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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024
 
OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from                      to                      

Commission File Number 1-8957

ALASKA AIR GROUP, INC.
 
Delaware91-1292054
(State of Incorporation)(I.R.S. Employer Identification No.)
19300 International Boulevard,Seattle,WA98188
Telephone:(206)392-5040
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker SymbolName of each exchange on which registered
Common stock, $0.01 par value ALKNew York Stock Exchange
 
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 ☒  No ☐ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer☒Accelerated filer  ☐Non-accelerated filer   
(Do not check if a smaller reporting company)		☐Smaller reporting company   ☐Emerging growth company   ☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒
 
The registrant has 126,159,173 common shares, par value $0.01, outstanding at July 31, 2024.

This document is also available on our website at https://investor.alaskaair.com.


ALASKA AIR GROUP, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024

 TABLE OF CONTENTS

As used in this Form 10-Q, the terms “Air Group,” the “Company,” “our,” “we” and "us" refer to Alaska Air Group, Inc. and its subsidiaries, unless the context indicates otherwise. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as “Alaska” and “Horizon” and together as our “airlines.”
 
2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
Cautionary Note Regarding Forward-Looking Statements
In addition to historical information, this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or the Company’s present expectations.

You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. For a discussion of our risk factors, see Item 1A. "Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Some of these risks include competition, labor costs, relations and availability, general economic conditions including those associated with pandemic recovery, increases in operating costs including fuel, inability to meet cost reduction, ESG and other strategic goals, seasonal fluctuations in demand and financial results, supply chain risks, events that negatively impact aviation safety and security, and changes in laws and regulations that impact our business. Please consider our forward-looking statements in light of those risks as you read this report.
3

PART I 
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
ALASKA AIR GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions)June 30, 2024December 31, 2023
ASSETS  
Current Assets  
Cash and cash equivalents$1,115 $281 
Marketable securities1,394 1,510 
Total cash and marketable securities2,509 1,791 
Receivables - net370 383 
Inventories and supplies - net106 116 
Prepaid expenses179 176 
Other current assets212 239 
Total Current Assets3,376 2,705 
Property and Equipment  
Aircraft and other flight equipment10,734 10,425 
Other property and equipment1,941 1,814 
Deposits for future flight equipment383 491 
 13,058 12,730 
Less accumulated depreciation and amortization4,537 4,342 
Total Property and Equipment - Net8,521 8,388 
Other Assets
Operating lease assets1,142 1,195 
Goodwill and intangible assets2,033 2,033 
Other noncurrent assets270 292 
Total Other Assets3,445 3,520 
Total Assets$15,342 $14,613 


4

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions, except share amounts)June 30, 2024December 31, 2023
LIABILITIES AND SHAREHOLDERS' EQUITY  
Current Liabilities  
Accounts payable$203 $207 
Accrued wages, vacation and payroll taxes513 584 
Air traffic liability1,576 1,136 
Other accrued liabilities852 800 
Deferred revenue1,312 1,221 
Current portion of operating lease liabilities153 158 
Current portion of long-term debt and finance leases359 353 
Total Current Liabilities4,968 4,459 
Long-Term Debt, Net of Current Portion2,313 2,182 
Noncurrent Liabilities  
Long-term operating lease liabilities, net of current portion1,050 1,125 
Deferred income taxes746 695 
Deferred revenue1,329 1,382 
Obligation for pension and post-retirement medical benefits358 362 
Other liabilities352 295 
Total Noncurrent Liabilities3,835 3,859 
Commitments and Contingencies (Note 7)
Shareholders' Equity  
Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or outstanding
— — 
Common stock, $0.01 par value, Authorized: 400,000,000 shares, Issued: 2024 - 140,570,032 shares; 2023 - 138,960,830 shares, Outstanding: 2024 - 126,475,292 shares; 2023 - 126,090,353 shares
1 1 
Capital in excess of par value757 695 
Treasury stock (common), at cost: 2024 - 14,094,740 shares; 2023 - 12,870,477 shares
(868)(819)
Accumulated other comprehensive loss(287)(299)
Retained earnings4,623 4,535 
 4,226 4,113 
Total Liabilities and Shareholders' Equity$15,342 $14,613 

