----

----

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

|                                                                    |                                          |
|-------------------------------------------------------------------------|-----------------------------------------------|
| Alaska                                                                  | 92-0009235                                    |
| (State      or other jurisdiction ofincorporation      or organization) | (I.R.S.      EmployerIdentification      No.) |

| Large      accelerated filer  ¨ | Accelerated      filer  ¨         |
|------------------------------------------------|--------------------------------------------------|
| Non-accelerated      filer  x        | Smaller      reporting company  ¨ |

----

| PART I.   FINANCIAL      INFORMATION | 4        |
|-----------------------------------------------------|----------|
|                                                | ITEM 1.  | CONDENSED FINANCIAL STATEMENTS | 4 |
|                                                | ITEM 2.  | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL      CONDITION AND RESULTS OF OPERATIONS | 19 |
|                                                | ITEM 4.  | CONTROLS AND PROCEDURES | 28 |
| PART II.  OTHER INFORMATION               | 29       |
|                                                | ITEM 1.  | LEGAL PROCEEDINGS | 29 |
|                                                | ITEM 1A. | RISK FACTORS | 29 |
|                                                | ITEM 5.  | OTHER INFORMATION | 29 |
|                                                | ITEM 6.  | EXHIBITS | 29 |
| SIGNATURES                                          |     | 30 |
| EXHIBIT INDEX                                       |     | 31 |

----

|   | · | general      economic conditions, including the impact of the current economic      environment on customer travelbehavior; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | our      significant indebtedness; |
|--------|--------|------------------------------------|

|   | · | our      ability to meet our cost reductiongoals; |
|--------|--------|---------------------------------------------------|

|   | · | an      aircraft accident or incident; |
|--------|--------|----------------------------------------|

|   | · | labor      disputes and our ability to attract and retain qualified      personnel; |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | operational      disruptions; |
|--------|--------|-------------------------------|

|   | · | the      concentration of our revenue from a few key  markets; |
|--------|--------|----------------------------------------------------------------|

|   | · | actual      or threatened terrorist attacks, global instability and potential U.S.      military actions or activities; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | · | our      reliance on automated systems and the risks associated with changes made      to those systems; |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | our      reliance on third-party vendors and partners;  and |
|--------|--------|-------------------------------------------------------------|

|   | · | changes      in laws and regulations. |
|--------|--------|---------------------------------------|

----

| PART I.       FINANCIAL      INFORMATION |   |           |    |   |              |   |
|------------------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
| ITEM 1.   CONDENSED FINANCIAL    STATEMENTS             |   |           |    |   |              |   |
|                                                                   |   |           |    |   |              |   |
| CONDENSED      BALANCE SHEETS (unaudited)                              |   |           |    |   |              |   |
| Alaska      Airlines, Inc.                                             |   |           |    |   |              |   |
|                                                                   |   |           |    |   |              |   |
| ASSETS                                                                 |   |           |    |   |              |   |
|                                                                   |   | March      31, |    |   | December      31, |   |
| (in      millions)                                                     |   | 2010           |    |   | 2009              |   |
| Current      Assets                                                    |   |           |    |   |              |   |
| Cash      and cash equivalents                                         |   | $              | 117.5   |   |              | $      | 164.2 |   |
| Marketable      securities                                             |   |           | 1,053.5 |   |              |   | 1,027.9 |   |
|   Total      cash and marketable securities                  |   |           | 1,171.0 |   |              |   | 1,192.1 |   |
| Receivables      from related parties                                  |   |           | 336.1   |   |              |   | 274.6 |   |
| Receivables      - net                                                 |   |           | 129.1   |   |              |   | 104.7 |   |
| Inventories      and supplies - net                                    |   |           | 29.1    |   |              |   | 27.3 |   |
| Deferred      income taxes                                             |   |           | 122.1   |   |              |   | 110.1 |   |
| Fuel      hedge contracts                                              |   |           | 49.5    |   |              |   | 54.9 |   |
| Prepaid      expenses and other current assets                         |   |           | 50.5    |   |              |   | 46.8 |   |
| Total      Current Assets                                              |   |           | 1,887.4 |   |              |   | 1,810.5 |   |
|                                                                   |   |           |    |   |              |   |   |   |
| Property      and Equipment                                            |   |           |    |   |              |   |   |   |
| Aircraft      and other flight equipment                               |   |           | 3,044.1 |   |              |   | 3,035.6 |   |
| Other      property and equipment                                      |   |           | 545.4   |   |              |   | 540.1 |   |
| Deposits      for future flight equipment                              |   |           | 173.2   |   |              |   | 169.2 |   |
|                                                                   |   |           | 3,762.7 |   |              |   | 3,744.9 |   |
| Less      accumulated depreciation and amortization                    |   |           | 1,177.7 |   |              |   | 1,136.6 |   |
| Total      Property and Equipment - Net                                |   |           | 2,585.0 |   |              |   | 2,608.3 |   |
|                                                                   |   |           |    |   |              |   |   |   |
| Fuel      Hedge Contracts                                              |   |           | 40.4    |   |              |   | 42.2 |   |
|                                                                   |   |           |    |   |              |   |   |   |
| Other      Assets                                                      |   |           | 86.7    |   |              |   | 80.3 |   |
|                                                                   |   |           |    |   |              |   |   |   |
| Total      Assets                                                      |   | $              | 4,599.5 |   |              | $      | 4,541.3 |   |
|                                                                   |   |           |    |   |              |   |   |   |
| See      accompanying notes to condensed financial statements.         |   |           |    |   |              |   |   |   |

