FUEL

Our business and financial results are highly impacted by the price and the availability of aircraft fuel. Aircraft fuel expense includes raw fuel expense, or the price that we generally pay at the airport, including taxes and fees, plus the effect of mark-to-market adjustments to our fuel hedge portfolio as the value of that portfolio increases and decreases. The cost of aircraft fuel is volatile and outside of our control, and it can have a significant and immediate impact on our operating results. Over the past three years, aircraft fuel expense ranged from 14%23% to 24%28% of operating expenses. Fuel prices are impacted by changes in both the price of crude oil and refining costs and can vary by region in the U.S.

The price of crude oil on an average annual basis for the past three years has ranged from a low of $39$68 per barrel in 20202021 to a high of $68$94 in 2021.2022. For us, a $1 per barrel change in the price of oil equates to approximately $16$20 million of raw fuel costexpense annually based on 20212023 consumption levels. Said another way, a one-cent change in our fuel price per gallon would have impacted our 20212023 raw fuel costexpense by approximately $7$8 million.

Refining margins, which represent the price of refining crude oil into aircraft fuel, are a smaller portion of the overall price of jet fuel, but have also contributed to the price volatility in recent years. Over the last three years, average annual West Coast refining margin prices have fluctuated from a low of $11$12 per barrel in 20202021 to a high of $26$48 per barrel in 2019.2022.

Generally, West Coast jet fuel prices are somewhat higher and more volatile than prices in the Gulf Coast or on the East Coast. Our average raw fuel cost per gallon increaseddecreased 14% in 2023, after increasing 73% in 2022 and increasing 37% in 2021, after decreasing 29% in 2020 and decreasing 6% in 2019.2021.

We usehave historically used crude oil call options as hedges againstto limit our exposure to the volatility of jetrapid increases in fuel prices. Call options effectively cap our price for crude oil, limiting our exposure to increasing fuel prices for about half of our planned fuel consumption. WithThe call options we are hedged againstlessen the financial impact from spikes in crude oil prices, and during a period of declines in crude oilwhen prices are below our call option strike prices, we only forfeit cash previously paid for hedge premiums. In the fourth quarter of 2023, we suspended purchases of crude oil call options as we reevaluate our fuel and hedge program strategies. Our final crude oil call option position will settle in the first quarter of 2025. We begin hedging approximately 18 months in advance of consumption.are exploring alternative strategies that will enable fuel cost optimization across our West Coast geographies and mitigate our concentrated reliance on West Coast refineries.

In 2020, Alaska began using sustainableSustainable aviation fuel for certain(SAF) is an important part of our long-term strategy to reduce emissions. In 2023, Alaska used limited quantities of SAF on flights departing from San Francisco International Airport and Los Angeles International Airport. Sustainable aviation fuelSAF prices are currentlygenerally higher than traditionaljet fuel prices as the SAF market is still developing. As of December 31, 2023, Alaska has agreements to purchase approximately 200 million gallons of neat SAF to be delivered through 2030. The demand for SAF within the aviation industry significantly exceeds the current available supply. We are evaluating options for obtaining the volume of sustainable aviation fuelsSAF that we expect will be necessary to move us towardstoward our long-term sustainability goals. These options include partnerships with alternative fuel companies and industry groups focused on ways to accelerate innovation in this area.

We believe that operating fuel-efficient aircraft and executing on operational best practices are the best hedges againststrategies to mitigate high fuel prices. Maintaining a young, fuel-efficient fleet helps reduce our fuel consumption rate, but alsoas well as the amount of greenhouse gases and other pollutants that our aircraft emit.

COMPETITION

Competition in the airline industry can be intense and unpredictable. Our competitors consist primarily of other airlines and, to a lesser extent, other forms of transportation. Competition can be direct, in the form of another carrier flying the exact non-stop route, or indirect, where a carrier serves the same two cities non-stop from an alternative airport in that city or via an itinerary requiring a connection at another airport. We compete with other domestic airlines and a limited number of international airlines on nearly all of our scheduled routes. Our largest competitor is Delta Air Lines Inc. (Delta). Approximately 76%75% of our capacity to and from Seattle competes with Delta. As we have grown in California and have expanded our transcontinental route offerings,In addition to Delta, United Airlines and Southwest Airlines have also become largeare significant competitors on the West Coast and have increased their capacity in markets we serve.the states of Hawaii and Alaska. Our California and transcontinental routes have a higher concentration of competitors when compared to our historical route structure, which was predominately concentrated inroutes within the Pacific Northwest. As carriers further restore domestic capacity in the recovery from the COVID-19 pandemic, we expect the amount of competitive capacity overlap with all carriers to increase in the first quarter of 2022.