5

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended June 30,Six Months Ended June 30,
(in millions, except per share amounts)2024202320242023
Operating Revenue    
Passenger revenue$2,651 $2,598 $4,655 $4,582 
Mileage Plan other revenue174 170 338 324 
Cargo and other revenue72 70 136 128 
Total Operating Revenue2,897 2,838 5,129 5,034 
Operating Expenses  
Wages and benefits782 754 1,586 1,477 
Variable incentive pay49 57 93 104 
Aircraft fuel, including hedging gains and losses615 573 1,180 1,238 
Aircraft maintenance129 125 251 249 
Aircraft rent46 54 93 113 
Landing fees and other rentals173 167 338 319 
Contracted services106 95 203 190 
Selling expenses84 81 161 147 
Depreciation and amortization128 113 254 217 
Food and beverage service67 60 125 114 
Third-party regional carrier expense64 54 118 106 
Other186 182 391 359 
Special items - operating146 186 180 250 
Total Operating Expenses2,575 2,501 4,973 4,883 
Operating Income322 337 156 151 
Non-operating Income (Expense)  
Interest income24 22 41 39 
Interest expense(36)(28)(71)(56)
Interest capitalized6 7 12 14 
Special items - net non-operating— (6)— (6)
Other - net— (7)— (16)
Total Non-operating Expense(6)(12)(18)(25)
Income Before Income Tax316 325 138 126 
Income tax expense96 85 50 28 
Net Income$220 $240 $88 $98 
Basic Earnings Per Share:$1.74 $1.88 $0.70 $0.77 
Diluted Earnings Per Share:$1.71 $1.86 $0.69 $0.76 
Weighted Average Shares Outstanding used for computation: 
Basic126.337 127.440 126.153 127.470 
Diluted128.310 128.919 127.857 128.860 
6

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS (unaudited)
Three Months Ended June 30,Six Months Ended June 30,
(in millions)2024202320242023
Net Income$220 $240 $88 $98 
Other comprehensive income (loss), net of tax
Marketable securities4 (5)5 16 
Employee benefit plans3 4 6 8 
Interest rate derivative instruments— 1 1 (1)
        Total other comprehensive income, net of tax$7 $— $12 $23 
Total Comprehensive Income, Net of Tax$227 $240 $100 $121 




7

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
(in millions)Common Stock OutstandingCommon StockCapital in Excess of Par ValueTreasury StockAccumulated Other Comprehensive LossRetained EarningsTotal
Balance at December 31, 2023126.090 $1 $695 $(819)$(299)$4,535 $4,113 
Net loss— — — — — (132)(132)
Other comprehensive income— — — — 5 — 5 
Common stock repurchase(0.561)— — (21)— — (21)
Stock-based compensation— — 15 — — — 15 
Stock issued under stock plans0.177 — (3)— — — (3)
Balance at March 31, 2024125.706 $1 $707 $(840)$(294)$4,403 $3,977 
Net income— — — — — 220 220 
Other comprehensive income— — — — 7 — 7 
Common stock repurchase(0.663)— — (28)— — (28)
Stock-based compensation0.013 — 13 — — — 13 
Stock issued for employee stock purchase plan1.401 — 37 — — — 37 
Stock issued under stock plans0.018 — — — — — — 
Balance at June 30, 2024126.475 $1 $757 $(868)$(287)$4,623 $4,226 