----

| CONDENSED      BALANCE SHEETS (unaudited)                                      |   |           |    |   |              |   |
|--------------------------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
| Alaska      Airlines, Inc.                                                     |   |           |    |   |              |   |
|                                                                           |   |           |    |   |              |   |
| LIABILITIES      AND SHAREHOLDER'S EQUITY                                      |   |           |    |   |              |   |
|                                                                           |   | March      31, |    |   | December      31, |   |
| (in      millions except share amounts)                                        |   | 2010           |    |   | 2009              |   |
| Current      Liabilities                                                       |   |           |    |   |              |   |
| Accounts      payable                                                          |   | $              | 43.8    |   |              | $      | 52.9 |   |
| Payables      to related companies                                             |   |           | 83.9    |   |              |   | 73.2 |   |
| Accrued      aircraft rent                                                     |   |           | 32.2    |   |              |   | 50.8 |   |
| Accrued      wages, vacation and payroll taxes                                 |   |           | 96.4    |   |              |   | 132.7 |   |
| Other      accrued liabilities                                                 |   |           | 539.9   |   |              |   | 506.4 |   |
| Air      traffic liability                                                     |   |           | 468.6   |   |              |   | 365.9 |   |
| Current      portion of long-term debt                                         |   |           | 133.0   |   |              |   | 131.2 |   |
| Total      Current Liabilities                                                 |   |           | 1,397.8 |   |              |   | 1,313.1 |   |
|                                                                           |   |           |    |   |              |   |   |   |
| Long-Term      Debt, Net of Current Portion                                    |   |           | 1,343.2 |   |              |   | 1,376.6 |   |
|                                                                           |   |           |    |   |              |   |   |   |
| Other      Liabilities and Credits                                             |   |           |    |   |              |   |   |   |
| Deferred      income taxes                                                     |   |           | 125.4   |   |              |   | 104.7 |   |
| Deferred      revenue                                                          |   |           | 395.1   |   |              |   | 410.5 |   |
| Obligation      for pension and postretirement medical benefits                |   |           | 412.8   |   |              |   | 421.0 |   |
| Other      liabilities                                                         |   |           | 105.6   |   |              |   | 112.6 |   |
|                                                                           |   |           | 1,038.9 |   |              |   | 1,048.8 |   |
| Commitments      and Contingencies                                             |   |           |    |   |              |   |   |   |
| Shareholder's      Equity                                                      |   |           |    |   |              |   |   |   |
| Common      stock, $1 par value                                                |   |           |    |   |              |   |   |   |
|   Authorized:      1,000      shares   |   |           |    |   |              |   |   |   |
|   Issued      and outstanding:  2010 and 2009 - 500 shares |   |           | -       |   |              |   | - |   |
|   Capital      in excess of par value                                |   |           | 653.8   |   |              |   | 649.9 |   |
| Accumulated      other comprehensive loss                                      |   |           | (237.0  | )      |              |   | (240.0 | ) |
| Retained      earnings                                                         |   |           | 402.8   |   |              |   | 392.9 |   |
|                                                                           |   |           | 819.6   |   |              |   | 802.8 |   |
| Total      Liabilities and Shareholder's Equity                                |   | $              | 4,599.5 |   |              | $      | 4,541.3 |   |
|                                                                           |   |           |    |   |              |   |   |   |
| See      accompanying notes to condensed financial statements.                 |   |           |    |   |              |   |   |   |