We believe that the following competitive factors matter to guests when making an air travel purchase decision:

Ticket and other fee pricing is a significant competitive factor in the airline industry, and the increased availability of fare information on the internet allows travelersindustry. Travelers are able to easily compare fares and identify competitor promotions and discounts. Pricing is driven by a variety of factors including, but not limited to, market-specific capacity, market share per route/geographic area, cost structure, fare vs. ancillary revenue strategies, and demand.

For example, airlinesAirlines often discount fares to drive traffic in new markets or to stimulate traffic when necessary to improve load factors. In addition, traditional networkHistorically, markets that faced competition from low-cost and ultra-low-cost carriers have been ablewere subject to reduce their operating costs through bankruptciesdisruptive ticket and mergers, while low-cost carriers have continued to grow their fleets and expand their networks, potentially enabling them to better control costsfee pricing as the carriers' low cost per available seat mile (the average cost to fly an aircraft seat one mile), which in turn may enableallowed them to lowerserve markets at very low fares. Post-COVID industry competitive dynamics are evolving. Legacy carriers with expansive networks and diversified product offerings have experienced greater success attracting more price-conscious customers with their fares.basic economy offerings. These factors can reduce our pricing power and that of the airline industry as a whole.

Domestic airline capacity is dominated by four large carriers, representing 78% of total seats. One of our advantages is that we offer low fares and a premium value product and experience. However, given the large concentration of industry capacity, some carriers in our markets may discount their fares substantially to develop or increase market share. Fares that are substantially below our cost to operate can be harmful if sustained over a long period of time. We will defend our

 

We compete with other airlines based on markets served and the frequency of service to those markets. Some airlines have more extensive route structures than we do, and reputationthey offer significantly more international routes. In order to expand opportunities for our guests, we enter into codeshare and interline relationships with other airlines. These relationships

We compete with other airlines in areas of customer service such as on-time performance and guest amenities - including first class and other premium seating, quality of on-board products, aircraft type and comfort. All mainlineAir Group offers first class and premium seats in all Mainline and Regional aircraft. In 2023, we completed our installation of satellite Wi-Fi on aircraft in operating service have our refreshed interior configuration, which provides our guests with one consistent experience across the Mainline fleet. We also beganIn 2024, we will begin installing next-generation Gogo® inflight satellite-basedhigh-speed satellite Wi-Fi on our entire Boeing and Airbus fleets in 2018, which is now plannedRegional fleet, becoming the first major airline to be completed in early 2022.do so.

Our employees are a critical element of our reputation. We have a highly engaged workforce that strives to provide genuine and caring service to our guests, both at the airport and onboard. We heavily emphasize our service standards with our employees through training and education programs, and monetary incentives related to operational performance and guest satisfaction.

In addition to domestic or foreign airlines that we compete with on most of our routes, we compete with ground transportation in our short-haul markets. Our airlines also compete with technology, such as video conferencing and internet-based meeting tools. We expect that the advancement and increased utilization of these tools will eliminate the need for some business-related travel.

TICKET DISTRIBUTION

 

Our tickets are distributed through three primarymultiple channels:

 

 

 

SEASONALITY AND OTHER FACTORS

Our results of operations for any interim period are not necessarily indicative of those for the entire year because our business is subject to seasonal fluctuations. In typical years, our profitability is generally lowest during the first and fourth quarters due principally to fewer departures and passengers. Profitability typically increases in the second quarter and then reaches its highest level during the third quarterquarters as a result of vacation travel. Although pre-tax profits have not fully recovered to pre-COVID levels, seasonal fluctuations began to return to pre-COVID patterns as demand recovered in 2021, aided by the widespread availability of COVID-19 vaccines in the second quarter. However, due to relatively weaker business travel recovery and volatility from new COVID variants, seasonal fluctuations have not fully normalized. In a typical year, some of the impacts of seasonality are offset by travel from the West Coast to leisure destinations like Hawaii and Costa Rica, and expansion to leisure and business destinations in the mid-continental and eastern U.S. Seasonality and operationaloperating fluctuations may have a significant impact on operating results in an interim or annual period, and are not predictable in the current environment and may be permanently changed post-pandemic.necessarily indicative of future operating results.

