Alaska Air (ALK) 8-K Current report

Exhibit 99.1

ALASKA AIR GROUP, INC.

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

	Three Months Ended						Year Ended
	December 31						December 31
	2002			2003			2002			2003
Operating Revenues:
Passenger	$	485.7		$	564.8		$	2,037.7		$	2,243.0
Freight and mail		17.7			18.7			77.1			82.3
Other — net		24.3			29.8			109.3			119.5
Total Operating Revenues		527.7			613.3			2,224.1			2,444.8
Operating Expenses:
Wages and benefits		219.3			240.4			858.1			937.9
Employee profit sharing		—			3.7			—			3.7
Contracted services		23.7			25.6			93.0			100.1
Aircraft fuel		79.4			91.9			302.0			356.9
Aircraft maintenance		48.9			43.6			170.2			183.8
Aircraft rent		48.8			48.8			190.4			194.9
Food and beverage service		16.3			14.4			66.2			61.0
Other selling expenses and commissions		32.6			34.1			159.9			133.2
Depreciation and amortization		31.8			34.8			132.5			133.0
Loss on sale of assets		0.9			2.0			0.1			2.2
Landing fees and other rentals		36.4			44.3			140.3			164.9
Other		49.4			45.0			200.3			184.3
Total Operating Expenses		587.5			628.6			2,313.0			2,455.9
Operating Loss		(59.8	)		(15.3	)		(88.9	)		(11.1	)
Nonoperating Income (Expense):
Interest income		5.1			4.5			21.2			12.8
Interest expense		(11.5	)		(12.4	)		(46.3	)		(47.8	)
Interest capitalized		1.2			0.4			2.7			2.3
U.S. government compensation		—			—			0.5			71.4
Other — net		0.1			(1.3	)		9.0			1.4
		(5.1	)		(8.8	)		(12.9	)		40.1
Income (loss) before income tax and accounting change		(64.9	)		(24.1	)		(101.8	)		29.0
Income tax expense (benefit)		(21.8	)		(8.0	)		(34.6	)		15.5
Income (loss) before accounting change		(43.1	)		(16.1	)		(67.2	)		13.5
Cumulative effect of accounting change		—			—			(51.4	)		-
Net Income (Loss)		($43.1	)		($16.1	)		($118.6	)	$	13.5
Basic and Diluted Earnings (Loss) Per Share:
Earnings (loss) before accounting change	$	(1.62	)	$	(0.60	)	$	(2.53	)	$	0.51
Cumulative effect of accounting change		—			—			(1.94	)		-
Earnings (Loss) Per Share	$	(1.62	)	$	(0.60	)	$	(4.47	)	$	0.51
Shares used for computation:
Basic		26.556			26.728			26.546			26.648
Diluted		26.556			26.728			26.546			26.730

Note 1:
Diluted shares excludes the shares of common stock issuable upon conversion of the convertible notes issued on March 21, 2003. Although we previously reported our expectation that the notes would become convertible in the fourth quarter of 2003, the actual closing prices of Alaska Air Group common stock during the quarter did not trigger the convertibility feature.

Note 2:
Operating loss for the three months and year ended December 31, 2003 includes adjustments to increase operating expenses by $2.8 million (pretax) and $3.1 million (pretax), respectively, related to prior years. Operating loss for the three months ended December 31, 2003 also includes adjustments to increase operating expenses by $1.8 million (pretax) and increase operating revenues by $6.3 million (pretax), both related to previous quarters in 2003. In addition, interest income for the 2003 year includes an adjustment recorded in the first quarter that reduced interest income by $2.8 million (pretax) related to the previous year. Management does not believe that these amounts are material to the periods affected.

Alaska Air Group, Inc.

CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)

	December 31		December 31
(In Millions)	2002		2003
Cash and marketable securities	$	636	$	812
Total current assets		954		1,148
Property and equipment-net		1,802		1,949
Other assets		125		162
Total assets	$	2,881	$	3,259
Current liabilities		778		1,017
Long-term debt and capital lease obligations		857		907
Other liabilities and credits		590		661
Shareholders’ equity		656		674
Total liabilities and shareholders’ equity	$	2,881	$	3,259

Note:Certain reclassifications have been made to the December 31, 2002 balance sheet to conform to the December 31, 2003 presentation.

Alaska Airlines Financial and Statistical Data (unaudited)

	Three Months Ended December 31									Year Ended December 31
							%									%
Financial Data (in millions):	2002			2003			Change			2002			2003			Change
Operating Revenues:
Passenger	$	392.2		$	460.3			17.4	%	$	1,667.7		$	1,840.4			10.4	%
Freight and mail		16.5			17.5			6.1	%		72.1			77.3			7.2	%
Other — net		21.1			26.7			26.5	%		93.3			109.7			17.6	%
Total Operating Revenues		429.8			504.5			17.4	%		1,833.1			2,027.4			10.6	%
Operating Expenses:
Wages and benefits		179.4			199.9			11.4	%		703.4			778.6			10.7	%
Employee profit sharing		—			2.9			NM			—			2.9			NM
Contracted services		20.3			20.7			2.0	%		80.1			81.6			1.9	%
Aircraft fuel		67.2			79.1			17.7	%		257.3			306.7			19.2	%
Aircraft maintenance		41.9			35.7			-14.8	%		145.2			153.4			5.6	%
Aircraft rent		32.4			31.1			-4.0	%		128.2			123.9			-3.4	%
Food and beverage service		15.6			13.9			-10.9	%		63.5			58.7			-7.6	%
Other selling expenses and commissions		31.8			39.0			22.6	%		154.6			148.0			-4.3	%
Depreciation and amortization		28.3			31.7			12.0	%		114.0			119.5			4.8	%
Loss on sale of assets		1.0			2.1			NM			1.7			3.4			NM
Landing fees and other rentals		28.3			34.3			21.2	%		110.5			127.8			15.7	%
Other		37.5			34.0			-9.3	%		148.8			136.9			-8.0	%
Total Operating Expenses		483.7			524.4			8.4	%		1,907.3			2,041.4			7.0	%
Operating Loss		(53.9	)		(19.9	)		NM			(74.2	)		(14.0	)		NM
Interest income		5.7			4.9						23.2			15.2
Interest expense		(11.6	)		(11.3	)					(46.6	)		(45.2	)
Interest capitalized		1.0			0.2						2.1			1.5
U.S. government compensation		—			—						0.3			52.8
Other — net		0.2			(1.2	)					7.9			1.5
		(4.7	)		(7.4	)					(13.1	)		25.8
Income (Loss) Before Income Tax and Accounting Change	$	(58.6	)	$	(27.3	)		NM		$	(87.3	)	$	11.8			NM
Operating Statistics:
Revenue passengers (000)		3,367			3,712			10.2	%		14,154			15,047			6.3	%
RPMs (000,000)		3,164			3,608			14.0	%		13,186			14,554			10.4	%
ASMs (000,000)		4,758			5,194			9.2	%		19,360			20,804			7.5	%
Passenger load factor		66.5	%		69.5	%		3.0	pts		68.1	%		70.0	%		1.9	pts
Breakeven load factor		78.4	%		74.4	%		-4.0	pts		73.1	%		72.3	%		-0.8	pts
Yield per passenger mile		12.40	¢		12.76	¢		2.9	%		12.65	¢		12.65	¢		0.0	%
Operating revenue per ASM		9.03	¢		9.71	¢		7.5	%		9.47	¢		9.74	¢		2.9	%
Operating expenses per ASM (a)		10.17	¢		10.10	¢		-0.7	%		9.85	¢		9.81	¢		-0.4	%
Operating expenses per ASM excluding fuel (a)		8.75	¢		8.57	¢		-2.1	%		8.52	¢		8.34	¢		-2.1	%
Fuel cost per gallon		84.7	¢		94.8	¢		11.9	%		79.6	¢		90.9	¢		14.2	%
Fuel gallons (000,000)		79.3			83.4			5.2	%		323.3			337.3			4.3	%
Average number of employees		10,065			9,921			-1.4	%		10,142			10,040			-1.0	%
Aircraft utilization (blk hrs/day)		10.3			10.3			0.0	%		10.6			10.5			-0.9	%
Operating fleet at period-end		102			109			6.9	%		102			109			6.9	%

