UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
FORM 10-Q (Mark One) xQUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,
2001. OR  ̈TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from  . . . . . . 
to  . . . . . . Commission file
number  1-8957 ALASKA AIRLINES, INC.(Exact name
of registrant as specified in its charter) Alaska

  92-0009235(State or other jurisdiction of

  (I.R.S. Employerincorporation or organization)

  Identification No.)
 19300 Pacific Highway South, Seattle,
Washington 98188(Address of principal executive offices) (206) 431-7079(Registrant's
telephone number, including area code) 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. YesxNo ̈ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date. The
registrant has 500 common shares, par value $1.00, outstanding at March
31, 2001.  
 PART I. FINANCIAL STATEMENTSITEM 1. Financial StatementsBALANCE SHEETS (unaudited)Alaska
Airlines, Inc.

ASSETSDecember 31, 2000

  March
  31, 2001(In Millions)Current AssetsCash and cash equivalents

  $101.0

  $84.8Marketable securities

  360.6

  306.7Receivables from related companies

  53.0

  75.6Receivables - net

  76.5

  96.3Inventories and supplies - net

  34.5

  34.5Prepaid expenses and other assets

  190.8

  171.9Total Current Assets

  816.4

  769.8Property and EquipmentFlight equipment

  1,527.2

  1,613.0Other property and equipment

  299.3

  338.3Deposits for future flight equipment

  192.0

  131.22,018.5

  2,082.5Less accumulated depreciation and amortization

  488.0

  506.41,530.5

  1,576.1Capital leases:Flight and other equipment

  44.4

  44.4Less accumulated amortization

  33.8

  34.310.6

  10.1Total Property and Equipment - Net

  1,541.1

  1,586.2Intangible Assets - Subsidiaries

  13.0

  12.8Other Assets

  35.9

  32.2Total Assets

  $2,406.4

  $2,401.0See accompanying notes to financial
statements.

LIABILITIES AND SHAREHOLDER'S EQUITYDecember 31, 2000

  March
  31, 2001(In Millions Except Share Amounts)Current LiabilitiesAccounts payable

  $117.1

  $112.4Payables to related companies

  0.5

  0.7Accrued aircraft rent

  74.2

  62.4Accrued wages, vacation and payroll taxes

  59.1

  60.5Other accrued liabilities

  127.1

  144.5Air traffic liability

  212.3

  270.3Current portion of long-term debt and capital lease
  obligations

  66.7

  33.9Total Current Liabilities

  657.0

  684.7Long-Term Debt and Capital Lease
  Obligations

  609.2

  611.3Other Liabilities and CreditsDeferred income taxes

  156.4

  144.5Deferred revenue

  133.0

  132.1Other liabilities

  147.2

  146.4436.6

  423.0Shareholder's EquityCommon stock, $1 par valueAuthorized:  1,000 sharesIssued:  2000 and 2001 - 500 shares

  -

  -Capital in
  excess of par value

  324.8

  324.8Retained earnings

  378.8

  357.2703.6

  682.0Total Liabilities and Shareholder's
  Equity

  $2,406.4

  $2,401.0See accompanying notes to financial
statements.

CONSOLIDATED STATEMENTS OF INCOMEAlaska
Airlines, Inc.

Three
  Months Ended March 31(In
  Millions)

  2000

  2001Operating RevenuesPassenger

  $360.1

  $385.1Freight
  and mail

  17.8

  18.3Other
  - net

  13.6

  14.7Total Operating Revenues

  391.5

  418.1Operating ExpensesWages
  and benefits

  138.6

  155.3Contracted
  services

  15.2

  17.9Aircraft
  fuel

  73.8

  74.0Aircraft
  maintenance

  28.4

  31.1Aircraft
  rent

  35.8

  35.3Food
  and beverage service

  12.1

  13.2Commissions

  15.6

  15.9Other
  selling expenses

  20.4

  26.0Depreciation
  and amortization

  18.6

  23.1Loss
  on sale of assets

  0.0

  0.9Landing
  fees and other rentals

  17.0

  21.5Other

  31.0

  36.4Total Operating Expenses

  406.5

  450.6Operating Loss

  (15.0)

  (32.5)Nonoperating Income (Expense)Interest
  income

  6.1

  9.5Interest
  expense

  (7.9)

  (12.1)Interest
  capitalized

  2.6

  2.6Other
  - net

  0.5

  (1.2)1.3

  (1.2)Loss
  before income tax and accounting change

  (13.7)

  (33.7)Income
  tax credit

  (5.5)

  (12.1)Loss
  before accounting change

  (8.2)

  (21.6)Cumulative
  effect of accounting change, net of income taxes of $35.6 million

  (56.9)

  -Net Loss

  $(65.1)

  $(21.6)See accompanying notes to financial statements.