In a typical year, in addition to passenger loads, factors that could cause our quarterly operating results to vary include:  

 

 

Many of the markets we serve experience inclement weather conditions in the winter, causing increased costs associated with deicing aircraft, canceling flights, and accommodating displaced passengers. Due to our geographicgeographically concentrated area of operations, we can be more susceptible to adverse weather conditions, particularly in the state of Alaska and the Pacific Northwest, than some of our competitors who may be better able to spread the impact of weather-related risks over larger route systems.

No material part of our business, or that of our subsidiaries, is dependent upon a single customer, or upon a few high-volume customers.

Aside from our commitments to reducing our airlines' carbon footprint, we also recognize the impact our operation has in generating waste. In 2018, we were the first U.S. airlineAlaska partners with a third-party firm to remove plastic strawsconduct quarterly waste audits at our hubs. Specific measures taken in recent years include requiring guests to pre-order meals to reduce food waste and stir sticks from our aircraft and in 2019, we launched a campaign called #FillBeforeYouFly to engage our employees and guests in reducing plastic waste. In 2021, we expanded inflight sustainability efforts by tradingreplacing single-use plastic water bottles and cups forwith plant-based cartons and recyclable paper cups. Alaska leads the industry in inflight recycling, and continues to evaluate new ways to further reduce inflight waste.

COMMUNITY INVOLVEMENT

Alaska and Horizon are dedicated to actively supporting the communities we serve. In 2021,2023, Air Group companies donated $11$15 million in cash and in-kind travel to approximately 9001,300 charitable organizations, and our employees volunteered more than 21,00040,000 hours of community service related to youth and education, medical research, and transportation. Our cargo businessAir Group also encourages its guests to play a role in supporting these communities. During the year, Mileage Plan members donated more than 100 million miles through Alaska's Care Miles program.

In 2023, after wildfires devastated parts of West Maui, Air Group provided critical support to the communities in need by transporting essential goodson the island. The Company transported more than 200,000 pounds of relief supplies to impacted communities and shipments of COVID-19 vaccines throughoutsent rescue flights to help evacuees off the state of Alaska.island. Alaska also partnered with non-profits to distribute donated miles to those who needed support to travel.

The Alaska Airlines Foundation (the Foundation) also provides grants to nonprofits that offer educational and career-development programs to young people. Organizations are invited to apply bi-annually for grants ranging from $5,000 to $20,000, with preference given to organizations that can demonstrate partnership and long-term program sustainability. Since inception in 1999, the Foundation has donated more than $3$4 million in grants, including nearly $260,000more than $500,000 in 2021.2023.

Our relations with U.S. labor organizations representing Alaska and Horizon employees are governed by the Railway Labor Act (RLA). Under the RLA, collective bargaining agreements do not expire, but instead become amendable as of a stated date. If either party wishes to modify the terms of any such agreement, it must notify the other party in the manner prescribed by the RLA and/or described in the agreement. After receipt of such notice, the parties must meet for direct negotiations, and if no agreement is notreached, either party may request the National Mediation Board to initiate a partprocess including mediation, arbitration, and a potential “cooling off” period that must be followed before either party may engage in self-help. Certain employees located outside the United States are also represented by unions or local representative groups.

 

The executive officers of Alaska Air Group, Inc. and its primary subsidiaries, Alaska Airlines, Inc. and Horizon Air Industries, who have significant decision-making responsibilities, their positions and their respective ages are as follows:

 

 

GENERAL

 

The airline industry is highly regulated, most notably by the federal government. The Department of Transportation (DOT), the Transportation Security Administration (TSA), and the FAA exercise significant regulatory authority over air carriers.

 

The Department of Justice (DOJ) and DOT have jurisdiction over airline competition matters. The DOJ has authority to review Alaska's proposed acquisition of Hawaiian Airlines under the U.S. antitrust laws. The U.S. Postal Service has jurisdiction over certain aspects of the transportation of mail and related services. Labor relations in the air transportation industry are regulated under the RLA. To the extent we continue to fly to foreign countries and pursue alliances with international carriers, we may be subject to certain regulations of foreign agencies and international treaties.

We are also subject to the oversight of the Occupational Safety and Health Administration (OSHA) concerning employee safety and health matters. The OSHA and other federal agencies have been authorized to create and enforce regulations that have an impact on our operations. In addition to these federal activities, various states have been delegated certain authorities under these federal statutes. Many state and local governments have adopted employee safety and health laws and regulations. We maintain our safety and health programs in order to meet or exceed these requirements.