(in millions)Common Stock OutstandingCommon StockCapital in Excess of Par ValueTreasury StockAccumulated Other Comprehensive LossRetained EarningsTotal
Balance at December 31, 2022127.534 $1 $577 $(674)$(388)$4,300 $3,816 
Net loss— — — — — (142)(142)
Other comprehensive income— — — — 23 — 23 
Common stock repurchase(0.414)— — (18)— — (18)
Stock-based compensation— — 12 — — — 12 
Stock issued under stock plans0.123 — (2)— — — (2)
Balance at March 31, 2023127.243 $1 $587 $(692)$(365)$4,158 $3,689 
Net income— — — — — 240 240 
Other comprehensive income— — — — — — — 
Common stock repurchase(0.872)— — (39)— — (39)
Stock-based compensation0.017 — 26 — — — 26 
Stock issued for employee stock purchase plan0.924 — 34 — — — 34 
Stock issued under stock plans0.036 — 1 — — — 1 
Balance at June 30, 2023127.348 $1 $648 $(731)$(365)$4,398 $3,951 
8

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended June 30,
(in millions)20242023
Cash Flows from Operating Activities:  
Net Income$88 $98 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization254 217 
Stock-based compensation and other37 56 
Special items - operating— 238 
Changes in certain assets and liabilities:
Changes in deferred income taxes47 27 
Increase in accounts receivable(55)(55)
Increase in air traffic liability440 394 
Increase in deferred revenue38 80 
Other - net23 (223)
Net cash provided by operating activities872 832 
Cash Flows from Investing Activities:  
Property and equipment additions  
Aircraft and aircraft purchase deposits(380)(414)
Other flight equipment(63)(113)
Other property and equipment(144)(107)
Supplier proceeds162 — 
Purchases of marketable securities(163)(389)
Sales and maturities of marketable securities288 574 
Fleet transition133 (29)
Other investing activities32 (1)
Net cash used in investing activities(135)(479)
Cash Flows from Financing Activities:  
Proceeds from issuance of long-term debt, net of issuance costs279 — 
Long-term debt payments(149)(149)
Common stock repurchases(49)(57)
Other financing activities6 41 
Net cash provided by (used in) financing activities87 (165)
Net increase in cash and cash equivalents824 188 
Cash, cash equivalents, and restricted cash at beginning of period308 369 
Cash, cash equivalents, and restricted cash at end of the period$1,132 $557 
9

Six Months Ended June 30,
(in millions)20242023
Supplemental disclosure:
Cash paid during the period for:
Interest, net of amount capitalized$55 $42 
Income taxes, net of refunds received— 14 
Non-cash transactions:
Right-of-use assets acquired through operating leases34 120 
Operating leases converted to finance leases— 310 
Property and equipment acquired through the issuance of debt68 134 
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents1,115 536 
Restricted cash included in Other noncurrent assets
17 21 
Total cash, cash equivalents, and restricted cash at end of the period$1,132 $557 



10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation
 
The unaudited Condensed Consolidated Financial Statements include the accounts of Air Group, or the Company, and its primary subsidiaries, Alaska and Horizon. The unaudited Condensed Consolidated Financial Statements also include McGee Air Services (McGee), a ground services subsidiary of Alaska, and other immaterial business units. All intercompany balances and transactions have been eliminated. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. Consistent with these requirements, this Quarterly Report on Form 10-Q does not include all the information required by GAAP for complete financial statements. It should be read in conjunction with the consolidated financial statements and accompanying notes in the Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, all adjustments have been made that are necessary to fairly present the Company’s financial position as of June 30, 2024 and the results of operations for the three and six months ended June 30, 2024 and 2023. Such adjustments were of a normal recurring nature. Certain rows, columns, figures, or percentages may not recalculate due to rounding.

In preparing these statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities, as well as the reported amounts of revenue and expenses, including impairment charges. Due to seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, changes in global economic conditions, changes in the competitive environment, and other factors, operating results for the three and six months ended June 30, 2024 are not necessarily indicative of operating results for the entire year.

