Alaska Air (ALK) 8-K Alaska Air Group Reports Second Quarter Results; Government Aid a Huge Help

Exhibit 99.1

Contact:	Brad Tilden	-or-	Lou Cancelmi
	206/392-5362		206/392-5170
FOR IMMEDIATE RELEASE				July 22, 2003

ALASKA AIR GROUP REPORTS SECOND QUARTER RESULTS; GOVERNMENT AID A HUGE HELP

     SEATTLE — Aided by $71.4 million in government assistance ($44.3 million after tax), Alaska Air Group, Inc. (NYSE:ALK) today reported second quarter net income of $45.2 million, or $1.70 per share, compared with a net loss of $2.9 million, or $0.11 per share, in the second quarter of 2002. Without the non-recurring compensation received under the Emergency Wartime Supplemental Appropriations Act, the company’s net income during the quarter was $0.9 million, or $0.03 per share.

     The company's net loss for the six months ended June 30, 2003 was $11.1 million, or $0.42 per share, compared to a net loss of $88.0 million, or $3.32 per share, during the same period in 2002. The 2002 net loss includes $51.4 million, or $1.94 per share, related to the write-off of goodwill in connection with the adoption of Statement of Financial Accounting Standards No. 142. Excluding the government compensation received in 2003 and the write-off of goodwill in 2002, our net loss for the six months ended 2003 was $55.4 million ($2.08 per share) versus a loss of $36.6 million ($1.38 per share) for 2002.

     “We eked out a small amount of net income for the quarter excluding the government compensation,” said Bill Ayer, chairman and chief executive officer. “We are working hard to achieve our cost management objectives and this quarter’s results are an encouraging sign that initiatives we have implemented to date are helping us with our plan to return to profitability on a full year basis.”

     Operationally, Alaska Airlines’ passenger traffic in the second quarter increased 9.1 percent on a capacity increase of 5.7 percent. Alaska’s load factor increased 2.2 percentage points to 70.6 percent compared to the same period in 2002. Alaska’s operating revenue per available seat mile (ASM) increased 0.9 percent, while its operating cost per ASM excluding fuel decreased 1.2 percent. Alaska’s pretax income was $59.6 million, or $6.8 million excluding government compensation, compared to a pretax loss of $0.1 million in 2002.

     Horizon Air’s passenger traffic in the second quarter increased 6.9 percent on a 4.3 percent capacity increase. Horizon’s load factor increased by 1.6 points to 63.3 percent. Horizon’s operating revenue per ASM increased 2.9 percent, while its operating cost per ASM excluding fuel increased 2.4 percent. Horizon’s pretax income was $15.7 million, or a loss of $2.9 million excluding government compensation, compared to a pretax loss of $2.8 million in 2002.

     Alaska Air Group had cash and short-term investments at June 30, 2003 of approximately $722 million compared to $636 million at December 31, 2002. The increased balance reflects the receipt of $71.4 million of government compensation and $123.2 million net proceeds received in connection with the completion of a private placement of floating rate convertible bonds on March 21, 2003. The company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, was 79 percent at June 30, 2003 compared to 77 percent as of December 31, 2002.

     A summary of financial and statistical data for Alaska Airlines and Horizon, as well as a reconciliation of the reported non-GAAP financial measures, can be found on pages 5-7.

     A conference call regarding the first quarter results will be simulcast via the Internet at 8:30 a.m. Pacific Daylight Time. It may be accessed through our website at www.alaskaair.com.

     This report may contain forward-looking statements that are based on the best information currently available to management. These forward-looking statements are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are indicated by phrases such as “will,” “should,” “the company believes,” “we expect” or any other language indicating a prediction of future events. There can be no assurance that actual developments will be those anticipated by the company. Actual results could differ materially from those projected as a result of a number of factors, some of which the company cannot predict or control. For a discussion of these factors, please see Item 1 of the company’s Annual Report on Form 10-K for the year ended December 31, 2002.

     Alaska Air Group is the parent company of Alaska Airlines, Inc. and Horizon Air Industries, Inc.

