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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q/A

(Amendment No. 1)


(Mark One)

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

For the quarterly period ended March 31, 2002.


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 AIRLINES, INC.

(Exact name of registrant as specified in its charter)


|                                                                      |  |                                                
|--------------------------------------------------------------------- |  | -----------------------------------------------
|Alaska
(State or other jurisdiction of
incorporation or organization) |  | 92-0009235
(I.R.S. Employer
Identification No.)

19300 Pacific Highway South, Seattle, Washington 98188
(Address of principal executive offices)

Registrants telephone number, including area code: (206) 431-7079

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 (X)  No (  )

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, 2002.

During 2002, the Company changed its accounting policies relating to the
accrual for certain lease return costs and capitalization of software
development costs. In addition, the Company changed its accounting for
aircraft purchase commitments assumed by a third party. The Company also made
other corrections and certain reclassifications of deferred income taxes and
other balance sheet and income statement items, none of which have a
significant impact on previously reported equity or net earnings. Because the
previous accounting methods and classifications are not considered to be in
compliance with generally accepted accounting principles in the United States
of America, the





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Companys previously issued
financial statements for the years ended December 31, 1999, 2000 and 2001,
including the interim periods within those years, and for the three months
ended March 31, 2002, have been restated.

This amendment to the Companys Quarterly Report on Form 10-Q for the three
months ended March 31, 2002
amends and restates only those items of the previously filed Form 10-Q which
have been affected by the restatement. In order to preserve the nature and
character of the disclosures set forth in such items as originally filed, no
attempt has been made in this amendment to modify or update such disclosures
except as required to reflect the effects of the restatement and to make
non-substantive revisions to the notes to the financial statements. For
additional information regarding the restatement, see Note 2 to the financial
statements.

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|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL STATEMENTS 
|                              | ITEM 1. Financial Statements                                                                 
|NOTES TO FINANCIAL STATEMENTS
|                              | ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | ITEM 3. Quantitative and Qualitative Disclosure about Market Risk                            
|PART II. OTHER INFORMATION   
|                              | ITEM 1. Legal Proceedings                                                                    
|                              | ITEM 6. Exhibits and Reports on Form 8-K                                                     
|Signatures                   
|CERTIFICATIONS               
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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PART I. FINANCIAL STATEMENTS




ITEM 1. Financial Statements

BALANCE SHEETS (unaudited)
Alaska Airlines, Inc.

ASSETS

|                                               |  |              |         |           |  |   |         | 
|---------------------------------------------- |  | ------------ | ------- | --------- |  | - | ------- | 
|                                               |  | Restated     |         | Restated 
|                                               |  | December 31, |         | March 31,
|(In Millions)                                  |  | 2001         |         | 2002     
|                                               |  |              |         |          
|Current Assets                                 |  |              |         |           |  |   |         | 
|Cash and cash equivalents                      |  | $            | 490.7   |           |  | $ | 354.1   | 
|Marketable securities                          |  |              | 169.8   |           |  |   | 263.7   | 
|Receivables from related companies             |  |              | 71.2    |           |  |   | 107.9   | 
|Receivables - net                              |  |              | 67.3    |           |  |   | 81.4    | 
|Inventories and supplies - net                 |  |              | 36.6    |           |  |   | 36.1    | 
|Prepaid expenses and other assets              |  |              | 85.2    |           |  |   | 91.4    | 
|                                               |  |              |         |           |  |   |         | 
|Total Current Assets                           |  |              | 920.8   |           |  |   | 934.6   | 
|                                               |  |              |         |           |  |   |         | 
|Property and Equipment                         |  |              |         |           |  |   |         | 
|Flight equipment                               |  |              | 1,888.7 |           |  |   | 1,878.3 | 
|Other property and equipment                   |  |              | 333.7   |           |  |   | 348.0   | 
|Deposits for future flight equipment           |  |              | 71.8    |           |  |   | 64.4    | 
|                                               |  |              |         |           |  |   |         | 
|                                               |  |              | 2,294.2 |           |  |   | 2,290.7 | 
|Less accumulated depreciation and amortization |  |              | 606.2   |           |  |   | 633.4   | 
|                                               |  |              |         |           |  |   |         | 
|Total Property and Equipment - Net             |  |              | 1,688.0 |           |  |   | 1,657.3 | 
|                                               |  |              |         |           |  |   |         | 
|Intangible Assets                              |  |              | 12.5    |           |  |   |        | 
|                                               |  |              |         |           |  |   |         | 
|Other Assets                                   |  |              | 134.7   |           |  |   | 138.1   | 
|                                               |  |              |         |           |  |   |         | 
|Total Assets                                   |  | $            | 2,756.0 |           |  | $ | 2,730.0 | 
|                                               |  |              |         |           |  |   |         | 

See accompanying notes to financial statements.

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BALANCE SHEETS (unaudited)
Alaska Airlines, Inc.