----

| CONDENSED      STATEMENTS OF OPERATIONS (unaudited)            |   |                             |   |   |   |   |
|----------------------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|
| Alaska      Airlines, Inc.                                     |   |                             |   |   |   |   |
|                                                           |   |                             |   |   |   |   |
|                                                           |   | Three      Months Ended March 31 |   |
| (in      millions)                                             |   | 2010                             |   |   | 2009   |   |
|                                                           |   |                             |   |   |   |   |
| Operating      Revenues                                        |   |                             |   |   |   |   |
| Passenger                                                      |   | $                                | 587.0  |   |   | $      | 539.8 |   |
| Freight      and mail                                          |   |                             | 22.0   |   |   |   | 18.3 |   |
| Other      - net                                               |   |                             | 52.1   |   |   |   | 33.2 |   |
| Total      mainline operating revenues                         |   |                             | 661.1  |   |   |   | 591.3 |   |
| Passenger      - purchased capacity                            |   |                             | 76.5   |   |   |   | 61.8 |   |
| Total      Operating Revenues                                  |   |                             | 737.6  |   |   |   | 653.1 |   |
| Operating      Expenses                                        |   |                             |   |   |   |   |   |   |
| Wages      and benefits                                        |   |                             | 191.2  |   |   |   | 197.4 |   |
| Variable      incentive pay                                    |   |                             | 14.8   |   |   |   | 7.1 |   |
| Aircraft      fuel, including hedging gains and losses         |   |                             | 171.7  |   |   |   | 131.9 |   |
| Aircraft      maintenance                                      |   |                             | 42.1   |   |   |   | 46.3 |   |
| Aircraft      rent                                             |   |                             | 25.9   |   |   |   | 26.5 |   |
| Landing      fees and other rentals                            |   |                             | 41.7   |   |   |   | 40.8 |   |
| Contracted      services                                       |   |                             | 30.6   |   |   |   | 30.5 |   |
| Selling      expenses                                          |   |                             | 26.7   |   |   |   | 19.1 |   |
| Depreciation      and amortization                             |   |                             | 45.7   |   |   |   | 43.3 |   |
| Food      and beverage service                                 |   |                             | 11.8   |   |   |   | 11.0 |   |
| Other                                                          |   |                             | 34.8   |   |   |   | 42.8 |   |
| Total      mainline operating expenses                         |   |                             | 637.0  |   |   |   | 596.7 |   |
| Purchased      capacity costs                                  |   |                             | 72.5   |   |   |   | 62.7 |   |
| Total      Operating Expenses                                  |   |                             | 709.5  |   |   |   | 659.4 |   |
| Operating      Income (Loss)                                   |   |                             | 28.1   |   |   |   | (6.3 | ) |
| Nonoperating      Income (Expense)                             |   |                             |   |   |   |   |   |   |
| Interest      income                                           |   |                             | 8.6    |   |   |   | 10.1 |   |
| Interest      expense                                          |   |                             | (22.1  | )      |   |   | (23.9 | ) |
| Interest      capitalized                                      |   |                             | 1.7    |   |   |   | 2.5 |   |
| Other      - net                                               |   |                             | 0.9    |   |   |   | (0.7 | ) |
|                                                           |   |                             | (10.9  | )      |   |   | (12.0 | ) |
| Income      (loss) before income tax                           |   |                             | 17.2   |   |   |   | (18.3 | ) |
| Income      tax expense (benefit)                              |   |                             | 7.3    |   |   |   | (6.2 | ) |
| Net      Income (Loss)                                         |   | $                                | 9.9    |   |   | $      | (12.1 | ) |
|                                                           |   |                             |   |   |   |   |   |   |
| See      accompanying notes to condensed financial statements. |   |                             |   |   |   |   |   |   |