Flight 1282 and Boeing 737-9 MAX Grounding

As a result of the Flight 1282 accident and the subsequent grounding of Boeing 737-9 MAX (B737-9) aircraft, Air Group's operation and results in the first and second quarters were significantly impacted. The Company received compensation from Boeing to address the financial damages incurred as a result of the grounding. In the first quarter, Boeing paid Air Group $162 million in cash. In the second quarter, Boeing issued Air Group $61 million in supplier credit memos to be applied against future Boeing goods and services purchases.

Compensation received under the agreement is accounted for as a reduction in cost basis of certain B737-9 aircraft. The compensation is reflected within Aircraft and other flight equipment and Deposits for future flight equipment in the unaudited Condensed Consolidated Balance Sheets.

NOTE 2. PROPOSED ACQUISITION OF HAWAIIAN HOLDINGS, INC.

On December 2, 2023, the Company entered into a definitive agreement to acquire Hawaiian Holdings, Inc. (Hawaiian). The Company has agreed to pay Hawaiian's shareholders $18.00 per share, or approximately $1.0 billion, in cash for the outstanding shares of Hawaiian. In addition, the Company expects to assume Hawaiian's debt and lease obligations on the date of acquisition. The acquisition has been approved by Hawaiian's shareholders and is subject to final approval by various regulatory bodies.

On February 7, 2024, Air Group and Hawaiian each received a request for additional information and documentary material (the “Second Request”) from the Antitrust Division of the Department of Justice (the “DOJ”) in connection with the DOJ’s review of the acquisition. On March 27, 2024, Air Group and Hawaiian entered into a timing agreement with the DOJ pursuant to which they agreed, among other things, not to consummate the acquisition before 90 days following the date on which both parties have certified substantial compliance with the Second Request unless they have received written notice from the DOJ prior to the end of such 90-day period that the DOJ has closed its investigation of the acquisition.

On May 7, 2024, Air Group and Hawaiian certified substantial compliance with the Second Request. The certification of substantial compliance triggered the start of the 90-day period described in the prior paragraph, which was previously scheduled to expire on August 5, 2024. On July 29, 2024, Air Group and Hawaiian agreed with the DOJ to extend the Review Period until 12:01 a.m. Eastern Time on August 15, 2024.

In the three and six months ended June 30, 2024, the Company incurred integration costs of $30 million and $38 million, respectively, primarily consisting of professional services fees. These costs are included within Special items - operating in the
11
unaudited Condensed Consolidated Statements of Operations. The Company expects to continue to incur integration costs as activities supporting the proposed acquisition continue.

NOTE 3. REVENUE

Ticket revenue is recorded as Passenger revenue, and represents the primary source of the Company's revenue. Also included in Passenger revenue is passenger ancillary revenue such as bag fees, on-board food and beverage, and certain revenue from the frequent flyer program. Mileage Plan other revenue includes brand and marketing revenue from the co-branded credit card and other partners, and certain interline frequent flyer revenue, net of commissions. Cargo and other revenue includes freight and mail revenue, and to a lesser extent, other ancillary revenue products such as lounge membership and certain commissions.

The level of detail within the Company’s unaudited Condensed Consolidated Statements of Operations and in this footnote depict the nature, amount, timing, and uncertainty of revenue and how cash flows are affected by economic and other factors.

Passenger Ticket and Ancillary Services Revenue

Passenger revenue recognized in the unaudited Condensed Consolidated Statements of Operations (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Passenger ticket revenue, net of taxes and fees$2,226 $2,207 $3,874 $3,855 
Passenger ancillary revenue135 123 243 227 
Mileage Plan passenger revenue290 268 538 500 
Total Passenger revenue$2,651 $2,598 $4,655 $4,582 

Mileage Plan Loyalty Program

Mileage Plan revenue included in the unaudited Condensed Consolidated Statements of Operations (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Mileage Plan passenger revenue$290 $268 $538 $500 
Mileage Plan other revenue174 170 338 324 
Total Mileage Plan revenue$464 $438 $876 $824 

Cargo and Other Revenue

Cargo and other revenue included in the unaudited Condensed Consolidated Statements of Operations (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Cargo revenue$36 $39 $64 $68 
Other revenue36 31 72 60 
Total Cargo and other revenue$72 $70 $136 $128 

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Air Traffic Liability and Deferred Revenue

Passenger ticket and ancillary services liabilities

The Company recognized Passenger revenue of $150 million and $103 million from the prior year-end air traffic liability balance for the three months ended June 30, 2024 and 2023, and $717 million and $588 million from the prior year-end air traffic liability balance for the six months ended June 30, 2024 and 2023.

