1994 (in millions):
1995           1994
Accumulated postretirement benefit
obligation (APBO):
Retirees                                  $1.4            $.9
Active plan participants
eligible for retirement                  2.9            1.7
Active plan participants not
eligible for retirement                  7.8            4.9
Unrecognized prior service cost             (.3)           (.3)
Unrecognized actuarial gain                  .3            3.2
Accrued postretirement benefit cost       $12.1          $10.4

The Company's APBO is unfunded.  Net annual postretirement benefit costs
for 1995, 1994 and 1993 include the following components (in millions):
1995         1994        1993
Service cost - benefits
attributed to service
during the period                $.7         $.7          $.6
Interest on APBO                   .7          .6           .6
Net postretirement
benefit cost                    $1.4        $1.3         $1.2

An 8.0% health care cost trend rate was assumed for 1996.  The rate was
assumed to decrease by 1/2% annually to 5.5% for 2001 and remain at that
level thereafter.  Increasing the rate by 1 percentage point in each year
would increase the APBO as of December 31, 1995 by $1.8 million and the net
periodic postretirement benefit cost for 1995 by $.2 million.  The weighted-
average discount rates used in determining the APBO for 1995 and 1994 were
7.5% and 9.0%, respectively.

Note 8. Special Charges
Results for 1993 include special charges of $15 million to recognize an
impairment of the value of the Boeing B727 fleet.  The special charges
include reserves for future excess lease costs and the write-down of
capitalized overhauls and spare parts to net realizable value.

Note 9. Income Taxes
The components of income tax expense (credit) were as follows (in
millions):
1995         1994        1993
Current tax expense (credit):
Federal                        $ 5.0       $ 8.0       $ (4.9)
State                             .3          .1          (.3)
Total current                     5.3         8.1         (5.2)
Deferred tax expense (credit):
Federal                          9.2         8.0         (8.2)
State                            2.2         2.4         (1.5)
Total deferred                   11.4        10.4         (9.7)
Total tax expense (credit)      $16.7       $18.5       $(14.9)

Income tax expense (credit) reconciles to the amount computed by applying
the U.S. federal rate of 35% to income before taxes as follows (in
millions):
1995         1994        1993
Income (loss) before
income tax                    $34.0       $41.0       $(45.8)
Expected tax
expense (credit)              $11.9       $14.3       $(16.0)
Nondeductible expense             3.0         2.4          1.2
Federal rate change              --          --            1.0
State income tax                  1.8         1.5         (1.2)
Other - net                      --            .3           .1
Actual tax expense (credit)     $16.7       $18.5       $(14.9)

Effective tax rate               49.1%       45.1%        32.5%

Deferred income taxes result from temporary differences in the timing of
recognition of revenue and expense for tax and financial reporting
purposes.  Deferred tax assets and liabilities comprise the following at
December 31 (in millions):

1995      1994
Excess of tax over book
depreciation                      $140.6    $117.1
Training expense                       1.5       2.2
Other - net                           --         1.3
Gross deferred tax liabilities       142.1     120.6
Loss carryforward                    (42.1)    (38.3)
Alternative minimum tax              (29.3)    (24.5)
Capital leases                        (3.1)     (4.5)
Pricing adjustment                    (1.2)     (1.2)
Frequent flyer program                (6.6)     (6.5)
Employee benefits                     (9.2)    (11.8)
Aircraft maintenance                 (16.3)     (7.7)
Gain on sale of assets                (2.3)     (5.5)
Capitalized interest                  (1.6)     (1.6)
Gross deferred tax assets           (111.7)   (101.6)
Net deferred tax liabilities        $ 30.4    $ 19.0

Current deferred tax asset         $ (10.6)   $ (9.6)
Noncurrent deferred tax liability     41.0      28.6
Net deferred tax liabilities        $ 30.4    $ 19.0

After consideration of temporary differences, taxable income for 1995 was
approximately $4 million, which was offset by net operating losses
generated in prior years.  Federal loss carryforwards can be used through
year 2007.
Note 10.      Business Segment Information
Financial information for Alaska and Horizon follows (in millions):
1995         1994        1993
Operating revenues:
Alaska                     $1,142.3    $1,061.6      $ 906.8
Horizon                       279.5       256.9        223.3
Operating income (loss):
Alaska                         72.4        62.9        (24.3)
Horizon                         4.3        12.9          8.8
Total assets:
Alaska                      1,266.5     1,245.0      1,037.5
Horizon                       154.9       152.3        141.9
Depreciation and amortization  expense:
Alaska                         58.2        47.7         49.0
Horizon                         9.9         8.7          9.3
Capital expenditures:
Alaska                         87.9       173.1         21.1
Horizon                        15.4        15.5          8.8

Note 11. Financial Instruments
The estimated fair values of the Company's financial instruments were as
follows (in millions):
December 31, 1995
Carrying      Fair
Amount     Value
Cash and cash equivalents           $ 25.8    $ 25.8
Marketable securities                109.3     109.7
Restricted deposits                   64.2      64.2
Long-term receivables                  3.8       3.8
Long-term debt                       532.2     521.9

December 31, 1994
Carrying      Fair
Amount     Value
Cash and cash equivalents           $ 11.6    $ 11.6
Marketable securities                 93.3      91.6
Restricted deposits                   66.9      66.9
Long-term receivables                 21.2      21.2
Long-term debt                       573.7     549.0

The fair value of cash equivalents approximates carrying value due to the
short maturity of these instruments.  The fair value of marketable
securities is based on quoted market prices.  The fair values of
restricted deposits and long-term receivables approximate the carrying
amounts.  The fair value of publicly traded long-term debt is based on
quoted market prices, and the fair value of other debt approximates
carrying value.