----

| CONDENSED      STATEMENTS OF SHAREHOLDER'S EQUITY (unaudited)  |   |   |   |   |            |   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|-----------------|--------|--------|
| Alaska      Airlines, Inc.                                     |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |            |   |   | Accumulated |   |   |   |   |   |   |   |
|                                                           |   |   |   |   | Capital      in |   |   | Other |   |   |   |   |   |   |   |
|                                                           |   | Common |   |   | Excess      of  |   |   | Comprehensive |   |   | Retained |   |
| (in      millions)                                             |   | Stock  |   |   | Par      Value  |   |   | Loss |   |   | Earnings |   |   | Total |   |
| Balances      at December 31, 2009                             |   | $      | 0.0    |   |            | $      | 649.9  |   |   | $ | (240.0 | ) |   | $ | 392.9 |   |   | $ | 802.8 |   |
| Net      income for the three months ended March 31, 2010      |   |   |   |   |            |   |   |   |   |   |   | 9.9 |   |   |   | 9.9 |   |
| Other      comprehensive income (loss):                        |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related      to marketable securities:                         |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Change      in fair value                          |   |   |   |   |            |   |   |   |   |   | 3.5 |   |   |   |   |   |   |   |   |   |
|   Reclassification      to earnings                  |   |   |   |   |            |   |   |   |   |   | (1.8 | ) |   |   |   |   |   |   |   |   |
|   Income      tax effect                             |   |   |   |   |            |   |   |   |   |   | (0.7 | ) |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |            |   |   |   |   |   | 1.0 |   |   |   |   |   |   |   | 1.0 |   |
|                                                           |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustments      related to employee benefit plans:            |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |
|   Reclassification      to earnings                  |   |   |   |   |            |   |   |   |   |   | 5.4 |   |   |   |   |   |   |   |   |   |
|    Income      tax effect                       |   |   |   |   |            |   |   |   |   |   | (1.7 | ) |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |            |   |   |   |   |   | 3.7 |   |   |   |   |   |   |   | 3.7 |   |
| Related      to interest rate derivative instruments:          |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Change      in fair value                          |   |   |   |   |            |   |   |   |   |   | (2.8 | ) |   |   |   |   |   |   |   |   |
|   Income      tax effect                             |   |   |   |   |            |   |   |   |   |   | 1.1 |   |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |            |   |   |   |   |   | (1.7 | ) |   |   |   |   |   |   | (1.7 | ) |
| Total      comprehensive income                                |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   | 12.9 |   |
|                                                           |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based      compensation                                  |   |   |   |   |            |   | 4.4    |   |   |   |   |   |   |   |   |   |   |   | 4.4 |   |
| Impact      of issuance of Air Group stock under stock plans   |   |   |   |   |            |   | (0.5   | ) |   |   |   |   |   |   |   |   |   |   | (0.5 | ) |
| Balances      at March 31, 2010                                |   | $      | 0.0    |   |            | $      | 653.8  |   |   | $ | (237.0 | ) |   | $ | 402.8 |   |   | $ | 819.6 |   |
|                                                           |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See      accompanying notes to condensed financial statements. |   |   |   |   |            |   |   |   |   |   |   |   |   |

----

| CONDENSED      STATEMENTS OF CASH FLOWS (unaudited)                |   |                             |   |   |   |   |
|--------------------------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|
| Alaska      Airlines, Inc.                                         |   |                             |   |   |   |   |
|                                                               |   |                             |   |   |   |   |
|                                                               |   | Three      Months Ended March 31 |   |
| (in      millions)                                                 |   | 2010                             |   |   | 2009   |   |
| Cash      flows from operating activities:                         |   |                             |   |   |   |   |
| Net      income (loss)                                             |   | $                                | 9.9    |   |   | $      | (12.1 | ) |
| Adjustments      to reconcile net income (loss) to net cash        |   |                             |   |   |   |   |   |   |
|  provided      by operating activities:                       |   |                             |   |   |   |   |   |   |
|    Depreciation      and amortization               |   |                             | 45.7   |   |   |   | 43.3 |   |
|    Stock-based      compensation                    |   |                             | 4.4    |   |   |   | 4.7 |   |
|    Increase      in air traffic liability           |   |                             | 102.7  |   |   |   | 26.9 |   |
|    Changes      in other assets and liabilities-net |   |                             | (121.4 | )      |   |   | (50.9 | ) |
| Net      cash provided by operating activities                     |   |                             | 41.3   |   |   |   | 11.9 |   |
| Cash      flows from investing activities:                         |   |                             |   |   |   |   |   |   |
| Property      and equipment additions:                             |   |                             |   |   |   |   |   |   |
|   Aircraft      and aircraft purchase deposits           |   |                             | (4.0   | )      |   |   | (172.5 | ) |
|   Other      flight equipment                            |   |                             | (12.6  | )      |   |   | (16.5 | ) |
|   Other      property and equipment                      |   |                             | (6.1   | )      |   |   | (9.2 | ) |
| Total      property and equipment additions                        |   |                             | (22.7  | )      |   |   | (198.2 | ) |
| Proceeds      from disposition of assets                           |   |                             | -      |   |   |   | 0.4 |   |
| Purchases      of marketable securities                            |   |                             | (284.0 | )      |   |   | (160.5 | ) |
| Sales      and maturities of marketable securities                 |   |                             | 261.0  |   |   |   | 151.9 |   |
| Restricted      deposits and other                                 |   |                             | (0.3   | )      |   |   | (3.4 | ) |
| Net      cash used in investing activities                         |   |                             | (46.0  | )      |   |   | (209.8 | ) |
| Cash      flows from financing activities:                         |   |                             |   |   |   |   |   |   |
| Proceeds      from issuance of long-term debt                      |   |                             | -      |   |   |   | 31.7 |   |
| Proceeds      from sale-leaseback transaction, net                 |   |                             | -      |   |   |   | 230.0 |   |
| Long-term      debt payments, including line of credit             |   |                             | (31.6  | )      |   |   | (114.6 | ) |
| Other      financing activities                                    |   |                             | (10.4  | )      |   |   | 4.7 |   |
| Net      cash provided by (used in) financing activities           |   |                             | (42.0  | )      |   |   | 151.8 |   |
| Net      change in cash and cash equivalents                       |   |                             | (46.7  | )      |   |   | (46.1 | ) |
| Cash      and cash equivalents at beginning of year                |   |                             | 164.2  |   |   |   | 283.0 |   |
| Cash      and cash equivalents at end of period                    |   | $                                | 117.5  |   |   | $      | 236.9 |   |
| Supplemental      disclosure of cash paid during the period for:   |   |                             |   |   |   |   |   |   |
|   Interest      (net of amount capitalized)              |   | $                                | 24.6   |   |   | $      | 23.9 |   |
|   Income      taxes                                      |   |                             | -      |   |   |   | - |   |
|                                                               |   |                             |   |   |   |   |   |   |
| See      accompanying notes to condensed financial statements.     |   |                             |   |   |   |   |   |   |