LIABILITIES AND SHAREHOLDER'S EQUITY

|                                                                |                                    |      |              |       |           |   |         |       | 
|--------------------------------------------------------------- | ---------------------------------- | ---- | ------------ | ----- | --------- | - | ------- | ----- | 
|                                                                |                                    |      | Restated     |       | Restated 
|                                                                |                                    |      | December 31, |       | March 31,
|(In Millions Except Share Amounts)                              |                                    | 2001 |              | 2002 
|                                                                |                                    |      |              |      
|Current Liabilities                                             |                                    |      |              |       |           |   |         |      
|Accounts payable                                                |                                    | $    | 98.8         |       |           | $ | 107.8   |      
|Payables to related companies                                   |                                    |      | 4.4          |       |           |   | 4.2     |      
|Accrued aircraft rent                                           |                                    |      | 71.9         |       |           |   | 55.8    |      
|Accrued wages, vacation and payroll taxes                       |                                    |      | 68.0         |       |           |   | 71.9    |      
|Other accrued liabilities                                       |                                    |      | 192.3        |       |           |   | 157.1   |      
|Air traffic liability                                           |                                    |      | 216.4        |       |           |   | 266.8   |      
|Current portion of long-term debt and
capital lease obligations |                                    |      | 43.2         |       |           |   | 43.7    |      
|                                                                |                                    |      |              |       |           |   |         |      
|Total Current Liabilities                                       |                                    |      | 695.0        |       |           |   | 707.3   |      
|                                                                |                                    |      |              |       |           |   |         |      
|Long-Term Debt and Capital Lease Obligations                    |                                    |      | 852.2        |       |           |   | 839.8   |      
|                                                                |                                    |      |              |       |           |   |         |      
|Other Liabilities and Credits                                   |                                    |      |              |       |           |   |         |      
|Deferred income taxes                                           |                                    |      | 182.3        |       |           |   | 178.7   |      
|Deferred revenue                                                |                                    |      | 193.5        |       |           |   | 200.2   |      
|Other liabilities                                               |                                    |      | 114.0        |       |           |   | 116.1   |      
|                                                                |                                    |      |              |       |           |   |         |      
|                                                                |                                    |      | 489.8        |       |           |   | 495.0   |      
|                                                                |                                    |      |              |       |           |   |         |      
|Shareholders Equity                                            |                                    |      |              |       |           |   |         |      
|Common stock, $1 par value                                      |                                    |      |              |       |           |   |         |      
|                                                                | Authorized: 1,000 shares           |      |              |       |           |   |         |       | 
|                                                                | Issued: 2001 and 2002 - 500 shares |      |              |      |           |   |         |      | 
|                                                                | Capital in excess of par value     |      |              | 324.8 |           |   |         | 324.8 | 
|Accumulated other comprehensive income (loss)                   |                                    |      | (2.2         | )     |           |   | 6.0     |      
|Retained earnings                                               |                                    |      | 396.4        |       |           |   | 357.1   |      
|                                                                |                                    |      |              |       |           |   |         |      
|                                                                |                                    |      | 719.0        |       |           |   | 687.9   |      
|                                                                |                                    |      |              |       |           |   |         |      
|Total Liabilities and Shareholders Equity                      |                                    | $    | 2,756.0      |       |           | $ | 2,730.0 |      
|                                                                |                                    |      |              |       |           |   |         |      

See accompanying notes to financial statements.

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STATEMENTS OF OPERATIONS (unaudited)
Alaska Airlines, Inc.

|                                                   |  |          |       |          |  |   |       |  
|-------------------------------------------------- |  | -------- | ----- | -------- |  | - | ----- | -
|Three Months Ended March 31                        |  | Restated |       | Restated
|(In Millions)                                      |  | 2001     |       | 2002    
|                                                   |  |          |       |         
|Operating Revenues                                 |  |          |       |          |  |   |       |  
|Passenger                                          |  | $        | 382.8 |          |  | $ | 374.0 |  
|Freight and mail                                   |  |          | 18.3  |          |  |   | 15.9  |  
|Other - net                                        |  |          | 17.5  |          |  |   | 22.3  |  
|                                                   |  |          |       |          |  |   |       |  
|Total Operating Revenues                           |  |          | 418.6 |          |  |   | 412.2 |  
|                                                   |  |          |       |          |  |   |       |  
|Operating Expenses                                 |  |          |       |          |  |   |       |  
|Wages and benefits                                 |  |          | 154.7 |          |  |   | 165.7 |  
|Contracted services                                |  |          | 18.8  |          |  |   | 21.8  |  
|Aircraft fuel                                      |  |          | 74.0  |          |  |   | 55.2  |  
|Aircraft maintenance                               |  |          | 34.5  |          |  |   | 35.6  |  
|Aircraft rent                                      |  |          | 35.3  |          |  |   | 31.8  |  
|Food and beverage service                          |  |          | 13.2  |          |  |   | 13.9  |  
|Commissions                                        |  |          | 15.9  |          |  |   | 14.2  |  
|Other selling expenses                             |  |          | 26.0  |          |  |   | 24.9  |  
|Depreciation and amortization                      |  |          | 23.6  |          |  |   | 28.2  |  
|Loss on sale of assets                             |  |          | 0.9   |          |  |   |      |  
|Landing fees and other rentals                     |  |          | 21.5  |          |  |   | 23.6  |  
|Other                                              |  |          | 38.0  |          |  |   | 36.3  |  
|                                                   |  |          |       |          |  |   |       |  
|Total Operating Expenses                           |  |          | 456.4 |          |  |   | 451.2 |  
|                                                   |  |          |       |          |  |   |       |  
|Operating Loss                                     |  |          | (37.8 | )        |  |   | (39.0 | )
|                                                   |  |          |       |          |  |   |       |  
|Nonoperating Income (Expense)                      |  |          |       |          |  |   |       |  
|Interest income                                    |  |          | 8.6   |          |  |   | 5.0   |  
|Interest expense                                   |  |          | (12.1 | )        |  |   | (11.9 | )
|Interest capitalized                               |  |          | 3.2   |          |  |   | 0.1   |  
|Other - net                                        |  |          | (0.5  | )        |  |   | 4.1   |  
|                                                   |  |          |       |          |  |   |       |  
|                                                   |  |          | (0.8  | )        |  |   | (2.7  | )
|                                                   |  |          |       |          |  |   |       |  
|Loss before income tax and accounting change       |  |          | (38.6 | )        |  |   | (41.7 | )
|Income tax benefit                                 |  |          | (13.9 | )        |  |   | (14.9 | )
|                                                   |  |          |       |          |  |   |       |  
|Loss before cumulative effect of accounting change |  |          | (24.7 | )        |  |   | (26.8 | )
|Cumulative effect of accounting change             |  |          |      |          |  |   | (12.5 | )
|                                                   |  |          |       |          |  |   |       |  
|Net Loss                                           |  | $        | (24.7 | )        |  | $ | (39.3 | )
|                                                   |  |          |       |          |  |   |       |  

See accompanying notes to financial statements.