STATEMENTS OF
SHAREHOLDER'S EQUITY (unaudited)Alaska
Airlines, Inc.

Capital inCommon

  Excess of

  Retained(In Millions)

  Stock

  Par Value

  Earnings

  TotalBalances at December 31, 2000

  $-

  $324.8

  $378.8

  $703.6Net loss for the three months ended March 31, 2001

  

  

  (21.6)

  (21.6)Balances at March 31, 2001

  $-

  $324.8

  $357.2

  $682.0See accompanying notes to financial
statements.

STATEMENTS OF
CASH FLOWS (unaudited)Alaska
Airlines, Inc.

Three
  Months Ended March 31  (In Millions)

  2000

  2001Cash flows from operating activities:Net
  loss

  $(65.1)

  $(21.6)Adjustments
  to reconcile net loss to cash:Cumulative effect of accounting change

  56.9

  -Depreciation and amortization

  18.6

  23.1Amortization of airframe and engine
  overhauls

  11.1

  14.3Loss on sale of assets

  -

  0.9Decrease in deferred income taxes

  (42.7)

  (11.9)Increase in accounts receivable

  (66.8)

  (42.4)Decrease in other current assets

  2.4

  18.9Increase in air traffic liability

  69.1

  58.0Increase in other current liabilities

  1.7

  2.5Other-net

  40.8

  3.1Net
  cash provided by operating activities

  26.0

  44.9Cash flows from investing activities:Purchases
  of marketable securities

  (1.5)

  (79.6)Sales
  and maturities of marketable securities

  50.6

  133.4Restricted
  deposits

  1.1

  (0.4)Flight
  equipment deposits returned

  -

  33.4Additions
  to flight equipment deposits

  (26.4)

  (13.1)Additions
  to property and equipment

  (50.3)

  (104.1)Net
  cash used in investing activities

  (26.5)

  (30.4)Cash flows from financing activities:Proceeds
  from issuance of long-term debt

  -

  29.5Long-term
  debt and capital lease payments

  (6.4)

  (60.2)Net
  cash used in financing activities

  (6.4)

  (30.7)Net
  change in cash and cash equivalents

  (6.9)

  (16.2)Cash
  and cash equivalents at beginning of period

  132.3

  101.0Cash and cash equivalents at end of period

  $125.4

  $84.8Supplemental
  disclosure of cash paid (refunded) during the period for:Interest

  $0.0

  $16.0Income taxes

  1.7

  (0.1)Noncash
  investing and financing activities

  None

  NoneSee accompanying notes to financial statements.

NOTES
TO FINANCIAL STATEMENTS THAT HAVE CHANGED SIGNIFICANTLY DURING THE THREE MONTHS
ENDED MARCH 31, 2001Alaska Airlines, Inc.

Note 1.Basis of
PresentationThe accompanying unaudited financial
statements of Alaska Airlines, Inc. (the Company or Alaska), should be read in
conjunction with the financial statements in the Company's annual report on
Form 10-K for the year ended December 31, 2000.  They include all adjustments that are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods.  The adjustments made were of a
normal recurring nature.  The Company is
a wholly owned subsidiary of Alaska Air Group, Inc. (Air Group) whose principal
subsidiaries are Alaska Airlines, Inc. and Horizon Air Industries, Inc.

The statements of income and cash
flows for the three months ended March 31, 2000 have been restated for the
change in accounting for the sale of miles, which was effective as of January
1, 2000.

Effective January 1, 2001, the
Company adopted Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended.  SFAS 133 requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value.  The Companys operating results
can be significantly impacted by changes in the price of aircraft fuel.  To manage the risks associated with changes
in aircraft fuel prices, the Company uses purchase options for crude oil
contracts.  These contracts, referred to
as fuel hedge contracts, have a high correlation to changes in aircraft fuel
prices, and therefore qualify as cash flow hedges under SFAS 133.  Upon adoption of SFAS 133, the Company
recorded the fair market value of its fuel hedging contracts on the
Consolidated Balance Sheet.  Each
period, the contracts will be adjusted to fair market value.  To the extent the change in the value of the
fuel contract does not perfectly offset the change in the value of the aircraft
fuel purchase being hedged, that portion of the hedge is recognized in
earnings.  For the three months ended
March 31, 2001, the Company recognized $1.4 million of nonoperating expense
related to fair market value changes in fuel hedge contracts.