Mileage Plan assets and liabilities

The Company records a receivable for amounts due from the affinity card partner and from other partners as mileage credits are sold until the payments are collected. The Company had $87 million of such receivables as of June 30, 2024 and $102 million as of December 31, 2023.

The table below presents a roll forward of the total frequent flyer liability (in millions):
Six Months Ended June 30,
20242023
Total Deferred Revenue balance at January 1$2,603 $2,497 
Travel miles and companion certificate redemption - Passenger revenue(508)(470)
Miles redeemed on partner airlines - Other revenue(67)(52)
Increase in liability for mileage credits issued613 602 
Total Deferred Revenue balance at June 30$2,641 $2,577 

NOTE 4. FAIR VALUE MEASUREMENTS

In determining fair value, there is a three-level hierarchy based on the reliability of the inputs used. Level 1 refers to fair values based on quoted prices in active markets for identical assets or liabilities. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 refers to fair values estimated using significant unobservable inputs.

Fair Value of Financial Instruments on a Recurring Basis

As of June 30, 2024, cost basis and fair value for marketable securities were $1.4 billion. Differences in cost basis and fair value of marketable securities are primarily a result of changes in interest rates and general market conditions. Management does not believe any unrealized losses are the result of credit quality based on its evaluation of industry and duration exposure, credit ratings of the securities, liquidity profiles, and other observable information as of June 30, 2024.
13

Fair values of financial instruments on the unaudited Condensed Consolidated Balance Sheets (in millions):
June 30, 2024December 31, 2023
Level 1Level 2TotalLevel 1Level 2Total
Assets
Marketable securities
U.S. government and agency securities$438 $— $438 $387 $— $387 
Equity mutual funds6 — 6 5 — 5 
Foreign government bonds— 10 10 — 10 10 
Asset-backed securities— 168 168 — 192 192 
Mortgage-backed securities— 91 91 — 115 115 
Corporate notes and bonds— 638 638 — 763 763 
Municipal securities— 43 43 — 38 38 
Total Marketable securities444 950 1,394 392 1,118 1,510 
Derivative instruments
Fuel hedge contracts - call options— 6 6 — 11 11 
Interest rate swap agreements— 9 9 — 8 8 
Total Assets$444 $965 $1,409 $392 $1,137 $1,529 

The Company uses the market and income approach to determine the fair value of marketable securities. U.S. government securities and equity mutual funds are Level 1 as the fair value is based on quoted prices in active markets. Foreign government bonds, asset-backed securities, mortgage-backed securities, corporate notes and bonds, and municipal securities are Level 2 as the fair value is based on standard valuation models that are calculated based on observable inputs such as quoted interest rates, yield curves, credit ratings of the security and other observable market information.

The Company uses the market approach and the income approach to determine the fair value of derivative instruments. The fair value for fuel hedge call options is determined utilizing an option pricing model based on inputs that are readily available in active markets or can be derived from information available in active markets. In addition, the fair value considers the exposure to credit losses in the event of non-performance by counterparties. Interest rate swap agreements are Level 2 as the fair value of these contracts are determined based on the difference between the fixed interest rate in the agreements and the observable interest SOFR-based forward rates at period end multiplied by the total notional value.