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RESTATED STATEMENT OF SHAREHOLDERS EQUITY (unaudited)
Alaska Airlines, Inc.

|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |   |  | 
|-------------------------------------------------- |  | ---------------------------- | - | --------- |  | ------------- | ----- | ------------- |  | -------- | ---- | ----------- | ---- | - | ----- | - |  | - | ----- | - |  | 
|                                                   |  |                              |   |           |  |               |       |               |  |          |      | Accumulated |      |   |       |   |  |   |       |  
|                                                   |  |                              |   |           |  |               |       | Capital in    |  | Other    |      |             |      |   |       |   |  |  
|                                                   |  |                              |   | Common    |  | Excess of     |       | Comprehensive |  | Retained |      |             |      |  
|(In Millions)                                      |  | Stock                        |   | Par Value |  | Income (Loss) |       | Earnings      |  | Total   
|                                                   |  |                              |   |           |  |               |       |               |  |         
|Balances at December 31, 2001                      |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|As previously reported                             |  | $                            |  |           |  | $             | 324.8 |               |  | $        | (3.1 | )           |      | $ | 368.7 |   |  | $ | 690.4 |  
|Prior period adjustment (see Note 2)               |  |                              |   |           |  |               |       |               |  |          | 0.9  |             |      |   | 27.7  |   |  |   | 28.6  |  
|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|As restated                                        |  |                              |  |           |  |               | 324.8 |               |  |          | (2.2 | )           |      |   | 396.4 |   |  |   | 719.0 |  
|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|Net loss for the three months
ended March 31, 2002 |  |                              |   |           |  |               |       |               |  |          |      |             |      |   | (39.3 | ) |  |   | (39.3 | )
|Other comprehensive income (loss)                  |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|Related to marketable securities:                  |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|                                                   |  | Change in fair value         |   |           |  |               |       |               |  |          |      |             | (1.6 | ) |       |   |  |   |       |   |  | 
|                                                   |  | Reclassification to earnings |   |           |  |               |       |               |  |          |      |             | 0.1  |   |       |   |  |   |       |   |  | 
|                                                   |  | Income tax effect            |   |           |  |               |       |               |  |          |      |             | 0.5  |   |       |   |  |   |       |   |  | 
|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|                                                   |  |                              |   |           |  |               |       |               |  |          | (1.0 | )           |      |   |       |   |  |   | (1.0  | )
|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|Related to fuel hedges:                            |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|                                                   |  | Change in fair value         |   |           |  |               |       |               |  |          |      |             | 16.4 |   |       |   |  |   |       |   |  | 
|                                                   |  | Reclassification to earnings |   |           |  |               |       |               |  |          |      |             | (1.8 | ) |       |   |  |   |       |   |  | 
|                                                   |  | Income tax effect            |   |           |  |               |       |               |  |          |      |             | (5.4 | ) |       |   |  |   |       |   |  | 
|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|                                                   |  |                              |   |           |  |               |       |               |  |          | 9.2  |             |      |   |       |   |  |   | 9.2   |  
|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|Total comprehensive loss                           |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   | (31.1 | )
|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  
|Balances at March 31, 2002                         |  | $                            |  |           |  | $             | 324.8 |               |  | $        | 6.0  |             |      | $ | 357.1 |   |  | $ | 687.9 |  
|                                                   |  |                              |   |           |  |               |       |               |  |          |      |             |      |   |       |   |  |   |       |  

See accompanying notes to financial statements.

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

|                                                                                          |  |                                                       |       |          |       |          |        |   |       |  
|----------------------------------------------------------------------------------------- |  | ----------------------------------------------------- | ----- | -------- | ----- | -------- | ------ | - | ----- | -
|                                                                                          |  |                                                       |       | Restated |       | Restated
|Three Months Ended March 31 (In Millions)                                                 |  | 2001                                                  |       | 2002    
|                                                                                          |  |                                                       |       |         
|Cash flows from operating activities:                                                     |  |                                                       |       |          |       |          |        |  
|Net loss                                                                                  |  | $                                                     | (24.7 | )        |       | $        | (39.3  | )
|Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |  |                                                       |       |          |       |          |        |  
|                                                                                          |  | Cumulative effect of accounting change                |       |          |      |          |        |   | 12.5  |  
|                                                                                          |  | Depreciation and amortization                         |       |          | 23.6  |          |        |   | 28.2  |  
|                                                                                          |  | Amortization of airframe and engine overhauls         |       |          | 12.6  |          |        |   | 14.4  |  
|                                                                                          |  | Changes in derivatives                                |       |          | 1.7   |          |        |   | (2.0  | )
|                                                                                          |  | Loss on sale of assets                                |       |          | 0.9   |          |        |   |      |  
|                                                                                          |  | Increase (decrease) in deferred income taxes          |       |          | 2.0   |          |        |   | (8.2  | )
|                                                                                          |  | Increase in accounts receivable                       |       |          | (37.3 | )        |        |   | (50.8 | )
|                                                                                          |  | Decrease in other current assets                      |       |          | 13.4  |          |        |   | 0.1   |  
|                                                                                          |  | Increase in air traffic liability                     |       |          | 61.0  |          |        |   | 50.4  |  
|                                                                                          |  | Increase (decrease) in other current liabilities      |       |          | 11.5  |          |        |   | (34.8 | )
|                                                                                          |  | Increase (decrease) in deferred revenue and other-net |       |          | (19.6 | )        |        |   | 11.9  |  
|                                                                                          |  |                                                       |       |          |       |          |        |  
|Net cash provided by (used in) operating activities                                       |  |                                                       | 45.1  |          |       |          | (17.6  | )
|                                                                                          |  |                                                       |       |          |       |          |        |  
|Cash flows from investing activities:                                                     |  |                                                       |       |          |       |          |        |  
|Proceeds from disposition of assets                                                       |  |                                                       |      |          |       |          | 0.9    |  
|Purchases of marketable securities                                                        |  |                                                       | (84.0 | )        |       |          | (117.7 | )
|Sales and maturities of marketable securities                                             |  |                                                       | 133.4 |          |       |          | 22.2   |  
|Property and equipment additions:                                                         |  |                                                       |       |          |       |          |        |  
|                                                                                          |  | Aircraft purchase deposits                            |       |          | (3.0  | )        |        |   |      |  
|                                                                                          |  | Capitalized overhauls                                 |       |          | (19.1 | )        |        |   | (11.6 | )
|                                                                                          |  | Aircraft                                              |       |          | (88.1 | )        |        |   |      |  
|                                                                                          |  | Other flight equipment                                |       |          | (10.2 | )        |        |   | (3.2  | )
|                                                                                          |  | Other property                                        |       |          | (7.4  | )        |        |   | (7.2  | )
|Aircraft deposits returned                                                                |  |                                                       | 27.7  |          |       |          | 7.4    |  
|Restricted deposits                                                                       |  |                                                       | (0.4  | )        |       |          | (2.2   | )
|                                                                                          |  |                                                       |       |          |       |          |        |  
|Net cash used in investing activities                                                     |  |                                                       | (51.1 | )        |       |          | (111.4 | )
|                                                                                          |  |                                                       |       |          |       |          |        |  
|Cash flows from financing activities:                                                     |  |                                                       |       |          |       |          |        |  
|Proceeds from issuance of long-term debt                                                  |  |                                                       | 29.5  |          |       |          |       |  
|Long-term debt and capital lease payments                                                 |  |                                                       | (39.7 | )        |       |          | (7.6   | )
|                                                                                          |  |                                                       |       |          |       |          |        |  
|Net cash used in financing activities                                                     |  |                                                       | (10.2 | )        |       |          | (7.6   | )
|                                                                                          |  |                                                       |       |          |       |          |        |  
|Net change in cash and cash equivalents                                                   |  |                                                       | (16.2 | )        |       |          | (136.6 | )
|Cash and cash equivalents at beginning of period                                          |  |                                                       | 101.2 |          |       |          | 490.7  |  
|                                                                                          |  |                                                       |       |          |       |          |        |  
|Cash and cash equivalents at end of period                                                |  | $                                                     | 85.0  |          |       | $        | 354.1  |  
|                                                                                          |  |                                                       |       |          |       |          |        |  
|Supplemental disclosure of cash paid (refunded) during the period for:                    |  |                                                       |       |          |       |          |        |  
|                                                                                          |  | Interest                                              |       | $        | 16.0  |          |        | $ | 9.9   |  
|                                                                                          |  | Income taxes                                          |       |          | (0.1  | )        |        |   |      |  
|Noncash investing and financing activities                                                |  | None                                                  |       | None    