NM = Not Meaningful

(a) See Note A on Page 5

Note 1:
Certain reclassifications have been made to the December 31, 2002 statements of operations to conform to the December 31, 2003 presentation.

Note 2:
Operating loss for the three months and year ended December 31, 2003 includes adjustments to increase operating expenses by $2.4 million (pretax) and $3.1 million (pretax), respectively, related to prior years. Operating loss for the three months ended December 31, 2003 also includes adjustments to increase operating expenses by $1.8 million (pretax) and increase operating revenues by $6.3 million (pretax), both related to previous quarters in 2003. In addition, interest income for the 2003 year includes an adjustment recorded in the first quarter that reduced interest income by $2.8 million (pretax) related to the previous year. Management does not believe that these amounts are material to the periods affected.

Horizon Air Financial and Statistical Data (unaudited)

	Three Months Ended December 31									Year Ended December 31
							%									%
Financial Data (in millions):	2002			2003			Change			2002			2003			Change
Operating Revenues:
Passenger	$	99.0		$	115.5			16.7	%	$	393.9		$	442.3			12.3	%
Freight and mail		1.1			1.2			9.1	%		5.0			5.0			0.0	%
Other — net		4.4			4.8			9.1	%		20.7			16.5			-20.3	%
Total Operating Revenues		104.5			121.5			16.3	%		419.6			463.8			10.5	%
Operating Expenses:
Wages and benefits		39.4			40.5			2.8	%		152.6			159.3			4.4	%
Employee profit sharing		—			0.8			NM			—			0.8			NM
Contracted services		5.4			6.6			22.2	%		21.0			25.0			19.0	%
Aircraft fuel		12.2			12.8			4.9	%		44.7			50.2			12.3	%
Aircraft maintenance		7.0			7.9			12.9	%		25.1			30.4			21.1	%
Aircraft rent		16.3			17.7			8.6	%		62.2			71.0			14.1	%
Food and beverage service		0.7			0.5			-28.6	%		2.7			2.3			-14.8	%
Other selling expenses and commissions		6.3			6.1			-3.2	%		29.4			24.9			-15.3	%
Depreciation and amortization		3.2			2.8			-12.5	%		17.0			12.3			-27.6	%
Gain on sale of assets		(0.1	)		(0.1	)		0.0	%		(1.6	)		(1.2	)		NM
Landing fees and other rentals		8.4			10.3			22.6	%		31.2			38.5			23.4	%
Other		11.1			10.0			-9.9	%		48.7			42.6			-12.5	%
Total Operating Expenses		109.9			115.9			5.5	%		433.0			456.1			5.3	%
Operating Income (Loss)		(5.4	)		5.6			NM			(13.4	)		7.7			NM
Interest income		—			0.2						0.7			0.7
Interest expense		(0.5	)		(0.5	)					(2.1	)		(2.4	)
Interest capitalized		0.2			0.2						0.6			0.8
Government compensation		—			—						0.2			18.6
Other — net		(0.1	)		(0.1	)					1.2			(0.1	)
		(0.4	)		(0.2	)					0.6			17.6
Income (Loss) Before Income Tax and Accounting Change	$	(5.8	)	$	5.4			NM		$	(12.8	)	$	25.3			NM
Operating Statistics:
Revenue passengers (000)		1,194			1,263			5.8	%		4,815			4,934			2.5	%
RPMs (000,000)		386			416			7.8	%		1,514			1,640			8.3	%
ASMs (000,000)		632			619			-2.1	%		2,428			2,569			5.8	%
Passenger load factor		61.1	%		67.3	%		6.2	pts		62.4	%		63.9	%		1.5	pts
Breakeven load factor		65.0	%		64.1	%		-0.9	pts		65.0	%		63.1	%		-1.9	pts
Yield per passenger mile		25.62	¢		27.72	¢		8.2	%		26.02	¢		26.96	¢		3.6	%
Operating revenue per ASM		16.53	¢		19.62	¢		18.7	%		17.29	¢		18.06	¢		4.5	%
Operating expenses per ASM (a)		17.39	¢		18.72	¢		7.7	%		17.84	¢		17.76	¢		-0.4	%
Operating expenses per ASM excluding fuel (a)		15.46	¢		16.64	¢		7.6	%		15.99	¢		15.80	¢		-1.2	%
Fuel cost per gallon		87.7	¢		98.2	¢		12.0	%		82.0	¢		93.4	¢		13.9	%
Fuel gallons (000,000)		13.9			13.1			-5.8	%		54.5			53.7			-1.5	%
Average number of employees		3,518			3,320			-5.6	%		3,476			3,361			-3.3	%
Aircraft utilization (blk hrs/day)		7.5			7.5			0.0	%		7.5			7.8			4.0	%
Operating fleet at period-end		63			62			-1.6	%		63			62			-1.6	%