During 1993, the Company entered into an interest rate swap agreement to
hedge a portion of its fixed rate debt.  The agreement, which expires in
1996, effectively changes the Company's interest rate on the debt from a
fixed rate to a floating rate based on LIBOR.

Variable interest payments are paid to a financial institution semi-
annually based on a notional principal amount of $201 million.  In 1996,
the Company will receive a $33.2 million payment from the financial
institution.  At December 31, 1995, $29.7 million of this amount (which
approximates the fair value of this financial instrument) is shown
as a receivable in current assets.  The Company is exposed to higher
interest payments if LIBOR increases and is exposed to credit loss in the
event of nonperformance by the financial institution.  Through December
31, 1995, this swap has resulted in a $.5 million net reduction in
interest expense.

The Company enters into hedge agreements to reduce its exposure to
fluctuations in the price of jet fuel.  The agreements establish a ceiling
price and floor price, and they provide for quarterly measurements of the
average price of fuel, as determined by an index.  The Company records a
gain or loss if a quarterly average exceeds the ceiling or falls below the
floor.  The fuel hedges had no material effect on 1995 operating results.
At December 31, 1995, the Company had a fuel hedge agreement in place with
a ceiling price of 70 cents covering approximately 45% of the expected fuel
usage through July 1996, and a floor price of 42 cents covering
approximately 45% of the expected fuel usage through July 1996.  At
December 31, 1995, the fuel index was at 56 cents.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of Alaska Air Group, Inc.:

We have audited the accompanying consolidated balance sheet of Alaska Air
Group, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1995.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Alaska Air Group, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The schedule listed in Item 14(a)
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial
statements.  This schedule has been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

Seattle, Washington
January 25, 1996

VALUATION AND QUALIFYING ACCOUNTS                                                                  
Alaska Air Group, Inc.                                                                 Schedule II 

Additions                            
Beginning       Charged      (A)            Ending 
(In Millions)                                     Balance    to Expense    Deductions      Balance 

Year Ended December 31, 1993                                                                       
(a) Reserve deducted from asset                                                                    
to which it applies:                                                                          
Allowance for doubtful accts                    $3.2          $0.9         $(1.5)        $2.6  
Obsolesence allowance for                                                                      
flight equipment spare parts                    $6.3          $2.0                       $8.3  

(b) Reserve recorded as other                                                                      
long-term liabilities:                                                                        
Leased aircraft return provision                   $39.8         $22.3        $(31.4)       $30.7  

Year Ended December 31, 1994                                                                       
(a) Reserve deducted from asset                                                                    
to which it applies:                                                                          
Allowance for doubtful accts                    $2.6          $0.9         $(1.2)        $2.3  
Obsolesence allowance for                                                                      
flight equipment spare parts                    $8.3          $4.5         $(0.7)       $12.1  

(b) Reserve recorded as other                                                                      
long-term liabilities:                                                                        
Leased aircraft return provision                   $30.7          $9.1        $(14.2)       $25.6  

Year Ended December 31, 1995                                                                       
(a) Reserve deducted from asset                                                                    
to which it applies:                                                                          
Allowance for doubtful accts                    $2.3          $0.6         $(1.3)        $1.6  
Obsolesence allowance for                                                                      
flight equipment spare parts                   $12.1          $2.7         $(1.3)       $13.5  

(b) Reserve recorded as other                                                                      
long-term liabilities:                                                                        
Leased aircraft return provision                   $25.6          $7.5         $(0.6)       $32.5  

(A) Deduction from reserve for purpose for which reserve was created.

EXHIBIT INDEX

Certain of the following exhibits have heretofore been filed with the
Commission and are incorporated herein by reference from the document
described in parenthesis.  Certain others are filed herewith.