See accompanying notes to financial statements.

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NOTES TO FINANCIAL STATEMENTS (unaudited)
Alaska Airlines, Inc.

Note 1. Basis of Presentation and Significant Accounting policies

The accompanying unaudited interim 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/A for the year ended
December 31, 2001. In the opinion of management, all adjustments have been made
which are necessary to present fairly the financial position of the Company as
of March 31, 2002, as well as the results of its operations for the three
months ended March 31, 2002 and 2001. Except for the restatement of the
previous financial statements as described below, 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. Certain reclassifications have been made
in the prior years restated financial statements to conform to the 2002
presentation.

These financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America (GAAP) and require management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities, as well as the
reported amounts of revenues and expenses. Significant estimates
include assumptions used to record liabilities, expenses and revenue
associated with the Companys Mileage Plan, estimated useful lives of
property and equipment and the amounts of certain accrued
liabilities. Actual results may differ from these estimates.

As further discussed in Note 2, in 2002 the Company restated its
financial statements for the year ended December 31, 2001, and for
all quarterly periods within the year ended December 31, 2001. The
Company also restated its financial statements for the three months
ended March 31, 2002.

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.
Under this statement, the Companys goodwill will no longer be amortized, but
instead will be tested for impairment on a minimum of an annual basis. The
impact of discontinuing amortization of existing goodwill has resulted in an
increase of net income of $0.1 million for the three months ended March 31,
2002. During the second quarter of 2002, the Company completed the first step
of its impairment test related to its $12.5 million of goodwill. In the fourth
quarter of 2002, the Company completed the second step of its impairment test
and determined that all of the Companys goodwill was impaired. As a result,
the Company recorded a one-time, non-cash charge, effective January 1, 2002, of
$12.5 million to write-off all of its goodwill. This charge is reflected as a
cumulative effect of accounting change in the statement of operations for the
three months ended March 31, 2002.

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 143,
Accounting for Asset Retirement Obligations, which requires that the fair
value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred if a reasonable estimate of fair value can be
made. The statement also requires that the associated asset retirement costs be
capitalized as part of the carrying amount of the long-lived asset. This
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The adoption of this statement is not expected
to have a material impact on the Companys financial position, results of
operations or cash flows.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of, and APB Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of Business, and
Extraordinary, Unusual and Infrequently

7



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##### Table of Contents



Occurring Events and Transactions. 
Adoption of this statement, in the fiscal year beginning January 1, 2002, did
not have a material impact on the Companys financial position, results of
operations, or cash flows.

Note 2. Restatement of Quarterly Financial Statements

During 2002, the Company changed its accounting policies relating to the
accrual for certain lease return costs and capitalization of software
development costs. In addition, the Company changed its accounting for
aircraft purchase commitments assumed by a third party. The Company also made
other corrections and certain reclassifications of deferred income taxes and
other balance sheet and income statement items, none of which have a
significant impact on previously reported equity or net earnings. Because the
previous accounting methods and classifications are not considered to be in
compliance with GAAP, the Companys previously issued financial statements for
the years ended December 31, 1999, 2000 and 2001, including the interim periods
within those years, and for the three months ended March 31, 2002, have been
restated. The changes result in an increase in shareholders equity of $28.6
million as of December 31, 2001. Significant changes are more fully described
below.

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 satisfy its return commitments. Under the
previous method, the Company accrued 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 are now capitalized and amortized over the remaining lease term, if
shorter than the life of the overhaul. Additionally, under the new method,
since the amount of cash payments by themselves cannot be reasonably predicted
at the inception of the lease, the Company will accrue cash payments expected
to be made to lessors over the last few years of the lease when probable and
estimable.

Internally Developed Software

The Company revised its accounting practices for certain costs of internally
developed software. These costs were previously charged to expense as they
were incurred. Internally developed software costs are now capitalized and
amortized over the estimated lives of the software.

Aircraft Purchase Commitments

The Company has a purchase commitment that 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 disclosed as a purchase commitment
and not included in long-term debt or deposits for future flight equipment.