Activity and Maturities for Marketable Securities

Maturities for marketable securities (in millions):
June 30, 2024Cost BasisFair Value
Due in one year or less$600 $592 
Due after one year through five years785 758 
Due after five years through ten years29 26 
Due after 10 years13 12 
No maturity date4 6 
Total$1,431 $1,394 

Fair Value of Other Financial Instruments

The Company uses the following methods and assumptions to determine the fair value of financial instruments that are not recognized at fair value as described below.

Cash, Cash Equivalents, and Restricted Cash: Cash equivalents consist of highly liquid investments with original maturities of three months or less, such as money market funds, commercial paper, and certificates of deposit. They are carried at cost, which approximates fair value.

14
The Company's restricted cash balances are primarily used to guarantee various letters of credit, self-insurance programs, or other contractual rights. Restricted cash consists of highly liquid securities with original maturities of three months or less. They are carried at cost, which approximates fair value.

Debt: To estimate the fair value of all fixed-rate debt as of June 30, 2024, the Company uses the income approach by discounting cash flows or estimation using quoted market prices, utilizing borrowing rates for comparable debt over the remaining life of the outstanding debt. The estimated fair value of the fixed-rate Enhanced Equipment Trust Certificate (EETC) debt is Level 2, as it is estimated using observable inputs, while the estimated fair value of $601 million of other fixed-rate debt, including PSP notes payable, is classified as Level 3, as it is not actively traded and is valued using discounted cash flows which is an unobservable input.

Fixed-rate debt on the unaudited Condensed Consolidated Balance Sheets and the estimated fair value of long-term fixed-rate debt (in millions):
June 30, 2024December 31, 2023
Fixed-rate debt$1,447 $1,515 
Estimated fair value$1,367 $1,382 

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property, plant and equipment, operating and finance lease assets, goodwill, and intangible assets. These assets are subject to fair valuation when there is evidence of impairment. No material impairments were recorded during the three and six months ended June 30, 2024.


NOTE 5. LONG-TERM DEBT
 
Long-term debt obligations on the unaudited Condensed Consolidated Balance Sheets (in millions):
 June 30, 2024December 31, 2023
Fixed-rate notes payable due through 2029$68 $80 
Fixed-rate PSP notes payable due through 2031600 600 
Fixed-rate EETC payable due through 2025 & 2027779 835 
Variable-rate notes payable due through 20361,239 971 
Less debt issuance costs(14)(15)
Total debt2,672 2,471 
Less current portion(a)
(359)(289)
Long-term debt, less current portion$2,313 $2,182 
Weighted-average fixed-interest rate3.3 %3.4 %
Weighted-average variable-interest rate6.9 %6.8 %
(a) Excludes finance lease liabilities recognized within Current portion of long-term debt and finance leases in the unaudited Condensed Consolidated Balance Sheets as of December 31, 2023.

Approximately $223 million of the Company's total variable-rate notes payable are effectively fixed via interest rate swaps at June 30, 2024, resulting in an effective weighted-average interest rate for the full debt portfolio of 4.7%.

During the six months ended June 30, 2024, the Company incurred debt of $348 million from multiple lenders and sources. New debt includes proceeds of $280 million, secured by a combination of aircraft and flight simulators. Additionally, $68 million was incurred as part of an agreement to finance certain E175 deliveries. Debt from this agreement is reflected as a non-cash transaction within the supplemental disclosures in the unaudited Condensed Consolidated Statements of Cash Flows. During the six months ended June 30, 2024, the Company made debt payments of $149 million.

Subsequent to quarter end, the Company incurred debt of $67 million, secured by aircraft.
15

Debt Maturity

At June 30, 2024, long-term debt principal payments for the next five years and thereafter are as follows (in millions):
 Total
Remainder of 2024$164 
2025385 
2026342 
2027666 
2028176 
Thereafter953 
Total Principal Payments$2,686 

Bank Lines of Credit
 
Alaska has three credit facilities totaling $626 million as of June 30, 2024. One credit facility is for $150 million, expires in April 2028, and is secured by certain accounts receivable, spare engines, spare parts, and ground service equipment. A second credit facility is for $400 million, expires in June 2026, and is secured by aircraft. Both facilities have variable interest rates based on SOFR plus a specified margin. A third credit facility is for $76 million, expires in June 2025, and is secured by aircraft.