3.(i)  Certificate of Incorporation of Alaska Air Group, Inc. as amended
through May 20, 1987 (Exhibit 3-01 to 1987 10-K).
*3.(ii) Bylaws of Alaska Air Group, Inc., as amended through February 8, 1996.
4.1  Rights Agreement dated as of December 2, 1986 between Alaska Air Group,
Inc. and The First National Bank of Boston, as Rights Agent (Exhibit No.
1 to Form 8A filed December 12, 1986).
10.1  Lease and Assignment of Sublease Agreement dated February 1, 1979
between Alaska Airlines, Inc. and the Alaska Industrial Development
Authority (Exhibit 10-15 to Registration Statement No. 2-70742).
10.2  Lease and Assignment and Sublease Agreement dated April 1, 1978 between
Alaska Airlines, Inc. and the Alaska Industrial Development Authority
(Exhibit 10-16 to Registration Statement No. 2-70742).
10.3  Management Incentive Plan (1992 Alaska Air Group, Inc. Proxy Statement).
10.4  Loan Agreement dated as of December 1, 1984, between Alaska Airlines,
Inc. and the Industrial Development Corporation of the Port of Seattle
(Exhibit 10-38 to 1984 10-K).
10.5  Alaska Air Group, Inc. 1984 Stock Option Plan, as amended through May 7,
1992.
10.6  Officers Supplementary Retirement Plan (1995 Alaska Air Group, Inc.
Proxy Statement).
10.7  Severance agreement between Alaska Air Group, Inc. and Raymond J. Vecci
(1995 Alaska Air Group, Inc. Proxy Statement).
10.8  Alaska Air Group, Inc. 1988 Stock Option Plan, as amended through
May 19, 1992 (Registration Statement No. 33-523242).
10.9  Purchase Agreement between McDonnell Douglas Corporation and Alaska
Airlines, Inc. DAC 88-36-D, dated October 14, 1988 (Exhibit 10-17 to
1988 10-K).
10.10  Capital Performance Plan (Exhibit 4.3 to Registration Statement 33-
33087).
#10.11 Lease Agreement dated January 22, 1990 between International Lease
Finance Corporation and Alaska Airlines, Inc. for the lease of a B737-
400 aircraft, summaries of 19 substantially identical lease agreements
for 19 additional B737-400 aircraft and Letter Agreement #1 dated
January 22, 1990 (Exhibit 10-14 to 1990 10-K).
#10.12 Purchase Agreement dated as of May 15, 1991, between Horizon Air
Industries, Inc. and Dornier Luftfahrt GmbH for the purchase of up to 60
Dornier 328 aircraft (Exhibit 10-19 to May 30, 1991 8-K).
#10.13 Amendment dated as of June 25, 1993 to the Purchase Agreement dated
as of May 15, 1991, between Horizon Air Industries, Inc. and Dornier
Luftfahrt GmbH for the purchase of up to 60 Dornier 328 aircraft
(Exhibit 10-19a to Second Quarter 1993  10-Q).
*11  Computation of Earnings Per Common Share
*12  Calculation of Ratio of Earnings to Fixed Charges and Preferred
Dividends
21  Subsidiaries of the Registrant (Exhibit 22-01 to 1987 10-K)
*23  Consent of Arthur Andersen LLP
*27  Financial Data Schedule
* Filed herewith.
# Confidential treatment was granted as to a portion of this document.

Alaska Air Group, Inc.                                                          EXHIBIT 11
Computation of Earnings Per Common Share
(In thousands, except per share)

1995           1994           1993
------         ------         ------

Primary -
Net income (loss)                                   $17,255        $22,531       ($30,918)
Deduct dividends on preferred shares                      -              -         (2,429)
Deduct preferred stock accretion                          -              -            (96)
------         ------         ------
Income (loss) applicable to common shares           $17,255        $22,531       ($33,443)
======         ======         ======

Average number of shares outstanding                 13,471         13,367         13,340
Assumed exercise of stock options reduced
by the number of shares purchased with
the proceeds from exercise of such options              14             11              -
------         ------         ------
Common shares outstanding as adjusted                13,485         13,378         13,340
======         ======         ======

Primary Earnings (Loss) per Share                     $1.28          $1.68         ($2.51)
======         ======         ======

Fully Diluted -
Net income (loss)                                   $17,255        $22,531       ($30,918)
After tax interest on convertible securities          8,952          9,252         10,008
------         ------         ------
Income (loss) applicable to common shares           $26,207        $31,783       ($20,910)
======         ======         ======

Average number of shares outstanding                 13,471         13,367         13,340
Assumed exercise of stock options                        14             11             12
Assumed conversion of 6.5% debentures                 3,151              -              -
Assumed conversion of 7.75% debentures                  468            512            518
Assumed conversion of 6.875% debentures               1,608          1,678          1,865
Assumed conversion of 7.25% zero coupon notes         2,053          4,030          4,277
Assumed conversion of preferred shares                    0              0              0
------         ------         ------
Average shares as adjusted                           20,765         19,598         20,012
======         ======         ======

Fully Diluted Earnings (Loss) per Share

$1.26          $1.62         ($0.94)
======         ======         ======
* Anti-dilutive                                                                          *

Alaska Air Group, Inc.                                                                           EXHIBIT 12
Calculation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
(In thousands, except ratios)

1995          1994          1993          1992          1991
--------      --------      --------     ---------       -------

Earnings:
Income (loss) before income tax
expense and accounting change             $33,983       $40,961      ($45,812)    ($125,706)      $16,207