8



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##### Table of Contents



The effects of the restatements on results from operations are as follows:

|                           |  |                    |       |                    |  |          |       |               |  |   |       |   |  |   |       |  
|-------------------------- |  | ------------------ | ----- | ------------------ |  | -------- | ----- | ------------- |  | - | ----- | - |  | - | ----- | -
|                           |  | Three Months Ended |       | Three Months Ended
|                           |  | March 31, 2001     |       | March 31, 2002    
|                           |  |                    |       |                   
|                           |  | As Previously      |       |                    |  |          |       | As Previously |  |   |       |  
|                           |  | Reported           |       | Restated           |  | Reported |       | Restated     
|                           |  |                    |       |                    |  |          |       |              
|                           |  | (in millions)     
|Total Operating Revenues   |  | $                  | 418.1 |                    |  | $        | 418.6 |               |  | $ | 408.9 |   |  | $ | 412.2 |  
|Total Operating Expenses   |  | $                  | 450.6 |                    |  | $        | 456.4 |               |  | $ | 450.7 |   |  | $ | 451.2 |  
|Operating Loss             |  | $                  | (32.5 | )                  |  | $        | (37.8 | )             |  | $ | (41.8 | ) |  | $ | (39.0 | )
|Net Loss Before Accounting |  |                    |       |                    |  |          |       |               |  |   |       |   |  |   |       |  
|Change                     |  | $                  | (21.6 | )                  |  | $        | (24.7 | )             |  | $ | (28.2 | ) |  | $ | (26.8 | )
|Net Loss                   |  | $                  | (21.6 | )                  |  | $        | (24.7 | )             |  | $ | (28.2 | ) |  | $ | (39.3 | )

The effects of the restatement on selected balance sheet items are as follows:

|                           |  |                   |         |                |  |          |         |               |  |   |         |  |  |   |         |  
|-------------------------- |  | ----------------- | ------- | -------------- |  | -------- | ------- | ------------- |  | - | ------- |  |  | - | ------- | -
|                           |  | December 31, 2001 |         | March 31, 2002
|                           |  | As Previously     |         |                |  |          |         | As Previously |  |   |         | 
|                           |  | Reported          |         | Restated       |  | Reported |         | Restated     
|                           |  |                   |         |                |  |          |         |              
|                           |  | (in millions)    
|Current Assets             |  | $                 | 904.7   |                |  | $        | 920.8   |               |  | $ | 917.1   |  |  | $ | 934.6   |  
|Property and Equipment-Net |  | $                 | 1,692.8 |                |  | $        | 1,688.0 |               |  | $ | 1,675.1 |  |  | $ | 1,657.3 |  
|Current Liabilities        |  | $                 | 700.2   |                |  | $        | 695.0   |               |  | $ | 706.5   |  |  | $ | 707.3   |  
|Long-Term Debt             |  | $                 | 863.3   |                |  | $        | 852.2   |               |  | $ | 862.5   |  |  | $ | 839.8   |  
|Shareholders Equity       |  | $                 | 690.4   |                |  | $        | 719.0   |               |  | $ | 670.9   |  |  | $ | 687.9   | *



|*   Includes $12.5 million cumulative effect of the accounting change in
connection with the impairment of goodwill upon the adoption of SFAS No. 142.
|------------------------------------------------------------------------------------------------------------------------------------------------------

Note 3. Frequent Flyer Program

Alaskas Mileage Plan liabilities are included under the following balance sheet captions:

|                               |  |                           |       |                        |  |   |       | 
|------------------------------ |  | ------------------------- | ----- | ---------------------- |  | - | ----- | 
|                               |  | RestatedDecember 31, 2001 |       | RestatedMarch 31, 2002
|                               |  |                           |       |                       
|                               |  | (in millions)            
|Current Liabilities:           |  |                           |       |                        |  |   |       | 
|Other accrued liabilities      |  | $                         | 65.7  |                        |  | $ | 70.5  | 
|Other Liabilities and Credits: |  |                           |       |                        |  |   |       | 
|Deferred revenue               |  |                           | 150.7 |                        |  |   | 157.8 | 
|Other liabilities              |  |                           | 31.9  |                        |  |   | 32.5  | 
|                               |  |                           |       |                        |  |   |       | 
|Total                          |  | $                         | 248.3 |                        |  | $ | 260.8 | 
|                               |  |                           |       |                        |  |   |       | 

Note 4. Other Assets

At December 31, 2001 and March 31, 2002, other assets included prepaid pension
cost of $98.4 million and $97.5 million, respectively.