Note 2.Prepaid
Expenses and Other Current AssetsAt December 31, 2000 and March 31, 2001, other current assets
included a deferred tax asset of $49.4 million.

Note 3.               Frequent Flyer Program (See Note
10 to Financial Statements at December 31, 2000)Balance Sheet Classification of Frequent Flyer LiabilityAlaska's Mileage Plan liabilities are included under the following balance
sheet captions.

December 31, 2000

  March 31, 2001(In millions)Current
  Liabilities:Other accrued liabilities

  $59.5

  $72.0Other
  Liabilities and Credits:Deferred revenue

  94.0

  94.0Other liabilities

  45.0

  45.0Total

  $198.5

  $211.0

Alaska 
Airlines Financial and Statistical Data

Three Months Ended March 31%Financial Data (in millions):

  2000

  2001

  ChangeOperating
  Revenues:Passenger

  $360.1

  $385.1

  6.9Freight
  and mail

  17.8

  18.3

  2.8Other
  - net

  13.6

  14.7

  8.1Total
  Operating Revenues

  391.5

  418.1

  6.8Operating
  Expenses:Wages
  and benefits

  138.6

  155.3

  12.0Contracted
  services

  15.2

  17.9

  17.8Aircraft
  fuel

  73.8

  74.0

  0.3Aircraft
  maintenance

  28.4

  31.1

  9.5Aircraft
  rent

  35.8

  35.3

  (1.4)Food
  and beverage service

  12.1

  13.2

  9.1Commissions

  15.6

  15.9

  1.9Other
  selling expenses

  20.4

  26.0

  27.5Depreciation
  and amortization

  18.6

  23.1

  24.2Loss
  on sale of assets

  0.0

  0.9

  NMLanding
  fees and other rentals

  17.0

  21.5

  26.5Other

  31.0

  36.4

  17.4Total
  Operating Expenses

  406.5

  450.6

  10.8Operating
  Loss

  (15.0)

  (32.5)Interest
  income

  6.1

  9.5Interest
  expense

  (7.9)

  (12.1)Interest
  capitalized

  2.6

  2.6Other
  - net

  0.5

  (1.2)1.3

  (1.2)Loss
  Before Income Tax  and Accounting
  Change

  $(13.7)

  $(33.7)Operating Statistics:Revenue
  passengers (000)

  3,168

  3,198

  1.0RPMs
  (000,000)

  2,814

  2,895

  2.9ASMs
  (000,000)

  4,231

  4,428

  4.6Passenger
  load factor

  66.5%

  65.4%

  (1.1)ptsBreakeven
  load factor

  70.6%

  73.4%

  2.8 ptsYield
  per passenger mile

  12.80¢

  13.30¢

  3.9Operating
  revenue per ASM

  9.25¢

  9.44¢

  2.1Operating
  expenses per ASM

  9.61¢

  10.18¢

  6.0Expense
  per ASM excluding fuel

  7.86¢

  8.51¢

  8.2Fuel
  cost per gallon

  99.1¢

  97.1¢

  (2.0)Fuel
  gallons (000,000)

  74.5

  76.2

  2.3Average
  number of employees

  9,279

  10,203

  10.0Aircraft
  utilization (blk hrs/day)

  10.9

  11.0

  0.9Operating
  fleet at period-end

  89

  96

  7.9NM =
  Not MeaningfulITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Forward-Looking InformationThis
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, 2000.

Results of Operations
First Quarter 2001 Compared with First Quarter 2000Net
loss for the first quarter of 2000 was $21.6 million compared with a loss
before accounting change of $8.2 million in 2000.  The operating loss for the first quarter of 2001 was $32.5
million compared with an operating loss of $15.0 million for 2000.  Financial and statistical data is shown on
page eight.  A discussion of this data
follows.

RevenuesCapacity
increased by 4.6% primarily due to additional flights in the Alaska-to-U.S.
mainland and the Arizona markets. 
Traffic grew by 2.9%, and passenger load factor decreased 1.1 percentage
points.  The Northern California,
Southeast Alaska and Arizona markets experienced the largest decreases in load
factor.  Passenger yields were up 3.9%,
primarily due to fuel-related fare increases. 
Yields were up in most major markets, with Northern California showing
the largest increase.  The higher yield
combined with the lower load factor resulted in a 2.1% increase in revenue per
available seat mile (ASM).  The combined
result of the 4.6% capacity increase and the 2.1% revenue per ASM increase was
a 6.9% increase in passenger revenue.

Freight and mail
revenues increased 2.8%, primarily due to higher mail rates.  Other-net revenues increased 8.1%, largely
due to increased revenue from the sale of miles in Alaska's frequent flyer
program.