----

| NOTE      1. | BASIS      OF PRESENTATION AND SIGNIFICANT ACCOUNTING  POLICIES |
|--------------|-----------------------------------------------------------------|

----

|                           |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total   |   |
|--------------------------------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|---------|--------|
| Cash      and cash equivalents |   | $            | 85.1   |   |         | $      | 32.4   |         |   | $      | — |   |   | $ | 117.5 |   |
| Marketable      securities     |   |         | 139.6  |   |         |   | 913.9  |         |   |   | — |   |   |   | 1,053.5 |   |
| Total                          |   | $            | 224.7  |   |         | $      | 946.3  |         |   | $      | — |   |   | $ | 1,171.0 |   |
|                           |   |         |   |   |         |   |   |         |   |   |    |   |   |   |   |   |

|                                |   | March      31, 2010 |    |   | December      31, 2009 |   |
|-------------------------------------|--------|---------------------|---------|--------|------------------------|--------|
| Amortized      cost:                |   |                |    |   |                   |   |
| Government      securities/agencies |   | $                   | 359.5   |   |                   | $      | 376.7 |   |
| Asset-backed      obligations       |   |                | 196.1   |   |                   |   | 215.4 |   |
| Other      corporate obligations    |   |                | 482.2   |   |                   |   | 421.8 |   |
|                                |   | $                   | 1,037.8 |   |                   | $      | 1,013.9 |   |
| Fair      value:                    |   |                |    |   |                   |   |   |   |
| Government      securities/agencies |   | $                   | 363.1   |   |                   | $      | 381.2 |   |
| Asset-backed      obligations       |   |                | 195.5   |   |                   |   | 214.7 |   |
| Other      corporate obligations    |   |                | 494.9   |   |                   |   | 432.0 |   |
|                                |   | $                   | 1,053.5 |   |                   | $      | 1,027.9 |   |

----

|                                |   |                          |   |   | Unrealized      Losses   |   |   |                        |   |   |                         |   |
|-------------------------------------|--------|-------------------------------|--------|--------|--------------------------|--------|--------|-----------------------------|--------|--------|------------------------------|--------|
|                                |   | Unrealized      Gains in AOCL |   |   | Less      than 12 months |   |   | Greater      than 12 months |   |   | Total      Unrealized Losses |   |   | Less:      Credit Loss Previously Recorded in Earnings |   |   | Net      Unrealized Losses in AOCL |   |   | Net      Unrealized Gains/(Losses) in AOCL |   |   | Fair      Value of Securities with Unrealized Losses |   |
| Government      Securities/Agencies |   | $                             | 3.9    |   |                     | $      | (0.3   | )                           |   | $      | --                           |   |   | $ | (0.3 | ) |   | $ | -- |   |   | $ | (0.3 | ) |   | $ | 3.6 |   |   | $ | 127.2 |   |
| Asset-backed      obligations       |   |                          | 2.2    |   |                     |   | (0.3   | )                           |   |   | (4.7                         | )      |   |   | (5.0 | ) |   |   | (2.2 | ) |   |   | (2.8 | ) |   |   | (0.6 | ) |   |   | 61.1 |   |
| Other      corporate obligations    |   |                          | 12.9   |   |                     |   | (0.2   | )                           |   |   | --                           |   |   |   | (0.2 | ) |   |   | -- |   |   |   | (0.2 | ) |   |   | 12.7 |   |   |   | 69.6 |   |
| Total                               |   | $                             | 19.0   |   |                     | $      | (0.8   | )                           |   | $      | (4.7                         | )      |   | $ | (5.5 | ) |   | $ | (2.2 | ) |   | $ | (3.3 | ) |   | $ | 15.7 |   |   | $ | 257.9 |   |

|                                     |   |                 |    |   |            |   |
|------------------------------------------|--------|----------------------|---------|--------|-----------------|--------|
|                                     |   | Carrying      Amount |    |   | Fair      Value |   |
| Long-term      debt at March 31, 2010    |   | $                    | 1,476.2 |   |            | $      | 1,457.5 |   |
| Long-term      debt at December 31, 2009 |   | $                    | 1,507.8 |   |            | $      | 1,481.2 |   |