# # #

ALASKA AIR GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In Millions Except Per Share Amounts)

		Three Months						Six Months
		Ended June 30						Ended June 30
		2002			2003			2002			2003
Operating Revenues:
Passenger		$	525.4		$	556.9		$	981.3		$	1,032.4
Freight and mail			21.2			22.4			38.3			41.0
Other — net			29.1			29.8			56.2			54.4
Total Operating Revenues			575.7			609.1			1,075.8			1,127.8
Operating Expenses:
Wages and benefits			211.8			232.5			414.7			459.6
Contracted services			22.4			24.4			47.1			50.1
Aircraft fuel			75.2			80.1			139.9			170.3
Aircraft maintenance			42.3			51.9			85.5			97.8
Aircraft rent			46.8			49.4			93.3			96.9
Food and beverage service			17.0			15.6			31.3			29.0
Commissions			11.5			3.5			23.9			6.8
Other selling expenses			33.5			29.0			63.7			56.2
Depreciation and amortization			34.0			33.1			66.3			65.5
Loss (gain) on sale of assets			0.1			—			(0.5	)		0.1
Landing fees and other rentals			36.0			38.7			65.8			75.8
Other			50.1			46.9			99.4			94.3
Total Operating Expenses			580.7			605.1			1,130.4			1,202.4
Operating (Loss) Income			(5.0	)		4.0			(54.6	)		(74.6	)
Nonoperating Income (Expense):
Interest income			5.7			5.4			10.1			6.0
Interest expense			(11.6	)		(14.2	)		(23.5	)		(25.3	)
Interest capitalized			0.6			0.7			0.8			1.5
U.S. government compensation			0.1			71.4			0.1			71.4
Other — net			6.4			5.5			10.9			5.9
			1.2			68.8			(1.6	)		59.5
Earnings (loss) before income tax and accounting change			(3.8	)		72.8			(56.2	)		(15.1	)
Income tax expense (benefit)			(0.9	)		27.6			(19.6	)		(4.0	)
Earnings (loss) before accounting change			(2.9	)		45.2			(36.6	)		(11.1	)
Cumulative effect of accounting change			—			—			(51.4	)		—
Net Earnings (Loss)			($2.9	)	$	45.2			($88.0	)		($11.1	)
Basic and Diluted Earnings (Loss) Per Share:
Earnings (loss) before accounting change		$	(0.11	)	$	1.70		$	(1.38	)	$	(0.42	)
Cumulative effect of accounting change			—			—			(1.94	)		—
Net Earnings (Loss) Per Share		$	(0.11	)	$	1.70		$	(3.32	)	$	(0.42	)
Shares used for computation:
	Basic		26.548			26.618			26.540			26.603
	Diluted		26.548			26.619			26.540			26.603

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Alaska Air Group, Inc.

CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)

	December 31		June 30
(In Millions)	2002		2003
Cash and marketable securities	$	636	$	722
Total current assets		976		1,094
Property and equipment-net		1,780		1,931
Other assets		125		159
Total assets	$	2,881	$	3,184
Current liabilities		778		894
Long-term debt and capital lease obligations		857		1,016
Other liabilities and credits		590		631
Shareholders’ equity		656		643
Total liabilities and equity	$	2,881	$	3,184

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Alaska Airlines Financial and Statistical Data

	Three Months Ended June 30									Six Months Ended June 30
							%									%
Financial Data (in millions):	2002			2003			Change			2002			2003			Change
Operating Revenues:
Passenger	$	433.6		$	460.6			6.2	%	$	807.6		$	847.6			5.0	%
Freight and mail		20.0			21.0			5.0	%		35.9			38.4			7.0	%
Other — net		25.1			29.0			15.5	%		47.4			51.6			8.9	%
Total Operating Revenues		478.7			510.6			6.7	%		890.9			937.6			5.2	%
Operating Expenses:
Wages and benefits		174.5			192.0			10.0	%		340.2			380.0			11.7	%
Contracted services		19.4			19.7			1.5	%		41.2			40.4			-1.9	%
Aircraft fuel		64.2			69.1			7.6	%		119.4			146.0			22.3	%
Aircraft maintenance		36.1			44.6			23.5	%		71.7			82.5			15.1	%
Aircraft rent		31.8			31.2			-1.9	%		63.6			61.7			-3.0	%
Food and beverage service		16.2			14.9			-8.0	%		30.1			27.8			-7.6	%
Commissions		14.2			12.2			-14.1	%		28.4			20.4			-28.2	%
Other selling expenses		27.8			23.3			-16.2	%		52.7			45.2			-14.2	%
Depreciation and amortization		28.5			29.6			3.9	%		56.7			58.1			2.5	%
Loss on sale of assets		0.2			0.2		NM				0.2			0.5		NM
Landing fees and other rentals		28.5			31.2			9.5	%		52.1			59.9			15.0	%
Other		37.5			34.3			-8.5	%		73.8			68.4			-7.3	%
Total Operating Expenses		478.9			502.3			4.9	%		930.1			990.9			6.5	%
Operating Income (Loss)		(0.2	)		8.3		NM				(39.2	)		(53.3	)		36.0	%
Interest income		6.1			4.5						11.1			5.7
Interest expense		(11.6	)		(11.4	)					(23.5	)		(22.7	)
Interest capitalized		0.4			0.4						0.5			1.1
U.S. government compensation		0.1			52.8						0.1			52.8
Other — net		5.1			5.0						9.2			5.4
		0.1			51.3						(2.6	)		42.3
Income (Loss) Before Income Tax and Accounting Change	$	(0.1	)	$	59.6		NM			$	(41.8	)	$	(11.0	)		-73.7	%
Operating Statistics:
Revenue passengers (000)		3,616			3,797			5.0	%		6,809			7,055			3.6	%
RPMs (000,000)		3,372			3,678			9.1	%		6,349			6,821			7.4	%
ASMs (000,000)		4,929			5,209			5.7	%		9,396			9,918			5.6	%
Passenger load factor		68.4	%		70.6	%		2.2	pts		67.6	%		68.8	%		1.2	pts
Breakeven load factor		69.5	%		70.2	%		0.7	pts		72.9	%		74.9	%		2.0	pts
Yield per passenger mile		12.86	¢		12.52	¢		-2.6	%		12.72	¢		12.43	¢		-2.3	%
Operating revenue per ASM		9.71	¢		9.80	¢		0.9	%		9.48	¢		9.45	¢		-0.3	%
Operating expenses per ASM (a)		9.72	¢		9.64	¢		-0.8	%		9.90	¢		9.99	¢		0.9	%
Operating expenses per ASM excluding fuel (a)		8.41	¢		8.32	¢		-1.2	%		8.63	¢		8.52	¢		-1.3	%
Fuel cost per gallon		78.0	¢		82.0	¢		5.1	%		75.9	¢		90.2	¢		18.8	%
Fuel gallons (000,000)		82.3			84.3			2.4	%		157.3			161.9			2.9	%
Average number of employees		10,222			10,136			-0.8	%		10,019			10,062			0.4	%
Aircraft utilization (blk hrs/day)		10.8			10.5			-2.8	%		10.4			10.4			0.0	%
Operating fleet at period-end		102			110			7.8	%		102			110			7.8	%