ExpensesOperating
expenses grew by 10.8% as a result of a 4.6% increase in capacity and a 6.0%
increase in cost per ASM.  Explanations
of significant year-over-year changes in the components of operating expenses
are as follows:



  Wages and benefits
  increased 12.0% due to a 10.0% increase in the number of employees combined
  with a 1.9% increase in average wages and benefits per employee.  Employees were added in all areas due to
  the net addition of 7 aircraft to the operating fleet (a 7.9% increase).  Average wage rates increased due to
  longevity increases for union employees and annual merit raises for
  management employees.

  Contracted services
  increased 17.8% due to higher rates for and increased volume of ground
  handling services, increased Mexican air traffic control fees and higher contract-labor
  costs.

  Maintenance expense
  increased 9.5%, exceeding the 6.0% increase in block hours, due to increased
  airframe and engine overhaul expenses. 
  A total of 19 C checks (annual airframe inspections) were performed
  in 2001 compared to 9 in 2000.

  Commission expense
  increased 1.9%, less than the 6.9% increase in passenger revenue, because a
  smaller percentage of ticket sales were made by travel agents.  In 2001, 61.6% of ticket sales were made
  through travel agents, versus 65.9% in 2000. 
  In 2001, 14.9% of ticket sales were made through Alaska's Internet web
  site versus 9.3% in 2000.

  Other selling expenses
  increased 27.5%, higher than the 6.9% increase in passenger revenue,
  primarily due to a $3.0 million increase in Mileage Plan awards expense, as a
  result of the following trends: (a) more ways to earn miles, (b) less
  forfeitures of miles, (c) greater use of travel awards on other airlines, and
  (d) higher costs to obtain awards on other airlines.  Effective September 1, 2001, higher redemption
  levels will be required for first class and peak awards on Alaska and
  Horizon, as well as for certain Hawaii and international awards on other
  airlines.  These changes are expected
  to slow the increase in MP awards expense.

  Depreciation and amortization
  increased 24.2%, primarily due to the owning of seven more aircraft in 2001.

  Landing fees and other
  rentals increased 26.5%, primarily due to higher rental rates at airports
  throughout the system.  The higher
  rates reflect the airports increased cost of operations due to living wage
  ordinances and expansion of their facilities.  These trends are expected to continue during 2001.

  Other expense
  increased 17.4%, primarily due to higher expenditures for insurance, flight
  crew hotels and meals, supplies, legal fees, property taxes and utilities.Nonoperating Income
(Expense)Net nonoperating items
were $1.2 million expense in 2001 compared to $1.3 million income in 2000.  The $2.5 million change was primarily due to
higher interest expense resulting from new debt incurred in the second half of
2000.  Effective January 1, 2001, the
Company adopted Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended.  SFAS 133 requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value.  Consequently, a $1.4 million
charge was recorded in 2001 to recognize the reduction in fair value of fuel
hedging contracts in accordance with the new standard.

Income Tax CreditAccounting standards require the Company to
provide for income taxes each quarter based on its estimate of the effective
tax rate for the full year.  The
volatility of air fares and fuel prices and the seasonality of the Company's business
make it difficult to accurately forecast full-year pretax results.  In addition, a relatively small change in
pretax results can cause a significant change in the effective tax rate due to
the magnitude of nondeductible expenses, such as goodwill amortization and
employee per diem costs.  In estimating
the 35.9% tax rate for the first quarter of 2001, the Company considered a
variety of factors, including the U.S. federal rate of 35%, estimates of
nondeductible expenses and state income taxes, and the 38.8% and 39.2% tax
rates used for full years 1998 and 1999. 
This rate is evaluated each quarter and adjustments are made if
necessary.

Liquidity and Capital ResourcesThe
table below presents the major indicators of financial condition and liquidity.

December 31, 2000

  March 31, 2001

  Change(In millions, except
  debt-to-equity)Cash
  and marketable securities

  $461.6

  $391.5

  $(70.1)Working
  capital

  159.4

  85.1

  (74.3)Unused
  credit facility

  150.0

  150.0

  Long-term
  debt and capital lease obligations

  609.2

  611.3

  2.1Shareholder's
  equity

  703.6

  682.0

  (21.6)Debt-to-capital

  46%:54%

  47%:53%

  NADebt-to-capital
  assuming aircraft operating leases are capitalized at seven times annualized rent

  70%:30%

  70%:30%

  NAThe
Company's cash and marketable securities portfolio decreased by $70.1 million
during the first three months of 2001. 
Operating activities provided $44.9 million of cash during this
period.  Additional cash was provided by
the issuance of $29.5 million of new debt and the return of $33.4 million of
flight equipment deposits.  Cash was
used for $117.2 million of capital expenditures, including the purchase of
three new Boeing 737 aircraft, flight equipment deposits, spare parts and
airframe and engine overhauls, and for $60.2 million of debt repayment.