9



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##### Table of Contents



Alaska Airlines Financial and Statistical Data

|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|-------------------------------------------- |  | --------------------------- | ------ | -------- |  | ------ | ----- | - |  |  | ----- | ---
|                                             |  | Three Months Ended March 31
|                                             |  |                            
|                                             |  | Restated                    |        | Restated |  | %     
|                                             |  | 2001                        |        | 2002     |  | Change
|Financial Data (in millions):                |  |                             |        |          |  |       
|Operating Revenues:                          |  |                             |        |          |  |        |       |   |  |  |       |    
|Passenger                                    |  | $                           | 382.8  |          |  | $      | 374.0 |   |  |  | -2.3  | %  
|Freight and mail                             |  |                             | 18.3   |          |  |        | 15.9  |   |  |  | -13.1 | %  
|Other
- net                                  |  |                             | 17.5   |          |  |        | 22.3  |   |  |  | 27.4  | %  
|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|Total Operating Revenues                     |  |                             | 418.6  |          |  |        | 412.2 |   |  |  | -1.5  | %  
|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|Operating Expenses:                          |  |                             |        |          |  |        |       |   |  |  |       |    
|Wages and benefits                           |  |                             | 154.7  |          |  |        | 165.7 |   |  |  | 7.1   | %  
|Contracted services                          |  |                             | 18.8   |          |  |        | 21.8  |   |  |  | 16.0  | %  
|Aircraft fuel                                |  |                             | 74.0   |          |  |        | 55.2  |   |  |  | -25.4 | %  
|Aircraft maintenance                         |  |                             | 34.5   |          |  |        | 35.6  |   |  |  | 3.2   | %  
|Aircraft rent                                |  |                             | 35.3   |          |  |        | 31.8  |   |  |  | -9.9  | %  
|Food and beverage service                    |  |                             | 13.2   |          |  |        | 13.9  |   |  |  | 5.3   | %  
|Commissions                                  |  |                             | 15.9   |          |  |        | 14.2  |   |  |  | -10.7 | %  
|Other selling expenses                       |  |                             | 26.0   |          |  |        | 24.9  |   |  |  | -4.2  | %  
|Depreciation and amortization                |  |                             | 23.6   |          |  |        | 28.2  |   |  |  | 19.5  | %  
|Loss on sale of assets                       |  |                             | 0.9    |          |  |        |      |   |  |  | NM    |    
|Landing fees and other rentals               |  |                             | 21.5   |          |  |        | 23.6  |   |  |  | 9.8   | %  
|Other                                        |  |                             | 38.0   |          |  |        | 36.3  |   |  |  | -4.5  | %  
|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|Total Operating Expenses                     |  |                             | 456.4  |          |  |        | 451.2 |   |  |  | -1.1  | %  
|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|Operating Loss                               |  |                             | (37.8  | )        |  |        | (39.0 | ) |  |  | 3.2   | %  
|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|Interest income                              |  |                             | 8.6    |          |  |        | 5.0   |   |  |  |       |    
|Interest expense                             |  |                             | (12.1  | )        |  |        | (11.9 | ) |  |  |       |    
|Interest capitalized                         |  |                             | 3.2    |          |  |        | 0.1   |   |  |  |       |    
|Other - net                                  |  |                             | (0.5   | )        |  |        | 4.1   |   |  |  |       |    
|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|                                             |  |                             | (0.8   | )        |  |        | (2.7  | ) |  |  |       |    
|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|Loss Before Income Tax and Accounting Change |  | $                           | (38.6  | )        |  | $      | (41.7 | ) |  |  | 8.0   | %  
|                                             |  |                             |        |          |  |        |       |   |  |  |       |    
|Operating Statistics:                        |  |                             |        |          |  |        |       |   |  |  |       |    
|Revenue passengers (000)                     |  |                             | 3,198  |          |  |        | 3,193 |   |  |  | -0.2  | %  
|RPMs (000,000)                               |  |                             | 2,895  |          |  |        | 2,977 |   |  |  | 2.8   | %  
|ASMs (000,000)                               |  |                             | 4,428  |          |  |        | 4,467 |   |  |  | 0.9   | %  
|Passenger load factor                        |  |                             | 65.4   | %        |  |        | 66.7  | % |  |  | 1.3   | pts
|Breakeven load factor                        |  |                             | 74.2   | %        |  |        | 76.0  | % |  |  | 1.8   | pts
|Yield per passenger mile                     |  |                             | 13.22  | ¢        |  |        | 12.56 | ¢ |  |  | -5.0  | %  
|Operating revenue per ASM                    |  |                             | 9.45   | ¢        |  |        | 9.23  | ¢ |  |  | -2.4  | %  
|Operating expenses per ASM                   |  |                             | 10.31  | ¢        |  |        | 10.10 | ¢ |  |  | -2.0  | %  
|Expense per ASM excluding fuel               |  |                             | 8.64   | ¢        |  |        | 8.87  | ¢ |  |  | 2.7   | %  
|Fuel cost per gallon                         |  |                             | 97.1   | ¢        |  |        | 73.6  | ¢ |  |  | -24.3 | %  
|Fuel gallons (000,000)                       |  |                             | 76.2   |          |  |        | 75.0  |   |  |  | -1.6  | %  
|Average number of employees                  |  |                             | 10,203 |          |  |        | 9,815 |   |  |  | -3.8  | %  
|Aircraft utilization (blk hrs/day)           |  |                             | 11.0   |          |  |        | 10.1  |   |  |  | -8.3  | %  
|Operating fleet at period-end                |  |                             | 96     |          |  |        | 102   |   |  |  | 6.3   | %  
|NM = Not Meaningful                          |  |                             |        |          |  |        |       |   |  |  |       |    

10



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##### Table of Contents






ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

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, including, without limitation,
statements relating to the Companys expectations regarding financing new
aircraft commitments. 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/A for the year ended
December 31, 2001.

As discussed in Note 2 to the financial statements, in 2002 the Company
restated its financial statements for the year ended December 31, 2001 and for
the interim periods within that year. The Company also restated its financial
statements for the three months ended March 31, 2002. The accompanying
managements discussion and analysis gives effect to the restatement.

Results of Operations

First Quarter 2002 Compared with First Quarter 2001

Net loss before cumulative effect of accounting change for the first quarter of
2002 was $26.8 million compared with a loss of $24.7 million in 2001. The 2002
net loss of $39.3 million includes the write-off of all of the Companys
goodwill ($12.5 million), in accordance with Statement of Financial Accounting
Standards (SFAS) No. 142. (See Note 1 to the financial statements.) The
operating loss for the first quarter of 2002 was $39.0 million compared with an
operating loss of $37.8 million for 2001. Financial and statistical data is
shown on page 10. A discussion of this data follows.

Revenues

Capacity was down 4.9% in January but increased 3.1% in February and 4.5% in
March. For the quarter, capacity increased 0.9% due to our service to new
markets (Seattle to Washington D.C., Los Angeles to Cancun and Los Angeles to
Calgary), partially offset by reduced service in existing markets, especially
the Pacific Northwest to Southern California and Northern California. Traffic
grew by 2.8%, and our passenger load factor increased 1.3 percentage points.
The Canada and Mexico markets experienced the largest increases in load factor.
Passenger yields were down 5.0% due to a combination of fewer business
passengers, a drop off in demand due to the September 11, 2001 terrorist
attacks, and fare sales offered to stimulate demand. Yields were down in
virtually all major markets, with Mexico and Canada showing the largest
decreases. The lower yield combined with the higher load factor resulted in a
2.4% decrease in revenue per available seat mile (ASM). The higher traffic
combined with the lower yield resulted in a 2.3% decrease in passenger revenue.

Freight and mail revenues decreased 13.1% due to lower freight and mail volumes
as a result of decreased business activity and increased security restrictions.
Other-net revenues increased 27.4%, largely due to increased revenue from the
sale of miles in Alaskas frequent flyer program.