NM = Not Meaningful

(a) See Note A on Page 5

Note:
Certain reclassifications have been made to the December 31, 2002 statements of operations to conform to the December 31, 2003 presentation.

Note A:
Pursuant to new guidelines issued by the Securities and Exchange Commission, we are providing the following unaudited 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 the change in accounting principle and government compensation 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 unusual 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 December 31						Year Ended December 31
	2002			2003			2002			2003
Operating expenses	$	483.7		$	524.4		$	1,907.3		$	2,041.4
ASMs (000,000)		4,758			5,194			19,360			20,804
Operating expenses per ASM		10.17	¢		10.10	¢		9.85	¢		9.81	¢
Operating expenses	$	483.7		$	524.4		$	1,907.3		$	2,041.4
Less: aircraft fuel		67.2			79.1			257.3			306.7
Operating expense excluding fuel	$	416.5		$	445.3		$	1,650.0		$	1,734.7
ASMs (000,000)		4,758			5,194			19,360			20,804
Operating expense per ASM excluding fuel		8.75	¢		8.57	¢		8.52	¢		8.34	¢

Horizon Air Industries, Inc.:
($ in millions)
	2002			2003			2002			2003
Operating expenses	$	109.9		$	115.9		$	433.0		$	456.1
ASMs (000,000)		632			619			2,428			2,569
Operating expenses per ASM		17.39	¢		18.72	¢		17.84	¢		17.76	¢
Operating expenses	$	109.9		$	115.9		$	433.0		$	456.1
Less: aircraft fuel		12.2			12.8			44.7			50.2
Operating expense excluding fuel	$	97.7		$	103.1		$	388.3		$	405.9
ASMs (000,000)		632			619			2,428			2,569
Operating expense per ASM excluding fuel		15.46	¢		16.64	¢		15.99	¢		15.80	¢

The following table summarizes Alaska Air Group, Inc.’s earnings (loss) and diluted earnings (loss) per share during 2002 and 2003 excluding the change in accounting principle and government compensation and as reported in accordance with GAAP (dollars in millions). There were no such amounts in the three months ended December 31, 2002 or 2003.

	Year Ended December 31
	2002						2003
	Dollars			Loss Per Share			Dollars			Earnings Per Share
Net loss and loss per share excluding the change in accounting principle and government compensation		($67.5	)		($2.54	)		($30.8	)		($1.15	)
Change in accounting principle relating to goodwill		(51.4	)		(1.94	)		—			—
Government compensation, net of tax		0.3			0.01			44.3		$	1.66
GAAP net income (loss) and earnings (loss) per share		($118.6	)		($4.47	)	$	13.5		$	0.51