Alaska has secured letters of credit against the third facility. All credit facilities have a requirement to maintain a minimum unrestricted cash and marketable securities balance of $500 million. Alaska was in compliance with this covenant at June 30, 2024.

NOTE 6. EMPLOYEE BENEFIT PLANS

Net periodic benefit costs for qualified defined-benefit plans include the following (in millions):
Three Months Ended June 30,Six Months Ended June 30,
 2024202320242023
Service cost$7 $7 $14 $14 
Pension expense included in Wages and benefits7 7 14 14 
Interest cost27 27 54 54 
Expected return on assets(32)(29)(64)(57)
Recognized actuarial loss4 6 9 12 
Pension expense (benefit) included in Non-operating Income$(1)$4 $(1)$9 
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NOTE 7. COMMITMENTS AND CONTINGENCIES

Boeing has communicated to Alaska that certain B737 aircraft are expected to be delivered later than the contracted delivery dates. This includes certain B737-8 and B737-9 aircraft contracted for delivery in 2024 that have been moved to 2025, as well as certain B737-10 aircraft contracted for delivery in 2025 that have been moved to 2026, pending certification of the B737-10. The Company has incorporated these adjustments in the tables below, however, management expects that additional Boeing aircraft deliveries may also be delayed beyond what is depicted in the tables.

Future minimum contractual payments for commitments as of June 30, 2024 (in millions):
Aircraft-Related Commitments(a)
Capacity Purchase Agreements and Other Obligations (b)
Remainder of 2024$864 $119 
20251,064 242 
20261,186 235 
20271,100 231 
2028151 234 
Thereafter715 658 
Total$5,080 $1,719 
(a)Includes contractual commitments for aircraft, engines, and aircraft maintenance. Option deliveries are excluded from minimum commitments until exercise.
(b)Excludes lease costs associated with capacity purchase agreements.

Aircraft Commitments

Aircraft purchase commitments include contractual commitments for aircraft and engines. Details for contractual aircraft commitments as of June 30, 2024 are outlined below.
Firm OrdersOptions and Other RightsTotal
Aircraft Type2024-20272026-20302024-2030
B73772105177
E1756410
   Total78109187

Aircraft Maintenance

Aircraft maintenance commitments include contractual commitments for engine maintenance agreements requiring monthly payments based upon utilization, such as flight hours, cycles, and age of the aircraft. In turn, these maintenance agreements transfer certain risks to the third-party service provider. Alaska has contracts for maintenance on its B737-800 and B737-900ER aircraft engines through 2026 and 2032, respectively. Horizon has contracts for maintenance on its E175 aircraft engines through 2033 and 2039.

Contingencies

The Company is a party to routine litigation matters incidental to its business and with respect to which no material liability is expected. Liabilities for litigation related contingencies are recorded when a loss is determined to be probable and estimable.

17
As part of the 2016 acquisition of Virgin America, Alaska assumed responsibility for the Virgin trademark license agreement with the Virgin Group. In 2019, pursuant to that agreement's venue provision, the Virgin Group sued Alaska in England, alleging that the agreement requires Alaska to pay $8 million per year as a minimum annual royalty through 2039, adjusted annually for inflation and irrespective of Alaska's actual use (or non-use) of the mark. Alaska stopped making royalty payments in 2019 after ending all use of the Virgin brand. On February 16, 2023, the commercial court issued a ruling adopting Virgin Group’s interpretation of the license agreement. The Company appealed the decision. On June 11, 2024, the appellate court issued a final decision affirming the lower court ruling in favor of the Virgin Group. Alaska also commenced a separate claim for breach of the agreement against the Virgin Group that may affect the Company’s total liability in the matter. Alaska recorded an accrual in the second quarter of 2024 for $45 million, representing the expenses associated with the trademark license agreement between January 2020 and June 2024. The expense is classified within Special items – operating in the unaudited Condensed Consolidated Statements of Operations.