	NM = Not Meaningful
(a)	See Note 1 on Page 7

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Horizon Air Financial and Statistical Data

	Three Months Ended June 30									Six Months Ended June 30
							%									%
Financial Data (in millions):	2002			2003			Change			2002			2003			Change
Operating Revenues:
Passenger	$	96.4		$	105.6			9.5	%	$	182.7		$	199.6			9.3	%
Freight and mail		1.2			1.4			16.7	%		2.4			2.6			8.3	%
Other — net		5.5			3.7			-32.7	%		11.2			7.4			-33.9	%
Total Operating Revenues		103.1			110.7			7.4	%		196.3			209.6			6.8	%
Operating Expenses:
Wages and benefits		37.2			40.5			8.9	%		74.5			79.6			6.8	%
Contracted services		4.2			6.1			45.2	%		8.1			12.7			56.8	%
Aircraft fuel		11.0			11.0			0.0	%		20.5			24.3			18.5	%
Aircraft maintenance		6.2			7.3			17.7	%		13.8			15.3			10.9	%
Aircraft rent		14.9			18.2			22.1	%		29.7			35.2			18.5	%
Food and beverage service		0.8			0.7			-12.5	%		1.2			1.2			0.0	%
Commissions		2.1			0.6			-71.4	%		4.4			1.2			-72.7	%
Other selling expenses		5.7			5.7			0.0	%		11.0			11.0			0.0	%
Depreciation and amortization		5.1			3.2			-37.3	%		9.0			6.8			-24.4	%
Gain on sale of assets		(0.1	)		(0.2	)	NM				(0.7	)		(0.4	)	NM
Landing fees and other rentals		7.8			9.2			17.9	%		14.2			17.9			26.1	%
Other		12.3			11.4			-7.3	%		25.0			22.9			-8.4	%
Total Operating Expenses		107.2			113.7			6.1	%		210.7			227.7			8.1	%
Operating Loss		(4.1	)		(3.0	)		-26.8	%		(14.4	)		(18.1	)		25.7	%
Interest income		0.4			0.1						0.4			0.3
Interest expense		(0.5	)		(0.8	)					(1.0	)		(1.3	)
Interest capitalized		0.1			0.3						0.3			0.4
Government compensation		—			18.6						—			18.6
Other — net		1.3			0.5						1.7			0.5
		1.3			18.7						1.4			18.5
Income (Loss) Before Income Tax and Accounting Change	$	(2.8	)	$	15.7		NM			$	(13.0	)	$	0.4		NM
Operating Statistics:
Revenue passengers (000)		1,192			1,207			1.3	%		2,287			2,295			0.3	%
RPMs (000,000)		374			400			6.9	%		703			758			7.8	%
ASMs (000,000)		607			633			4.3	%		1,138			1,248			9.7	%
Passenger load factor		61.7	%		63.3	%		1.6	pts		61.8	%		60.7	%		-1.1	pts
Breakeven load factor		63.9	%		65.3	%		1.4	pts		67.0	%		66.8	%		-0.1	pts
Yield per passenger mile		25.76	¢		26.40	¢		2.5	%		25.99	¢		26.33	¢		1.3	%
Operating revenue per ASM		16.99	¢		17.49	¢		2.9	%		17.25	¢		16.79	¢		-2.6	%
Operating expenses per ASM		17.66	¢		17.96	¢		1.7	%		18.51	¢		18.25	¢		-1.5	%
Operating expenses per ASM excluding fuel (a)		15.85	¢		16.22	¢		2.4	%		16.71	¢		16.30	¢		-2.5	%
Fuel cost per gallon		80.8	¢		83.5	¢		3.4	%		79.1	¢		92.7¢			17.2	%
Fuel gallons (000,000)		13.6			13.1			-3.7	%		25.9			26.1			0.8	%
Average number of employees		3,417			3,342			-2.2	%		3,435			3,378			-1.6	%
Aircraft utilization (blk hrs/day)		7.5			7.8			3.6	%		7.3			7.8			6.8	%
Operating fleet at period-end		62			59			-4.8	%		62			59			-4.8	%