11



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##### Table of Contents



Expenses

For the quarter, total operating expenses were flat compared to 2001. Fuel
expense decreased by $18.8 million, which was offset by increases in other
expense categories, primarily wages and benefits. Cost per ASM decreased by
2.0%. Cost per ASM excluding fuel increased by 2.7%. Explanations of
significant year-over-year changes in the components of operating expenses are
as follows:



| |  |  | Wages and benefits increased 7.1% due to an 11.3% increase in
average wages and benefits per employee combined with a 3.8% decrease
in the number of employees. Average wages and benefits per employee
increased due to a pilot pay increase that was effective in June 2001,
longevity increases for union employees, annual merit raises for
management employees, and higher pension and health insurance costs
for all employees.                                         
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Contracted services increased 16.0% primarily due to increased
airport security screening costs.                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | Fuel expense decreased 25.4% due to a 24.3% decrease in the cost
per gallon of fuel and a 1.6% decrease in gallons consumed. The fuel
consumption rate decreased 0.7% due to the use of more fuel-efficient
B737-700 and B737-900 aircraft. The lower fuel prices saved $17.7
million.                                                                                                                                                                                         
|
| |  |  | Maintenance expense increased 3.2%, largely due to increased
airframe overhaul expenses. A total of 11 C checks (annual airframe
inspections) were performed at outside contractors in 2002 compared to
three in 2001.                                                                                                                                                                                                                                                       
|
| |  |  | Commission expense decreased 10.7%, exceeding the 2.3% decrease
in passenger revenue, due to a commission cap we instituted in
November 2001 and the continuing shift to direct sales channels. In
2002, 58.5% of Air Group ticket sales were made through travel agents,
versus 61.6% in 2001. In 2002, 18.8% of the ticket sales were made
through Alaskas Internet web site versus 14.9% in 2001.                                                                          
|
| |  |  | Depreciation and amortization increased 19.5%, primarily because
we owned seven more aircraft in 2002.                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Landing fees and other rentals increased 9.8%, primarily due to
higher rates. The 2002 results include a $2.2 million credit from
adjusting a December 2001 accrual due to a year-end airport assessment
coming in lower than expected. Absent this credit, landing fees and
other rentals increased 20.0%. The higher rates are attributable to
airport construction projects and the effects of increased security
and other costs resulting from the events of September 11.
|
| |  |  | Other expense decreased 4.5%, as lower supplies, property tax,
passenger remuneration, personnel and legal costs offset higher
expenditures for insurance.                                                                                                                                                                                                                                                                                                                     

12



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##### Table of Contents



Nonoperating Income (Expense)

Net nonoperating items were $2.7 million expense in 2002 compared to $0.8
million expense in 2001. Interest income decreased $3.6 million due to lower
interest rates, while interest expense (net of capitalized interest) was up
$2.9 million due to new debt incurred in the past year and much lower levels of
capitalization. Other-net includes $2.5 million in gains resulting from hedge
ineffectiveness on fuel hedging contracts in 2002, a $1.4 million insurance
recovery and a $0.9 million gain on conversion of Equant N.V. shares (a
telecommunications network company owned by many airlines).

Income Tax Benefit

Accounting standards require us to provide for income taxes each quarter based
on our estimate of the effective tax rate for the full year. The volatility of
air fares and fuel prices and the seasonality of our 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 employee per
diem costs. In estimating the 35.7% tax rate for the first quarter of 2002, we
considered a variety of factors, including the U.S. federal rate of 35%,
estimates of nondeductible expenses and state income taxes, and our forecast of
pretax income for the full year. We evaluate this rate each quarter and make
adjustments if necessary.

Critical Accounting Policies

For more information on the Companys critical accounting policies, see Item 7
of the Companys Annual Report on Form 10-K/A for the year ended December 31,
2001. In 2002, the Company revised its accounting practices with respect to
aircraft lease return costs. This change is more fully described in Note 2 to
the financial statements.

Liquidity and Capital Resources

The table below presents the major indicators of financial condition and
liquidity.

|                                                                                                  |  |                            |                                       |                         |  |        |        |   |  |    |       |  
|------------------------------------------------------------------------------------------------- |  | -------------------------- | ------------------------------------- | ----------------------- |  | ------ | ------ | - |  | -- | ----- | -
|                                                                                                  |  | December 31, 2001 Restated |                                       | March 31, 2002 Restated |  | Change
|                                                                                                  |  |                            |                                       |                         |  |       
|                                                                                                  |  |                            | (In millions,
except debt-to-capital)
|Cash and marketable securities                                                                    |  | $                          | 660.5                                 |                         |  | $      | 617.8  |   |  | $  | (42.7 | )
|Working capital                                                                                   |  |                            | 225.8                                 |                         |  |        | 227.3  |   |  |    | 1.5   |  
|Long-term debt and
capital lease obligations                                                      |  |                            | 852.2                                 |                         |  |        | 839.8  |   |  |    | (12.4 | )
|Shareholders equity                                                                              |  |                            | 719.0                                 |                         |  |        | 687.9  |   |  |    | (31.1 | )
|Debt-to-capital                                                                                   |  |                            | 54%:46                                | %                       |  |        | 55%:45 | % |  | NA
|Debt-to-capital assuming aircraft
operating leases are capitalized
at seven times annualized rent |  |                            | 72%:28                                | %                       |  |        | 72%:28 | % |  | NA

The Companys cash and marketable securities portfolio decreased $42.7 million
during the first three months of 2002. Transportation tax payments of $49.4
million related to the fourth quarter 2001 were deferred until this quarter as
allowed under the Air Transportation Safety and System Stabilization Act, and
receivables from Horizon increased $33.4 million. Cash was also used for $22.0
million of capital expenditures, including the purchase of spare parts and
airframe and engine overhauls. These decreases were partially offset by $7.4
million of flight equipment deposits that were returned by the Companys
aircraft manufacturer.

13



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##### Table of Contents



Shareholders equity decreased $31.1 million, primarily due to the net loss of
$39.3 million.

