Exhibit 99.1
Statement Under Oath of Principal Executive Officer and Principal Financial
Officer Regarding Facts and Circumstances Relating to Exchange Act Filings
I, John F. Kelly, state and attest that:
(1) To the best of my knowledge, based upon a review of the covered
reports of Alaska Air Group, Inc., and, except as set forth on Exhibit A
hereto or as corrected or supplemented in a subsequent covered report:
- no covered report contained an untrue statement of a
material fact as of the end of the period covered by
such report (or in the case of a report on Form 8-K or
definitive proxy materials, as of the date on which it
was filed); and
- no covered report omitted to state a material fact
necessary to make the statements in the covered report,
in light of the circumstances under which they were
made, not misleading as of the end of the period covered
by such report (or in the case of a report on Form 8-K
or definitive proxy materials, as of the date on which
it was filed).
(2) I have reviewed the contents of this statement with the Company's
audit committee.
(3) In this statement under oath, each of the following, if filed on or
before the date of this statement, is a "covered report":
- the Annual Report on Form 10-K filed with the Commission
on March 3, 2002 for fiscal year ended December 31, 2001
of Alaska Air Group, Inc;
- all reports on Form 10-Q, all reports on Form 8-K and
all definitive proxy materials of Alaska Air Group, Inc.
filed with the Commission subsequent to the filing of
the Form 10-K identified above; and
- any amendments to any of the foregoing.
/s/ John F. Kelly Subscribed and sworn to before
------------------------------ me this____ day of August, 2002.
John F. Kelly
Date: August 13, 2002
----------------------
Notary Public
My Commission Expires:
EXHIBIT A
As previously announced, in June 2002 Alaska Air Group, Inc. (the "Company")
changed its accounting policies relating to the accrual for certain lease return
costs and the capitalization of software development costs. These changes, which
are more fully described below, are being implemented following a consultation
with the Company's new independent auditors, who were appointed in May 2002. The
Company will be restating its financial statements and related filings with the
Securities and Exchange Commission. The restatements will change the periods in
which certain expenses are recognized. The effect of these changes is as shown
in the Company's quarterly report on Form 10-Q for the fiscal quarter ended June
30, 2002, but in summary, they result in an increase of $29.3 million of equity
as of June 30, 2002 and modestly better results than those previously reported.
However, for the first and second quarters of 2001, operating expenses are
slightly higher than those previously reported and the operating result is
slightly lower. For future periods, these changes may affect the timing and
amounts of the Company's reported operating expenses. Additionally, the Company
changed its accounting for aircraft purchase commitments assumed by a third
party, and made a reclassification of deferred income taxes, both of which do
not impact equity or earnings.
Leased Aircraft Return Costs
The Company leases many of its aircraft under relatively long-term operating
lease agreements. These aircraft are subject to periodic airframe and engine
overhauls based on the Company's maintenance program. The Company's previous
policy was to capitalize these overhauls and amortize the costs over the
estimated lives of the overhauls. Separately, many of the Company's lease
agreements contain provisions which require that at the end of the lease, either
certain minimum times remain until the next overhaul or the Company make a cash
payment to the lessor. At the inception of the lease, the Company does not know
the balance between actual time remaining to the next overhaul and cash payments
that will be used to satisfied its return commitments. Under the previous
method, the Company accrued for the costs of returning leased aircraft,
including any cash payments due to lessors and any unamortized overhauls, on a
straight-line basis over the lives of the leases. Airframe and engine overhauls
will now be capitalized and amortized over the remaining lease term, if shorter
than the life of the overhaul. Additionally, under our new method, since the
timing and amount of cash payments cannot be reasonably predicted at the
inception of the lease, the Company will be accruing cash payments expected to
be made to lessors over the last few years of the lease, versus over the entire
lease term.
Internally Developed Software
The Company also revised its accounting practices for certain costs of
internally developed software. These costs were previously charged to expense as
they were incurred, and they will now be capitalized and amortized over the
estimated lives of the software.
Aircraft Purchase Commitments
The Company has an aircraft purchase commitment, which may trigger a liability
under certain events of default. The Company previously recognized a portion of
this commitment which was funded by a third party as a liability, and related
aircraft purchase deposits, on its
balance sheet. Since the executory contract for the purchase commitment is not
an obligation of the Company until the aircraft is delivered, this commitment is
now disclosed as a purchase commitment and not included in long-term debt or
deposits for future flight equipment.
The Company expects to complete the revisions to its historical financial
statements and file appropriate amendments with the SEC as soon as practicable.
To the extent these revisions may involve the reaudit of historical financial
statements by the Company's new independent auditors, they could result in the
restatement of other items not described in this Exhibit, although I have no
knowledge of any such required restatements.