CommitmentsAs of March 31, 2001, the Company had firm
orders for 13 aircraft requiring aggregate payments of approximately $358
million, as set forth below.  In
addition, Alaska has options to acquire 26 more B737s.  Alaska expects to finance the new planes
with either leases, long-term debt or internally generated cash.

Delivery Period - Firm OrdersAircraft

  2001

  2002

  2003

  TotalBoeing
  B737-700

  --

  --

  2

  2Boeing
  B737-900

  5

  4*

  2*

  11Total

  5

  4

  4

  13Payments
  (Millions)

  $160

  $121

  $77

  $358

* With manufacturer
approval, some of  these firm orders may
be converted to other Next Generation Boeing 737 aircraft.

PART II.  OTHER INFORMATION
ITEM 1.  Legal ProceedingsOakland
Maintenance InvestigationIn December 1998 the U.S. attorney for the Northern District of California
initiated a grand jury investigation concerning certain 1998 maintenance
activities at Alaskas Oakland maintenance base.  The investigation has also included the aircraft involved in the
loss of Flight 261 in January 2000. 
Alaska is cooperating with this investigation.  To the Companys knowledge, no charges have been filed.  The FAA has separately proposed a civil
penalty of $44,000 in connection with this matter.  The parties are in settlement discussions over this penalty.  These proceedings are described in more
detail in the Alaska Air Group, Inc. Annual Report on Form 10-K for the fiscal
year ended December 31, 2000.

Flight
261 LitigationAlaska is a defendant in a number of lawsuits relating to the loss of Flight
261 on January 31, 2000.  Lawsuits
on behalf of all 88 passengers and crew on board have been filed against
Alaska, The Boeing Company and others. 
The suits seek unspecified compensatory and punitive damages.  In May 2001 the judge presiding over the
majority of the cases ruled that punitive damages are not available against
Alaska.  Consistent with industry
standards, the Company maintains insurance against aircraft accidents.  This litigation is described in more detail
in the Alaska Air Group, Inc. Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.

FAA
AuditIn April 2000, the FAA performed an audit of Alaska's maintenance and flight
operations departments to ensure adherence to mandated procedures.  The FAA has proposed civil penalties of
approximately $1 million in connection with this matter.  The parties are in settlement discussions
over these penalties.  This audit and
the actions taken by the FAA and Alaska as a result are described in more
detail in the Alaska Air Group, Inc. Annual Report on Form 10-K for the fiscal
year ended December 31, 2000.

The
Company cannot predict the outcome of any of the pending civil or potential
criminal proceedings described above. 
As a result, the Company can give no assurance that these proceedings,
if determined adversely to Alaska, would not have a material adverse effect on
the financial position or results of operations of the Company.  However, while we cannot predict the outcome
of these matters, management believes their ultimate disposition is not likely
to materially affect the Companys financial position or results of
operations.  This forward-looking
statement is based on managements current understanding of the relevant law
and facts; it is subject to various contingencies, including the potential
costs and risks associated with litigation and the actions of judges and
juries.  The Company is also subject to
other ordinary routine litigation incidental to its business and with respect
to which no material liability is expected.

ITEM 5.  Other InformationEmployeesAlaska currently has no open contracts with its
employee unions.  However, arising from
another matter, the Company agreed to discuss with the Air Line Pilots
Association International (ALPA), pay rates for flying the Boeing 737-900
aircraft, the first of which is to be delivered in May 2001.  Discussions between Alaska and ALPA did not
result in an agreement and the parties went to arbitration in April 2001.  ALPA proposed an award for a higher rate of
pay for those pilots flying the Boeing 737-900.  Alaska submitted a proposed award that retains a common rate of
pay for all aircraft types.  The
arbitrators decision is expected sometime before the delivery of the first
Boeing 737-900 in May 2001.

ITEM 6.  Exhibits and
Reports on Form 8-KNo exhibits are attached and no reports
on Form 8-K were filed this quarter.



Signatures

Pursuant to the
requirements of the Securities Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.

ALASKA AIRLINES, INC.RegistrantDate:  May 9, 2001/s/ John F. KellyJohn F. KellyChairman and Chief
  Executive Officer/s/ Bradley D. TildenBradley D. TildenVice President/Finance
  and Chief Financial Officer