CommitmentsAs of March 31, 2002, the Company had firm orders for 8 aircraft
requiring aggregate payments of approximately $237 million, as set forth below.
In addition, Alaska has options to acquire 28 more B737s. Alaska expects to
finance the new planes with either leases, long-term debt or internally
generated cash.

|                    |  |                               |    |      |  |      |     |       |  |   |    |  |  |   |     | 
|------------------- |  | ----------------------------- | -- | ---- |  | ---- | --- | ----- |  | - | -- |  |  | - | --- | 
|                    |  | Delivery Period - Firm Orders
|                    |  |                              
|Aircraft            |  | 2002                          |    | 2003 |  | 2004 |     | Total
|                    |  |                               |    |      |  |      |     |      
|Boeing B737-700     |  |                               |   |      |  |      | 2   |       |  |   |   |  |  |   | 2   | 
|Boeing B737-900     |  |                               | 1  |      |  |      | 2   |       |  |   | 3  |  |  |   | 6   | 
|                    |  |                               |    |      |  |      |     |       |  |   |    |  |  |   |     | 
|Total               |  |                               | 1  |      |  |      | 4   |       |  |   | 3  |  |  |   | 8   | 
|                    |  |                               |    |      |  |      |     |       |  |   |    |  |  |   |     | 
|Payments (Millions) |  | $                             | 63 |      |  | $    | 105 |       |  | $ | 69 |  |  | $ | 237 | 
|                    |  |                               |    |      |  |      |     |       |  |   |    |  |  |   |     | 

The Company has a purchase commitment that may trigger a liability under
certain events of default. The Company previously recognized a portion of the
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. See Note 2 to the financial statements.

New Accounting Standards -Effective January 1, 2002, the Company adopted SFAS
No. 142, Goodwill and Other Intangible Assets. Under this statement the
Companys goodwill will no longer be amortized, but instead will be tested for
impairment on a minimum of an annual basis. The impact of discontinuing
amortization of existing goodwill has resulted in an increase of net income of
$0.1 million for the three months ended March 31, 2002. During the second
quarter of 2002, the Company completed the first step of its impairment test
related to its $12.5 million of goodwill. In the fourth quarter of 2002, the
Company completed the second step of its impairment test and determined that
all of the Companys goodwill was impaired. As a result, the Company recorded
a one-time, non-cash charge, effective January 1, 2002, of $12.5 million to
write-off all of its goodwill. This charge is reflected as a cumulative
effect of accounting change in the statement of operations for the three months
ended March 31, 2002.

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
143, Accounting for Asset Retirement Obligations, which requires that the
fair value of a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of fair value can
be made. The statement also requires that the associated asset retirement
costs be capitalized as part of the carrying amount of the long-lived asset.
This statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The adoption of this statement is not expected
to have a material impact on the Companys financial position, results of
operations or cash flows.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of, and APB Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of Business, and

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Extraordinary, Unusual and Infrequently Occurring Events and Transactions.
Adoption of this statement, in the fiscal year beginning January 1, 2002, did
not have a material impact on the Companys financial statements .




ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

The Company utilizes financial derivative instruments as hedges to
decrease its exposure to jet fuel price increases. The Company accounts for
its fuel hedge derivative instruments as cash flow hedges as defined by SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended. At March 31, 2002, the Company had hedge agreements in place to hedge
approximately 40% of its 2002 and 35% of its 2003 expected jet fuel
requirements. Under SFAS No. 133, all changes in fair value that are
considered to be effective are recorded in accumulated other comprehensive
income (loss) until the underlying jet fuel is consumed. The fair value of the
Companys hedge instruments at March 31, 2002 was a net asset of approximately
$7.8 million, which is recorded in prepaid expenses and other assets in the
balance sheet.

During the three months ended March 31, 2002, the Company recognized
approximately $.5 million in realized hedging losses which are reflected in
aircraft fuel in the statement of operations.
During the three months ended March 31, 2002, the Company recorded $1.8
million in income related to the ineffectiveness of the Companys hedges. This
amount is recorded as non-operating income (expense) in other-net in the
statement of operations.

As of March 31, 2002, the Company had unrealized gains of $9.2 million
(net of taxes of $5.4 million). This amount is reflected in accumulated other
comprehensive income (loss) in the balance sheet.




PART II. OTHER INFORMATION




ITEM 1. Legal Proceedings

Flight 261 Litigation

Alaska is a defendant in a number of lawsuits relating to the loss of Flight
261 on January 31, 2000. Representatives of all 88 passengers and crew on board
have filed cases 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. Alaska has settled a number of these cases and continues in its
efforts to settle the remaining ones. Consistent with industry standards, the
Company maintains insurance against aircraft accidents.

Management believes the ultimate disposition of this matter 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 a party to other ordinary routine litigation incidental to
its business and with respect to which no material liability is expected.

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ITEM 6. Exhibits and Reports on Form 8-K



|(a) |  | No reports on Form 8-K were filed this quarter.                                          
|--- |  | -----------------------------------------------------------------------------------------
|   
|(b) |  | Exhibit 99.1- Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350
|   
|(c) |  | Exhibit 99.2- Certification of Chief Financial Officer Pursuant to
18.U.S.C. Section 1350




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.Registrant                                                                     
|                                                                                                    
|Date:  March 28, 2003                                                                               
|                                                                                                    
|/s/  Bradley D. TildenBradley D. Tilden
Executive Vice President/Finance and Chief Financial Officer
|                                                                                                    
|/s/  Terri K. MaupinTerri K. Maupin
Staff Vice President/Finance and Controller                     

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CERTIFICATIONS

I, William S. Ayer, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q/A for the
period ended March 31, 2002 of Alaska Airlines, Inc.;                                                                                                                                                                                                            
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report.                   

|               |  |                                                                
|-------------- |  | ---------------------------------------------------------------
|March 28, 2003 |  | By /s/  William S. Ayer
William S. Ayer
Chief Executive Officer

I, Bradley D. Tilden, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q/A for the
period ended March 31, 2002 of Alaska Airlines, Inc.;                                                                                                                                                                                                            
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report.                   

|               |  |                                                                    
|-------------- |  | -------------------------------------------------------------------
|March 28, 2003 |  | By /s/  Bradley D. Tilden
Bradley D. Tilden
Chief Financial Officer

17