ENVIRONMENTAL

 

The Airport Noise and Capacity Act recognizes the rights of airport operators with noise problems to implement local noise abatement programs so long as they do not interfere unreasonably with interstate or foreign commerce or the national air transportation system. Authorities in several cities have established aircraft noise reduction programs, including the imposition of nighttime curfews. We believe we have sufficient scheduling flexibility to accommodate local noise restrictions.

At this timeThe state of California has enacted rules, effective in 2025, that will expand required disclosures discussing the impact of environmental change; agencies within the federal government have proposed similar rules that are not yet finalized. Costs associated with compliance could be significant. Except for these rules, we do not currently anticipate adverse financial impacts from any specific existing or pending environmental regulation or reporting requirements, new regulations, related to our existing or past operations, or compliance issues that could harm our financial condition, results of operations, or cash flows in future periods.

INSURANCE

We carry insurance of types customary in the airline industry and in amounts deemed adequate to protect our interests and property and to comply both with federal regulations and certain credit and lease agreements. The insurance policies principally provide coverage for airline hull, spares and comprehensive legal liability, war and allied perils, and workers’ compensation. In addition, we currently carry a cyber insurance policy in the event of security breaches from malicious parties.

We believe that our emphasis on safety and our state-of-the-art flight deck safety technology help to control the cost of our insurance.

 

 

If any of the following occurs, our business, financial condition, and results of operations could be harmed. The trading price of our common stock could also decline. We operate in a continually changing business environment. In this environment, new risks may emerge, and already identified risks may vary significantly in terms of impact and likelihood of occurrence. Management cannot predict such developments, nor can it assess the impact, if any, on our business of such new risk factors or of events described in any forward-looking statements.

Our reputation and financial results could be harmed in the event of an airline accident or incident.

 

An accident or incident involving one of our aircraft or an aircraft operated by one of our codesharecommercial partners or CPA carriers could involve loss of life and result in a loss of confidence in our Company by the flying public and/or aviation authorities. We could experience significant claims from injured passengers, bystanders and surviving relatives, as well as costs for the repair or replacement of a damaged aircraft and temporary or permanent loss from service. We maintain liability insurance in amounts and of the type generally consistent with industry practice, as do our codesharecommercial partners and CPA carriers. However, the amount of such coverage may not be adequate to fully cover all claims, and we may be forced to bear substantial economic losses from such an event. Substantial claims resulting from an accident in excess of our related insurance coverage would harm our business and financial results. Moreover, any aircraft accident or incident, even if it is fully insured andor does not involve one of our aircraft, could cause a public perception that our airlines or the aircraft we or our partners fly are less safe or reliable than other transportation alternatives. This would harm our business.

Our operations are often affected by factors beyond our control, including delays, cancellations, and other conditions, which could harm our business, financial condition, and results of operations.

As is the case for all airlines, our operations often are affected by delays, cancellations and other conditions caused by factors largely beyond our control.

Factors that might impact our operations include:

 

 

Due to the concentration of our flights in the Pacific Northwest and Alaska, we believe a large portion of our operation is more susceptible to adverse weather conditions than other carriers.carriers with networks that cover a larger geographic area. A general reduction in airline passenger traffic as a result of any of the above-mentioned factors could harm our business, financial condition, and results of operations.

We rely on vendors and third parties for certain critical activities and sourcing, which could expose us to disruptions in our operation or unexpected cost increases.

 

We rely on vendors for a variety of services and functions critical to our business, including airframe and engine maintenance, regional flying, ground handling, fueling, computer reservation system hosting, telecommunication systems, information technology infrastructure and services, and deicing, among others. We also rely on government-controlled systems such as air traffic control technology that could malfunction for reasons out of our control.

 

Our use of outside vendors increases our exposure to several risks. Even though we strive to formalize agreements with these vendors that define expected service levels, our use of outside vendors increases our exposurewe may not have the ability to several risks.influence change with all vendors. In the event that one or more vendors go into bankruptcy, ceases operation, or fails to perform as promised, for reasons such as supply chain delays, or workforce shortages, replacement services may not be readily available at competitive rates, or at all. If one of our vendors fails to perform adequately, we may experience increased costs, delays, maintenance issues, safety issues, or negative public perception of our airline. Vendor bankruptcies, unionization, regulatory compliance issues, or significant changes in the competitive marketplace among suppliers could adversely affect vendor services or force us to renegotiate existing agreements on less favorable terms. These events could result in disruptions in our operations or increases in our cost structure.