----

|                                                        |   | 2010   |   |   | 2009   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Raw      or “into-plane” fuel cost              |   | $      | 162.7  |   |   | $      | 118.8 |   |
| Losses      in value and settlement of fuel hedge contracts |   |   | 9.0    |   |   |   | 13.1 |   |
| Aircraft      fuel expense                                  |   | $      | 171.7  |   |   | $      | 131.9 |   |

|                                     | Approximate      % of Expected Fuel Requirements |  Gallons      Hedged(in      millions) |  Approximate      Crude Oil Price per      Barrel |
|------------------------------------------|--------------------------------------------------|---------------------------------------------|--------------------------------------------------------|
| Second      Quarter 2010                 | 50%                                              | 38.6                                        | $69                                                    |
| Third      Quarter 2010                  | 50%                                              | 40.6                                        | $74                                                    |
| Fourth      Quarter 2010                 | 50%                                              | 37.4                                        | $83                                                    |
|    Remainder      of 2010 | 50%                                              | 116.6                                       | $75                                                    |
| First      Quarter 2011                  | 50%                                              | 37.7                                        | $87                                                    |
| Second      Quarter 2011                 | 41%                                              | 32.9                                        | $83                                                    |
| Third      Quarter 2011                  | 36%                                              | 29.9                                        | $86                                                    |
| Fourth      Quarter 2011                 | 29%                                              | 22.2                                        | $87                                                    |
|    Full      Year 2011    | 39%                                              | 122.7                                       | $85                                                    |
| First      Quarter 2012                  | 23%                                              | 18.1                                        | $87                                                    |
| Second      Quarter 2012                 | 14%                                              | 11.8                                        | $90                                                    |
| Third      Quarter 2012                  | 13%                                              | 10.7                                        | $95                                                    |
| Fourth      Quarter 2012                 | 11%                                              | 8.8                                         | $93                                                    |
|    Full      Year 2012    | 15%                                              | 49.4                                        | $91                                                    |
| First      Quarter 2013                  | 6%                                               | 4.4                                         | $95                                                    |
|    Full      Year 2013    | 1%                                               | 4.4                                         | $95                                                    |

----

|                                              |   | March      31, 2010 |   |   | December      31, 2009 |   |
|---------------------------------------------------|--------|---------------------|--------|--------|------------------------|--------|
| Crude      oil call options or “caps” |   | $                   | 89.1   |   |                   | $      | 96.2 |   |
| Refining      margin swap contracts               |   |                | 0.8    |   |                   |   | 0.9 |   |
|    Total                           |   | $                   | 89.9   |   |                   | $      | 97.1 |   |

|                                              |   | March      31, 2010 |    |   | December      31, 2009 |   |
|---------------------------------------------------|--------|---------------------|---------|--------|------------------------|--------|
| Fixed-rate      notes payable due through 2022    |   | $                   | 1,134.7 |   |                   | $      | 1,160.9 |   |
| Variable-rate      notes payable due through 2019 |   |                | 341.5   |   |                   |   | 346.9 |   |
| Long-term      debt                               |   |                | 1,476.2 |   |                   |   | 1,507.8 |   |
| Less      current portion                         |   |                | (133.0  | )      |                   |   | (131.2 | ) |
|                                              |   | $                   | 1,343.2 |   |                   | $      | 1,376.6 |   |

----

|                                    |   | 2010   |   |   | 2009   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|
| Service      cost                       |   | $      | 8.1    |   |   | $      | 11.1 |   |
| Interest      cost                      |   |   | 16.9   |   |   |   | 16.7 |   |
| Expected      return on assets          |   |   | (17.7  | )      |   |   | (12.8 | ) |
| Amortization      of prior service cost |   |   | (0.2   | )      |   |   | 1.1 |   |
| Actuarial      loss                     |   |   | 5.5    |   |   |   | 7.2 |   |
| Net      pension expense                |   | $      | 12.6   |   |   | $      | 23.3 |   |

|                                                        |   | March 31,      2010 |   |   | December      31, 2009 |   |
|-------------------------------------------------------------|--------|---------------------|--------|--------|------------------------|--------|
| Restricted      deposits (primarily restricted investments) |   | $                   | 65.3   |   |                   | $      | 65.0 |   |
| Deferred      costs and other*                              |   |                | 21.4   |   |                   |   | 15.3 |   |
|                                                        |   | $                   | 86.7   |   |                   | $      | 80.3 |   |