Less: Capitalized interest                     (208)         (353)         (446)       (6,102)       (8,301)
Add:
Interest on indebtedness                     51,479        46,960        37,624        43,223        40,180
Amortization of debt expense                  1,100         1,368           690           643           519
Portion of rent under long-term
operating leases representative
of an interest factor                      67,295        65,618        60,136        49,889        41,327
-------       -------       -------       -------       -------
Total Earnings Available for Fixed
Charges and Preferred Dividends          $153,649      $154,554       $52,192      ($38,053)      $89,932
=======       =======       =======       =======       =======

Fixed Charges and Preferred Dividends:
Preferred dividends                               -             -        $2,429        $6,400        $6,383
Times, ratio of income before
income tax expense to net income               NA            NA          1.48          1.57          1.57
------        ------        ------        ------        ------
Preferred dividends on pretax basis              NA            NA         3,595        10,048        10,021
Amortization of preferred stock
issuance costs                                  -             -            96           288           288
Interest                                     51,479        46,960        37,624        43,223        40,180
Amortization of debt expense                  1,100         1,368           690           643           519
Portion of rent under long-term
operating leases representative
of an interest factor                      67,295        65,618        60,136        49,889        41,327
-------       -------       -------       -------       -------
Total Fixed Charges and
Preferred Dividends                      $119,874      $113,946      $102,141

$104,091       $92,335
=======       =======       =======       =======       =======
Ratio of Earnings to Fixed Charges
and Preferred Dividends                      1.28          1.36          0.51         (0.37)         0.97
=======       =======       =======       =======       =======

Coverage deficiency                               -             -       $49,949      $142,144        $2,403
=======       =======       =======       =======       =======

Exhibit 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation of our report dated January 25, 1996 included in this Form 10-
K, into the Company's previously filed Registration Statements, File
Numbers 2-96973, 33-22358, and 33-33087.

/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP

Seattle, Washington
February 9, 1996

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ALASKA AIR GROUP INC. 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1000

<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1995
<PERIOD-END>                               DEC-31-1995
<CASH>                                           25800
<SECURITIES>                                    109300
<RECEIVABLES>                                    90100
<ALLOWANCES>                                      1600
<INVENTORY>                                      44800
<CURRENT-ASSETS>                                338400
<PP                                         1150100
<DEPRECIATION>                                  336100
<TOTAL-ASSETS>                                 1313400
<CURRENT-LIABILITIES>                           444800
<BONDS>                                         522400
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         16700
<OTHER-SE>                                      195800
<TOTAL-LIABILITY-AND-EQUITY>                   1313400
<SALES>                                        1417500
<TOTAL-REVENUES>                               1417500
<CGS>                                          1341600
<TOTAL-COSTS>                                  1341600
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               51500
<INCOME-PRETAX>                                  34000
<INCOME-TAX>                                     16700
<INCOME-CONTINUING>                              17300
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     17300
<EPS-PRIMARY>                                     1.28
<EPS-DILUTED>                                     1.26

BYLAWS
OF
ALASKA AIR GROUP, INC.

As Amended and in Effect February 8, 1996
(Date of Previous Amendment:  September 14, 1993)

ARTICLE I

REGISTERED OFFICE AND AGENT

The registered office of the corporation is located at
Corporate Trust Center, 1209 Orange Street, 9, County of New
Castle, Delaware 19801, and the name of its registered agent at
such address is The Corporation Trust Company.

ARTICLE II

MEETING OF STOCKHOLDERS

Section 1.     Annual Meetings.

A meeting of the stockholders for the purpose of electing
directors and for the transaction of such other business as may
properly be brought before the meeting shall be held annually at
two o'clock in the afternoon on the third Tuesday of May, or at
such other time or such other day as shall be fixed by resolution
of the Board of Directors.  If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the
next succeeding business day.

Section 2.     Special Meetings.

Special meetings of the stockholders for any purpose or
purposes may be called at any time by a majority of the Board of
Directors or by the Chairman of the Board.

Section 3.     Place of Meetings.

All meetings of the stockholders may be held at such places
as shall be stated in the notice of the meeting.

Section 4.     Notice of Meetings.

Except as otherwise provided by statute, written notice of
each meeting of the stockholders shall be given not less than
thirty and not more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.  If mailed,
notice will be given when deposited in the United States mails,
postage prepaid, directed to such stockholder at his address as it
appears in the stock ledger of the corporation.

When a meeting is adjourned to another time and place, notice
of the adjourned meeting need not be given if the time and place
thereof are announced at the meeting at which the adjournment is
given.  If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

Section 5.     Quorum.

At any meeting of the stockholders, the holders of record of
a majority of the total number of shares of outstanding stock of
the corporation entitled to vote, present in person or represented
by proxy, shall constitute a quorum for all purposes.

If a quorum is present at any meeting of stockholders, the
affirmative vote of the holders of a majority of the stock present
in person or represented by proxy and entitled to vote on the
subject matter shall be the act of the stockholders, except as
otherwise expressly provided in the Certificate of Incorporation,
these Bylaws or applicable law.