Impacts of climate change, including legal, regulatory orphysical and transition risks, as well as market responses, may have a material adverse result on our operations and/orand financial position.

Concerns regarding climate change, including the impacts of a gradual increase in global temperatures leading to more severe weather conditions, continue to rise. Increased frequency or duration of extreme weather conditions could cause significant and prolonged impacts to our operation, or disrupt our supply chain.chain, and influence consumer travel decisions. These disruptions may result in increased operating costs and lost revenue should we be unable to operate our published schedules.

The airline industry continues to face potential security concerns and related costs.

Terrorist attacks, the fear of such attacks or other hostilities involving the U.S. could have a significant negative effect on the airline industry, including us, and could:

 

 

 

 

 

 

 

The occurrence of any of these events would harm our business, financial condition, and results of operations.

The airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adverse effect on our business. If we cannot successfully compete in the marketplace, our business, financial condition, and operating results will be materially adversely affected.

The U.S. airline industry is characterized by substantial price competition. Airlines compete for market share by increasing or decreasing theirthrough pricing, capacity (supply), route systems and the number of markets served. Several of ourserved, merchandising, and products and services offered to guests. We have significant capacity overlap with competitors, have increased their capacity in markets we serve, particularly in our key West Coast markets. This dynamic may be exacerbated by competition among airlines to attract passengers during the recovery from the COVID-19 pandemic.periods of economic recovery. The resulting increased competition in both domestic and international markets may have a material adverse effect on our results of operations, financial condition, or liquidity.liquidity if we are unable to attract and retain guests.

We strive toward maintaining and improving our competitive cost structure by setting aggressive unit cost-reduction goals. This is an important part of our business strategy of offering the best value to our guests through low fares while achieving acceptable profit margins and return on capital. If we are unable to maintain our cost advantage over the long-term and achieve sustained targeted returns on invested capital, we will likely not be able to grow our business in the future or weather industry downturns. Therefore, our financial results may suffer.

Our concentration in certain markets could cause us to be disproportionately impacted by adverse changes in circumstances in those locations.

 

Our strategy involves a high concentration of our business in key West Coast markets. A significant portion of our flights occur to and from our Seattle, Portland, and Bay Area hubs. In 2021, passengers to and fromstations in Seattle, Portland, and the Bay AreaArea. In 2023, passengers to and from these locations accounted for 82% of our total guests.

We believe that concentrating our service offerings in this way allows us to maximize our investment in personnel, aircraft and ground facilities, as well as to gain greater advantage from sales and marketing efforts in those regions. As a result, we remain highly dependent on our key markets. Our business could be harmed by any circumstances causing a reduction in demand for air transportation in our key markets. An increase in competition in our key markets could also cause us to reduce fares or take other competitive measures that, if sustained, could harm our business, financial condition, and results of operations.

We are dependent on a limited number of suppliers for aircraft and parts.

 

Should these suppliers be unable to manufacture, orobtain certification for, and deliver new aircraft, we may not be able to grow our fleet at intended rates, which could impact our financial position. Boeing has significant production constraints and regulatory delays for the 737-9B737 family of aircraft, which may impact the timing of deliveries. If we are unable to receive these aircraft andor future aircraft in a timely manner, our growth plans could be negatively impacted. Given Alaska's size relative to its competitors, these challenges may have a disproportionate impact on Alaska. Additionally, further consolidation amongstamong aircraft and aircraft parts manufacturers could further limit the number of suppliers. This could result in an inability to operate our aircraft orproduction instability in the foreign countrieslocations in which the aircraft and its parts are manufactured.manufactured or an inability to operate our aircraft.

We rely on partner airlines for codeshare and frequent flyer marketing arrangements.

 

We routinely engage in analysis and discussions regarding our own strategic position, including alliances, codeshare arrangements, interline arrangements, and frequent flyer program enhancements, and will continue to pursue these commercial activities. If other airlines participate in consolidation or reorganization, those airlines may significantly improve their cost structures or revenue generation capabilities, thereby potentially making them stronger competitors of ours and potentially impairing our ability to realize expected benefits from our own strategic relationships.

Economic uncertainty, or anotherincluding a recession, would likely impact demand for our product and could harm our financial condition and results of operations.