On April 15, 2024, a private antitrust action captioned Warren Yoshimoto, et al., v. Alaska Airlines, Inc., et al. was filed in the United States District Court for the District of Hawaii, against Alaska Airlines, Inc. and Alaska Air Group, Inc. The plaintiffs, whom the complaint describes as airline passengers, allege that the pending acquisition of Hawaiian Airlines, Inc. by Alaska Airlines, Inc. would violate U.S. antitrust laws. They seek to enjoin the merger or obtain divestitures, as well as costs and attorneys’ fees. The Company believes the allegations in the complaint are without merit and will defend against them vigorously, while continuing to work cooperatively with the U.S. Department of Justice to obtain regulatory clearance to close the acquisition.

NOTE 8. SHAREHOLDERS' EQUITY

Common Stock Repurchase

In August 2015, the Board of Directors authorized a $1 billion share repurchase program. The Company repurchased 1.2 million shares for $49 million during the six months ended June 30, 2024 and 1.3 million shares for $57 million during the six months ended June 30, 2023. As of June 30, 2024, the Company has repurchased 12.3 million shares for $738 million, with $262 million remaining under this program.
CARES Act Warrant Issuances
As taxpayer protection required under the Payroll Support Program (PSP) under the CARES Act, the Company granted the U.S. Department of the Treasury a total of 1,455,437 warrants to purchase ALK common stock in 2020 and 2021. An additional 427,080 warrants were issued in conjunction with a draw on the CARES Act Loan in 2020. These warrants are non-voting, freely transferable, may be settled as net shares or in cash at the Company's option, and have a five-year term. The warrants were sold at auction in the second quarter of 2024 to a third party investor. The sale had no impact to the amount held on the Company's balance sheet.
As of June 30, 2024, there are 1,882,517 total warrants outstanding, with a weighted average strike price of $39.06. The value of the warrants was estimated using a Black-Scholes option pricing model. The total fair value of all outstanding warrants was $30 million, recorded in stockholders' equity at issuance.

NOTE 9. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding, including the dilutive effect of outstanding share-based instruments such as employee stock awards and warrants.
18
Three Months Ended June 30,Six Months Ended June 30,
(in millions, except per share amounts)
2024202320242023
Net income$220 $240 $88 $98 
Basic weighted average shares outstanding
126.337 127.440 126.153 127.470 
Dilutive effect of employee stock awards1.627 1.066 1.421 0.962 
Dilutive effect of stock warrants0.346 0.413 0.283 0.428 
Diluted weighted average shares outstanding
128.310 128.919 127.857 128.860 
Basic earnings per share$1.74 $1.88 $0.70 $0.77 
Diluted earnings per share$1.71 $1.86 $0.69 $0.76 
Antidilutive amounts excluded from calculation:
Employee stock awards1.1 1.7 1.9 2.1 
Stock warrants0.2 0.1 0.2 0.1 


NOTE 10. ACCUMULATED OTHER COMPREHENSIVE LOSS
A roll forward of the amounts included in accumulated other comprehensive loss is shown below for the three and six months ended June 30, 2024 and 2023:
(in millions)Marketable SecuritiesEmployee Benefit PlanInterest Rate DerivativesTax EffectTotal
Balance at March 31, 2024$(45)$(354)$9 $96 $(294)
Change in value6 — — — 6 
Reclassifications into earnings— 4 — (3)1 
Balance at June 30, 2024$(39)$(350)$9 $93 $(287)
Balance at December 31, 2023$(46)$(358)$8 $97 $(299)
Change in value7 — 1 — 8 
Reclassifications into earnings— 8 — (4)4 
Balance at June 30, 2024$(39)$(350)$9 $93 $(287)<