In the absence of a quorum at any meeting, the holders of a
majority of the stock entitled to vote thereat, present in person
or represented by proxy at the meeting, may adjourn the meeting,
from time to time, until the holders of the number shares
requisite to constitute a quorum shall be present in person or
represented at the meeting.

Section 6.     Organization.

At each meeting of the stockholders, the Chairman of the
Board, or in his absence such person as shall have been designated
by the Board of Directors, or in the absence of such designation a
person elected by the holders of the majority in number of shares
of stock present in person or represented by proxy and entitled to
vote, shall act as chairman of the meeting.

The Secretary, or in his absence, an Assistant Secretary or,
in the absence of the Secretary and all of the Assistant
Secretaries, any person appointed by the chairman of the meeting,
shall act as secretary of the meeting.

Section 7.     Voting.

Unless otherwise provided in the Certificate of Incorporation
or a resolution of the Board of Directors creating a series of
stock, at each meeting of the stockholders, each holder of shares
entitled to vote at such meeting shall be entitled to one vote for
each share of stock having voting power in respect of each matter
upon which a vote is to be taken.  Shares of its own capital stock
belonging to the corporation, or to another corporation if a
majority of the shares entitled to vote in the election of
directors of such other corporation is held by the corporation,
shall neither be entitled to vote nor counted for quorum purposes.

Section 8.     Notification of Nominations.

Nominations for the election of Directors may be made by or
at the direction of the Board of Directors.  A stockholder may
also nominate a person or persons for election as Directors, but
only if written notice of such stockholder's intent to make such
nominations is received by the Secretary of the corporation, not
later than (i) with respect to an election to be held at a regular
annual meeting of stockholders, 90 days in advance of the third
Tuesday in May, and (ii) with respect to an election to be held at
any other meeting of the stockholders, the close of business on
the 10th day following the date of the first public disclosure,
which may include any public filing by the corporation with the
Securities and Exchange Commission, of the Originally Scheduled
Date of such meeting.  Each such notice shall set forth (a) the
name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record entitled
to vote at such meeting; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming them) pursuant to which the
nomination is to be made; (d) such other information regarding
each nominee as would have been required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had each nominee been nominated by the Board
of Directors; and (e) the consent of each nominee to serve as a
Director if elected.  The chairman of any meeting of stockholders
to elect Directors and the Board of Directors shall refuse to
recognize the nomination of any person not made in compliance with
the foregoing procedure.  For purposes of these Bylaws, the
"Originally Scheduled Date" of any meeting of stockholders shall
be the date such meeting is scheduled to occur in the notice first
given to stockholders regardless of whether such meeting is
continued or adjourned or whether any subsequent notice is given
for such meeting or the record date of such meeting is changed.

Section 9.     Proper Business for Stockholders' Meetings.

At any annual or special meeting of the stockholders of the
corporation, only business properly brought before the meeting may
be transacted.  To be properly brought before an annual meeting,
business (i) must be specified in the notice of the meeting (or
any supplement thereto) given by or at the direction of the Board
of Directors, (ii) otherwise properly brought before the meeting
by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a stockholder.
For business to be properly brought before a meeting by a
stockholder, written notice thereof must have been received by the
Secretary of the corporation, not later than (i) with respect to a
regular annual meeting, 90 days in advance of the third Tuesday in
May, and (ii) with respect to any other meeting, the close of
business on the 10th day following the date of the first public
disclosure, which may include any public filing by the corporation
with the Securities and Exchange Commission, of the Originally
Scheduled Date of such meeting.  Any such notice shall set forth
as to each matter the stockholder proposes to bring before the
meeting (i) a brief description of the business desired to be
brought before the meeting, and the reasons for conducting such
business at the meeting and the language of the proposal, (ii) the
name and address of the stockholder proposing such business, (iii)
a representation that the stockholder is a holder of record of stock
of the corporation entitled to vote
at such meeting, and (iv) any material interest of the stockholder
in such business.  No business shall be conducted at any meeting
of stockholders except in accordance with this paragraph, and the
chairman of any meeting of stockholders and the Board of Directors
shall refuse to permit any business to be brought before meeting
without compliance with the foregoing procedures.

ARTICLE III

BOARD OF DIRECTORS

Section 1.     Number, Qualification and Term of Office.

A majority of the members of the Board of Directors shall not
be employees of the Company.  These Bylaws shall not be amended to
change the requirement for a majority of outside directors unless
approved by a vote of the shareholders, or by a vote of a majority
of the outside directors, but in no case prior to September 14,
1995.  The number, qualification and term of office of the
Directors shall be as set forth in the Certificate of
Incorporation.

Section 2.     Vacancies.

Vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number
of Directors may be filled by a majority of the Directors then in
office, although less than a quorum, or by a sole remaining
Director, at any regular or special meeting of the Board of
Directors.

Section 3.     Resignations.

Any Director may resign at any time upon written notice to
the Secretary of the corporation.  Such resignation shall take
effect on the date of receipt of such notice or at any later date
specified therein; and the acceptance of such resignation shall
not be necessary to make it effective.