----

|                                              |   | March      31, 2010 |   |   | December      31, 2009 |   |
|---------------------------------------------------|--------|---------------------|--------|--------|------------------------|--------|
| Current      Liabilities:                         |   |                |   |   |                   |   |
| Other      accrued liabilities                    |   | $                   | 287.7  |   |                   | $      | 267.9 |   |
| Other      Liabilities and Credits (non-current): |   |                |   |   |                   |   |   |   |
| Deferred      revenue                             |   |                | 395.1  |   |                   |   | 410.6 |   |
| Other      liabilities                            |   |                | 12.6   |   |                   |   | 13.2 |   |
|                                              |   | $                   | 695.4  |   |                   | $      | 691.7 |   |

|                      |   | 2010   |   |   | 2009   |   |
|---------------------------|--------|--------|--------|--------|--------|--------|
| Passenger      revenues   |   | $      | 39.6   |   |   | $      | 37.2 |   |
| Other      - net revenues |   |   | 42.0   |   |   |   | 24.5 |   |
|                      |   | $      | 81.6   |   |   | $      | 61.7 |   |

----

|                                |   | 2010   |   |   | 2009   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|
| Stock      options                  |   | $      | 1.6    |   |   | $      | 2.0 |   |
| Restricted      stock units         |   |   | 2.2    |   |   |   | 2.5 |   |
| Performance      stock awards       |   |   | 0.5    |   |   |   | -- |   |
| Employee      stock purchase plan   |   |   | 0.1    |   |   |   | 0.2 |   |
| Total      stock-based compensation |   | $      | 4.4    |   |   | $      | 4.7 |   |

----

----

----

ITEM 2.        MANAGEMENT'S

|   | · | First Quarter in Review      – highlights from the first quarter of 2010 outlining some of the major      events that happened during the period and how they affected our financial      performance. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Results of Operations –      an in-depth analysis of the results of operations for the three months      ended March 31, 2010.  We believe this analysis will help the      reader better understand our condensed statements of      operations.  This section also includes forward-looking      statements regarding our view of the remainder of  2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Liquidity and Capital      Resources – as we are filing this Form 10-Q with reduced      disclosures in accordance with General Instruction H(1)(a) and (b) of Form      10-Q, we do not discuss liquidity and capital      resources.  Liquidity and capital resources are managed at an      Air Group level.  As such, we would refer the reader to Alaska      Air Group, Inc.’s Form 10-Q filed on May 5, 2010 for an analysis of cash      flows, liquidity, and capitalresources. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mainline      operating unit revenues increased 11.4% over the first quarter of 2009,      stemming from significant increases in passenger unit revenues that were      driven by higher load factors.  Baggage fees contributed $19.1      million to the revenue improvement, reflecting the benefit of our first      bag fee that was introduced during the third quarter of    2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Economic      fuel averaged $2.25 per gallon in the first quarter of 2010, compared to      $1.91 in 2009.  This increase, partially offset by a slight      decline in consumption, resulted in a $22.2 million increase in our      economic fuel expense for thequarter. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | • | It      is consistent with how we present information in our quarterly earnings      press releases; |
|--------|---------|------------------------------------------------------------------------------------------------------|

|   | • | We      believe it is the basis by which we are evaluated by industry      analysts; |
|--------|---------|--------------------------------------------------------------------------------------|

|   | • | Our      results excluding these items are most often used in internal management      and board reporting and decision-making;  |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Our      results excluding these adjustments serve as the basis for our various      employee incentive plans, thus the information allows investors to better      understand the changes in variable incentive pay expense in our condensed      statements of operations;  and |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | It      is useful to monitor performance without these items as it improves a      reader’s ability to compare our results to those of other      airlines. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                    |   | Three      Months Ended March 31 |   |
|-------------------------------------------------------------------------|--------|----------------------------------|--------|
| (in      millions)                                                      |   | 2010                             |   |   | 2009 |   |
| Income      (loss) before income taxes, excluding items      below |   | $                                | 26.5   |   |   | $ | (26.6 | ) |
| Mark-to-market      fuel hedge adjustments                              |   |                             | (9.3   | ) |   |   | 8.3 |   |
| Income      (loss) before income taxes as reported                      |   | $                                | 17.2   |   |   | $ | (18.3 | ) |