 

The airline industry, which is subject to relatively high fixed costs and highly variable and unpredictable demand, is particularly sensitive to changes in economic conditions. We are particularly dependent on U.S. consumer confidence and the health of the U.S. economy. Unfavorable U.S. economic conditions have historically driven changes in travel patterns and have resulted in reduced consumer spending forand led to decreases in both leisure and business travel. For some consumers, leisure travel is a discretionary expense, and shorter distance travelers, in particular, have the option to replace air travel with surface travel. Businesses are able to forgo air travel by using communication alternatives such as video conferencing or may be more likely to purchase less expensive tickets to reduce costs, which can result in a decrease in average revenue per seat. Unfavorable economic conditions also hamper the ability of airlines to raise fares to counteract increased fuel, labor, and other costs. Additionally, reduced consumer spending would adversely impact revenue and cash flows from our co-branded credit card agreements. Unfavorable or even uncertain economic conditions could negatively affect our financial condition and results of operations.

The airline industry is highly regulated, most notably by third parties. Failure to invest in new technology or a disruptionthe federal government. The Department of our current systems or their operators could harm our business.Transportation (DOT), the Transportation Security Administration (TSA), and the FAA exercise significant regulatory authority over air carriers.

The application of the acquisition method of accounting resulted in us recording goodwill, which could result in significant future impairment charges and negatively affect our financial results.

In accordance with acquisition accounting rules, we recorded goodwill on our consolidated balance sheet to the extent the Virgin America acquisition purchase price exceeded the net fair value of Virgin America’s tangible and identifiable intangible assets and liabilities as of the acquisition date. Goodwill is not amortized, but is tested for impairment at least annually. We could record impairment charges in our results of operations as a result of, among other items, extreme fuel price volatility, a significant decline in the fair value of certain tangible or intangible assets, unfavorable trends in forecasted results of operations and cash flows, uncertain economic environment and other uncertainties. We can provide no assurance that a significant impairment charge will not occur in one or more future periods. Any such charges may materially affect our financial results.

A significant increase in labor costs or unsuccessful attempts to strengthen our relationships with union employees or loss of key personnel could adversely affect our business and results of operations.

Labor costs remain a significant component of our total expenses. In addition to costs associated with represented employee groups, labor costs could also increase for non-unionized employees and via vendor agreements as we work to compete for highly skilled and qualified employees against the major U.S. airlines and other businesses in a thrivingcompetitive job market. Labor costs have recently increased significantly driven by inflationary pressure on wages.

Ongoing and periodic negotiations with labor unions could result in job actions, such as slow-downs, sick-outs, or other actions designed to disrupt normal operations and pressure the employer to acquiesce to bargaining demands during negotiations, althoughnegotiations. Although unlawful until after lengthy mediation attempts, the operation could be significantly impacted. Although we have a long track record of fostering good communications, negotiating approaches, and developing other strategies to enhance workforce engagement in our long-term vision, unsuccessful attempts to strengthen relationships with union employees or loss of key personnel could divert management’s attention from other projects and issues which could adversely affectand negatively impact the business. In addition, our businessbargained-for labor agreement terms for flight crew are increasingly coming into conflict with state and results of operations.local laws purporting to govern benefits and duties.

The inability to attract, retain, and train qualified personnel, or maintain our culture, could result in guest impacts and adversely affect our business and results of operations.

We compete against other major U.S. airlines for pilots, aircraft technicians and other labor. AsRecently, there have been shortages of pilots for hire in the regional market and more pilots in the industry approachare approaching mandatory retirement age, the U.S. airline industry may be affected by a pilot shortage.age. Attrition beyond normal levels, or the inability to attract new pilots, could negatively impact our operating results.results of operations. The shortage of pilots and opportunities at other carriers could mean that our captains and first officers leave our airlines more often than forecasted. Additionally, the industry, including related vendor partners, has experienced and may continue to experience challenges in hiring and retaining other labor positions, such as aircraft technicians, ground handling and customer service agents, and flight attendants. The Company's or our vendor partners' inability to attract and retain personnel for these positions could negatively impact our operating results of operations, which may harm our growth plans. Additionally, we may be required to increase our wage and benefit packages, or pay increased rates to our vendors, to retain these positions. This would result in increased overall costs and may adversely impact our guest experience and financial position.

Our success is also dependent on cultivating and maintaining a unified culture with cohesive values and goals. Much of our continued success is tied to our guest loyalty. Failure to maintain and grow the Alaska culture could strain our ability to maintain relationships with guests, suppliers, employees and other constituencies. As part of this process, we may continue to incur substantial costs for employee programs.