Section 4.     Meetings.

Meetings of the Board of Directors may be called by the
Chairman of the Board and shall be called by the Secretary on the
written request of a majority of Directors.  The Board of
Directors may hold its meetings at such place as the Chairman of
the Board or in his absence a majority of Directors from time to
time may determine.  Notice of each meeting shall be sent to each
Director by first class mail or by telephone, telegraph or any
other means of electronic communication in each case directed to
his residence or usual place of business, or delivered to him in
person or given to him orally.  Notice by mail shall be sent by
the Secretary at least ten (10) days previous, and notice by
telephone, telegraph or other electronic communication at least
five (5) days previous, to the time fixed for the meeting; unless,
in case of exigency the Chairman of the Board shall prescribe a
shorter notice.  A written waiver of notice, signed by the
Director entitled to notice, whether before or after the time of
the meeting, shall be deemed equivalent to notice.  The notice of
meeting shall state the time and place of the meeting.

Section 5.     Quorum and Manner of Acting.

Except as otherwise provided by statute, the Certificate of
Incorporation, or these Bylaws, the presence of a majority of the
total number of Directors shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors,
and the act of a majority of the Directors present at any such
meeting at which a quorum is present shall be the act of the Board
of Directors.  In the absence of a quorum, a majority of the
Directors present may adjourn the meeting, from time to time,
until a quorum is present.

Section 6.     Organization.

At every meeting of the Board of Directors, the Chairman of
the Board or in his absence, a chairman chosen by a majority of
the Directors present shall act as chairman of the meeting.  The
Secretary, or in his absence, an Assistant Secretary, or in the
absence of the Secretary and all the Assistant Secretaries, any
person appointed by the chairman of the meeting, shall act as
secretary of the meeting.

Section 7.     Consent of Directors in Lieu of Meeting.

Unless otherwise restricted by the Certificate of
Incorporation or by these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors, or any
committee designated by the Board, may be taken without a meeting
if all members of the Board or committee consent thereto in
writing, and such written consent is filed with the minutes of the
proceedings of the Board or committee.

Section 8.     Telephonic Meetings.

Members of the Board of Directors, or any committee
designated by the Board, may participate in a meeting of the Board
or committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in
person at such meeting.

ARTICLE IV

COMMITTEES OF THE BOARD OF DIRECTORS

Section 1.     Executive Committee.

The Board of Directors may, in its discretion, designate
annually an Executive Committee consisting of the Chairman of the
Board and not less than two other Directors as it may from time to
time determine, provided that the majority of Executive Committee
members shall be nonemployee directors.  The Board of Directors
shall appoint the Chairman of the Executive Committee from among
the members of the Committee.  Except as limited by statute, by
the Certificate of Incorporation, by these Bylaws, or by further
action of the Board of Directors, the Executive Committee may
exercise all the power of the Board of Directors.  All action
taken by the Executive Committee shall be subject to revision or
alteration of the Board; but no such revision or alteration of any
such action shall affect any act or right of any third party
dependent upon such action and having occurred or arisen prior to
notice to such third party of such revision or alteration.  Any
person dealing with the corporation may rely upon a copy of any of
said minutes, votes or resolution, certified by the Chairman of
the Committee or by the Secretary or any Assistant Secretary of
the corporation, and a copy so certified shall be conclusive
evidence of the matters therein stated.  The Executive Committee
shall not, unless specifically authorized by a resolution of the
Board of Directors, spend, finance or commit the Company to any
sum exceeding $5 million in any one instance for nonaircraft
capital assets or $30 million in any one instance for aircraft
acquisitions.

Meetings of the Executive Committee shall be held at the call
of the Chairman of the Executive Committee or the Chairman of the
Board.  In addition, the Committee shall hold as many special
meetings as it determines necessary.

Section 2.     Other Committees.

The Board of Directors may, by resolution passed by a
majority of the Directors, designate such other committees,
consisting of one or more Directors, as it may from time to time
determine, and each such committee shall serve for such term and
shall have and may exercise such duties, functions and powers as
the Board of Directors may from time to time prescribe.  The
Chairman of each such committee shall be designated by the Board
of Directors.

Section 3.     Committee; Books and Records.

Notice of committee meetings shall be governed by the
provisions of Article III, Section 4, above.  Each committee shall
keep a record of its acts and proceedings, and all action of the
committee shall be reported to the Board of Directors at the next
meeting of the Board, except that minutes of each Executive
Committee meeting shall be forwarded to each Director within seven
days of such meeting.

Section 4.     Quorum and Manner of Action.

At each meeting of any committee the presence of a majority
of the members of such committee shall be necessary to constitute
a quorum for the transaction of business, and if a quorum is
present the concurrence of a majority of those present shall be
necessary for the taking of any action.

ARTICLE V

OFFICERS

Section 1.     Number

The officers of the corporation shall be a Chairman of the
Board, a President, a Secretary, and such other officers as may be
elected by the Board of Directors or appointed by the Chairman of
the Board.  Any number of offices may be held by the same person.