	NM = Not Meaningful
(a)	See Note 1 on Page 7

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Note 1:
Pursuant to new guidelines issued by the Securities and Exchange Commission, we are providing the following reconciliation of non-GAAP performance indicators to their comparable financial measures reported on a GAAP basis. Our disclosure of operating costs and cost per available seat mile, excluding fuel, provides us the ability to measure and monitor our performance both with and without the cost of aircraft fuel as both the cost and availability of fuel are subject to economic and political factors beyond our control. We also believe that disclosing net income (loss) and diluted earnings (loss) per share excluding non-recurring items is helpful to investors in evaluating our operational performance because we believe the reimbursements received from the government and the write-off of goodwill are non-recurring events. The following table reconciles operating expenses excluding fuel and operating expense per ASM excluding fuel for Alaska Airlines, Inc. and Horizon Air Industries, Inc.:

Alaska Airlines, Inc.:
($ in millions)	Three Months Ended June 30,						Six Months Ended June 30,
	2002			2003			2002			2003
Operating expenses	$	478.9		$	502.3		$	930.1		$	990.9
ASMs (000,000)		4,929			5,209			9,396			9,918
Operating expenses per ASM		9.72	¢		9.64	¢		9.90	¢		9.99	¢
Operating expenses	$	478.9		$	502.3		$	930.1		$	990.9
Less: aircraft fuel		64.2			69.1			119.4			146.0
Operating expense excluding fuel	$	414.7		$	433.2		$	810.7		$	844.9
ASMs (000,000)		4,929			5,209			9,396			9,918
Operating expense per ASM excluding fuel		8.41	¢		8.32	¢		8.63	¢		8.52	¢

Horizon Air Industries, Inc.:
($ in millions)	2002			2003			2002			2003
Operating expenses	$	107.2		$	113.7		$	210.7		$	227.7
ASMs (000,000)		607.0			633.0			1,138.0			1,248.0
Operating expenses per ASM		17.66	¢		17.96	¢		18.51	¢		18.25	¢
Operating expenses	$	107.2		$	113.7		$	210.7		$	227.7
Less: aircraft fuel		11.0			11.0			20.5			24.3
Operating expense excluding fuel		96.2		$	102.7		$	190.2		$	203.4
ASMs (000,000)		607			633			1,138			1,248
Operating expense per ASM excluding fuel		15.85	¢		16.22	¢		16.71	¢		16.30	¢

     The following table summarizes Alaska Air Group, Inc.’s net earnings (loss) and diluted income (loss) per share during 2002 and 2003 excluding non-recurring items and as reported in accordance with GAAP (dollars in millions):

	Three Months Ended June 30,
	2002						2003
	Dollars			EPS			Dollars		EPS
Net income (loss) and diluted EPS excluding Government compensation		($2.9	)		($0.11	)	$	0.9	$	0.03
Government compensation, net of tax		—			—			44.3		1.67
Reported GAAP amounts		($2.9	)		($0.11	)	$	45.2	$	1.70

	Six Months Ended June 30,
	2002						2003
	Dollars			EPS			Dollars			EPS
Net loss and diluted EPS excluding non-recurring items		($36.6	)		($1.38	)		($55.4	)		($2.08	)
Change in accounting principle relating to goodwill		(51.4	)		(1.94	)		—			—
Government compensation, net of tax		—			—			44.3			1.66
Reported GAAP amounts		($88.0	)		($3.32	)		($11.1	)		($0.42	)

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