Section 2.     Election, Term of Office and Qualifications.

The officers of the corporation shall be elected annually by
the Board of Directors.  Each officer elected by the Board of
Directors shall hold office until his successor shall have been
duly elected and qualified, or until he shall have died, resigned
or been removed in the manner hereinafter provided.

Section 3.     Resignations.

Any officer may resign at any time upon written notice to the
Chairman of the Board.  Such resignation shall take effect on the
date of its receipt, or on any later date specified therein; and
the acceptance of such resignation shall not be necessary to make
it effective.

Section 4.     Removals.

Any officer elected by the Board of Directors may be removed,
with or without cause, by the Board of Directors.  Any officer
appointed by the Chairman of the Board may be removed, with or
without cause, by the Chairman of the Board.

Section 5.     Vacancies.

Any vacancy occurring in any office of the corporation shall
be filled for the unexpired portion of the term in the same manner
as prescribed in these Bylaws for regular election or appointment
to such office.

Section 6.     Compensation of Officers

The salaries of all officers elected by the Board of
Directors shall be approved or authorized by the Board of
Directors or by the Chairman of the Board when so authorized by
the Board of Directors.

Section 7.     Chairman of the Board.

The Chairman of the Board shall be the Chief Executive
Officer of the corporation and shall have the general and active
management of the business of the corporation and general and
active supervision and direction over the other officers, agents
and employees and shall see that their duties are properly
performed.  He shall, if present, preside at each meeting of the
stockholders and of the Board.  He shall perform all duties
incident to the office of Chairman of the Board and such other
duties as may from time to time be assigned to him by the Board.
The Chairman of the Board shall have the power to vote shares
stock of other corporations held by the corporation, except as may
be otherwise determined by the Board.

Section 8.     President.

The President shall have general and active supervision and
direction over the business and affairs of the corporation and
over its several officers, subject, however, to the direction of
the Chairman of the Board.  He shall perform all duties incident
to the office of President and such other duties as may be
assigned to him by the Board, the Chairman of the Board or these
Bylaws.

Section 9.     Secretary.

The Secretary or one or more Assistant Secretaries shall
attend all meetings of the Board and all meetings of the
stockholders and act as secretary thereof, and shall record all
votes and the minutes of all proceedings in a book to be kept for
that purpose, and shall perform like duties for any committee of
the Board when required.  The Secretary shall be given other
duties as pertain to his office.  The Secretary shall keep in safe
custody the seal of the corporation and when authorized by the
Board of Directors, affix it, when required, to any instrument.
An Assistant Secretary shall perform the duties of the Secretary
in the event of his absence or disability and shall perform such
other duties as may be imposed upon him by the Board of Directors.

Section 10.    Absence or Disability of Officers.

In the absence or disability of the Chairman of the Board or
the President, the Board of Directors may designate, by
resolution, individuals to perform their duties.  The Board of
Directors may also delegate this power to a committee.

ARTICLE VI

STOCK CERTIFICATES AND TRANSFER THEREOF

Section 1.     Stock Certificates.

Except as otherwise permitted by statute, the Certificate of
Incorporation or resolution or resolutions of the Board of
Directors, every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of, the
corporation by the Chairman of the Board and Chief Executive
Officer, the President, or a Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares, and
the class and series thereof, owned by him in the corporation.
Any and all of the signatures on the certificate may be a
facsimile.  In case any officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.

Section 2.     Lost, Destroyed or Mutilated Certificates.

In the case of loss or destruction of a certificate of stock,
no new certificate shall be issued in lieu thereof except upon
satisfactory proof to the Secretary of such loss or destruction;
and upon the giving of satisfactory security, by bond or
otherwise, against loss to the corporation, if such is deemed to
be required.

Section 3.     Record Date.

In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty nor less than
thirty days before the date of such meeting, nor more than sixty
days prior to any other action.  A determination of stockholders
of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.

ARTICLE VII

DIVIDENDS

Except as otherwise provided by statute or the Certificate of
Incorporation, the Board of Directors may declare dividends upon
the shares of its capital stock whenever, and in such amounts as,
in its opinion, the condition of the affairs of the corporation
shall render it advisable.  Dividends may be paid in cash, in
property, or in shares of capital stock of the corporation.

ARTICLE VIII

INDEMNIFICATION

Section 1.     Right to Indemnification.

Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved (including, without
limitation, as a witness) in any actual or threatened action, suit
or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact
that he or she is or was a Director or officer of the corporation
or that, being or having been such a Director or officer or
employee of the corporation, he or she is or was serving at the
request of the corporation as a Director, officer, employee or
agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity
as a Director, officer, employee or agent or in any other capacity
while serving as a Director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the full
extent permitted by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than
permitted prior thereto) or by other applicable law as then in
effect, against all expense, liability and loss (including
attorneys' fees, judgments, finds, ERISA excise taxes or penalties
and amounts to be paid in settlement) actually and reasonably
incurred or suffered by such indemnitee in connection therewith
and such indemnification shall continue as to an indemnitee who has
ceased to be a Director, officer, employee, or
agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that except as
provided in Section 2 with respect to proceedings seeking to
enforce rights to indemnification, the corporation shall indemnify
any such indemnitee seeking indemnification in connection with a
proceeding (or part thereof) initiated by such indemnitee only if
such proceeding (or part thereof) was authorized by the Board of
Directors of the corporation.  The right to indemnification
conferred in this Section shall be a contract right and shall
include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided,
however, that if the Delaware General Corporations Law requires,
an advancement of expenses incurred by an indemnitee in his or her
capacity as a Director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee including,
without limitation, service to an employee benefit plan) shall be
made only upon delivery to the corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee
to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be
indemnified for such expenses under this Section 1 or otherwise.

Section 2.     Right of Indemnitee to Bring Suit.

If a claim under Section 1 is not paid in full by the
corporation within sixty days after a written claim has been
received by the corporation, except in the case of a claim for
advancement of expenses, in which case the applicable period shall
be twenty days, the indemnitee may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the
claim.  If successful in whole or in part in any such suit, the
indemnitee shall be entitled to be paid also the expense of
prosecuting such suit.  The indemnitee shall be presumed to be
entitled to indemnification under this Article upon submission of
a written claim (and, in an action brought to enforce a claim for
advancement of expenses, where the required undertaking, if any is
required, has been tendered to the corporation), and thereafter
the corporation shall have the burden of proof to overcome the
presumption that the indemnitee is not so entitled.  Neither the
failure of the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances
nor an actual determination by the corporation (including its
Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee is not entitled to
indemnification shall be a defense to the suit or create a
presumption that the indemnitee is not so entitled.

Section 3.     Nonexclusivity of Rights.

The right to indemnification and to the advancement of
expenses conferred in this Article shall not be exclusive of any
other right which any person may have or hereafter acquire under
any statute, provision of the Certificate of Incorporation, Bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise.  Notwithstanding any amendment to or repeal of this
Article, any indemnitee shall be entitled to indemnification in
accordance with the provisions hereof and thereof with respect to
any acts or omissions of such indemnitee occurring prior to such
amendment or repeal.

Section 4.     Insurance, Contracts and Funding.

The corporation may maintain insurance, at its expense, to
protect itself and any Director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss,
whether or not the corporation would have the power to indemnify
such person against such expense, liability or loss under the
Delaware General Corporation Law.  The corporation may without
further stockholder approval, enter into contracts with any
indemnitee in furtherance of the provisions of this Article and
may create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to
ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.

Section 5.     Persons Serving Other Entities.

Any person who is or was a Director, officer or employee of
the corporation who is or was serving as a Director or officer of
another corporation of which a majority of the shares entitled to
vote in the election of its directors is held by the corporation
shall be deemed to be so serving at the request of the corporation
and entitled to indemnification and advancement of expenses under
Section 1.

Section 6.     Indemnification of Employees and Agents of the
Corporation.

The corporation may, by action of its Board of Directors,
grant rights to indemnification and advancement of expenses to any
employee or agent, or any group or groups of employees or agents,
of the corporation with the same scope and effect as the
provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the
corporation.

ARTICLE IX

CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

Section 1.     Checks, Drafts, Etc.; Loans.

All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall, from time
to time, be determined by resolution of the Board of Directors.
Such authority may be general or confined to specific
circumstances.

Section 2.     Deposits.

All funds of the corporation shall be deposited, from time to
time, to the credit of the corporation in such banks, trust
companies or other depositories as the Board of Directors may
select, or as may be selected by any officer or officers, agent or
agents of the corporation to whom such power may, from time to
time, be delegated by the Board of Directors; and for the purpose
of such deposit, any officer or agent to whom such power may be
delegated by the Board of Directors, may endorse, assign and
deliver checks, drafts and other orders for the payment of money
which are payable to the order of the corporation.

ARTICLE X

AMENDMENTS

These Bylaws may be altered or repealed and new Bylaws may be
made by the affirmative vote of a majority of the Board of
Directors, subject to the right of the stockholders to amend or
repeal Bylaws made or amended by the Board of Directors or to
adopt new Bylaws, by the affirmative vote of a majority of the
outstanding stock of the corporation entitled to vote thereon and
the holders of three-fourths of the stock present in person or
represented by proxy at the meeting, provided that notice of the
proposed action be included in the notice of such meeting.

Terms of the masculine gender used for convenience in these
Bylaws should be understood in the feminine gender where
appropriate.

*  *  *  *  *

I, MARJORIE E. LAWS, being the duly appointed Vice
President/Corporate Affairs and Corporate Secretary of Alaska Air
Group, Inc. do hereby certify that the foregoing is a true and
correct copy of the Bylaws of Alaska Air Group, Inc. in effect on
this _____ day of ______________, 19 __.

____________________________
Marjorie E. Laws
Vice President/Corporate Affairs
and
Corporate Secretary