----

| Financial      and Statistical Data (unaudited)        |   |                                   |   |   |   |   |   |     |   |
|--------------------------------------------------------|--------|----------------------------------------|--------|--------|--------|--------|--------|----------|--------|
|                                                   |   |                                   |   |   |   |   |   |     |   |
|                                                   |   |  Three      Months Ended March 31 |   |
|                                                   |   |                                   |   |   |   |   |   |     |   |
| Financial      Data (in millions):                     |   | 2010                                   |   |   | 2009   |   |   | % Change |   |
| Operating      Revenues:                               |   |                                   |   |   |   |   |   |     |   |
| Passenger                                              |   | $                                      | 587.0  |   |   | $      | 539.8  |     |   |   | 8.7 |   |
| Freight      and mail                                  |   |                                   | 22.0   |   |   |   | 18.3   |     |   |   | 20.2 |   |
| Other      - net                                       |   |                                   | 52.1   |   |   |   | 33.2   |     |   |   | 56.9 |   |
| Total      mainline operating revenues                 |   |                                   | 661.1  |   |   |   | 591.3  |     |   |   | 11.8 |   |
| Passenger      - purchased capacity                    |   |                                   | 76.5   |   |   |   | 61.8   |     |   |   | 23.8 |   |
| Total      Operating Revenues                          |   |                                   | 737.6  |   |   |   | 653.1  |     |   |   | 12.9 |   |
|                                                   |   |                                   |   |   |   |   |   |     |   |   |   |   |
| Operating      Expenses:                               |   |                                   |   |   |   |   |   |     |   |   |   |   |
| Wages      and benefits                                |   |                                   | 191.2  |   |   |   | 197.4  |     |   |   | (3.1 | ) |
| Variable      incentive pay                            |   |                                   | 14.8   |   |   |   | 7.1    |     |   |   | 108.5 |   |
| Aircraft      fuel, including hedging gains and losses |   |                                   | 171.7  |   |   |   | 131.9  |     |   |   | 30.2 |   |
| Aircraft      maintenance                              |   |                                   | 42.1   |   |   |   | 46.3   |     |   |   | (9.1 | ) |
| Aircraft      rent                                     |   |                                   | 25.9   |   |   |   | 26.5   |     |   |   | (2.3 | ) |
| Landing      fees and other rentals                    |   |                                   | 41.7   |   |   |   | 40.8   |     |   |   | 2.2 |   |
| Contracted      services                               |   |                                   | 30.6   |   |   |   | 30.5   |     |   |   | 0.3 |   |
| Selling      expenses                                  |   |                                   | 26.7   |   |   |   | 19.1   |     |   |   | 39.8 |   |
| Depreciation      and amortization                     |   |                                   | 45.7   |   |   |   | 43.3   |     |   |   | 5.5 |   |
| Food      and beverage service                         |   |                                   | 11.8   |   |   |   | 11.0   |     |   |   | 7.3 |   |
| Other                                                  |   |                                   | 34.8   |   |   |   | 42.8   |     |   |   | (18.7 | ) |
| Total      mainline operating expenses                 |   |                                   | 637.0  |   |   |   | 596.7  |     |   |   | 6.8 |   |
| Purchased      capacity costs                          |   |                                   | 72.5   |   |   |   | 62.7   |     |   |   | 15.6 |   |
| Total      Operating Expenses                          |   |                                   | 709.5  |   |   |   | 659.4  |     |   |   | 7.6 |   |
|                                                   |   |                                   |   |   |   |   |   |     |   |   |   |   |
| Operating      Income (Loss)                           |   |                                   | 28.1   |   |   |   | (6.3   | )        |   | NM |   |
|                                                   |   |                                   |   |   |   |   |   |     |   |   |   |   |
| Interest      income                                   |   |                                   | 8.6    |   |   |   | 10.1   |     |   |   |   |   |
| Interest      expense                                  |   |                                   | (22.1  | )      |   |   | (23.9  | )        |   |   |   |   |
| Interest      capitalized                              |   |                                   | 1.7    |   |   |   | 2.5    |     |   |   |   |   |
| Other      - net                                       |   |                                   | 0.9    |   |   |   | (0.7   | )        |   |   |   |   |
|                                                   |   |                                   | (10.9  | )      |   |   | (12.0  | )        |   |   |   |   |
|                                                   |   |                                   |   |   |   |   |   |     |   |   |   |   |
| Income      (Loss) Before Income Tax                   |   | $                                      | 17.2   |   |   | $      | (18.3  | )        |   | NM |   |
|                                                   |   |                                   |   |   |   |   |   |     |   |   |   |   |
| Mainline      Operating Statistics:                    |   |                                   |   |   |   |   |   |     |   |   |   |   |
| Revenue      passengers (000)                          |   |                                   | 3,641  |   |   |   | 3,573  |     |   |   | 1.9 |   |
| RPMs      (000,000) "traffic"                          |   |                                   | 4,472  |   |   |   | 4,179  |     |   |   | 7.0 |   |
| ASMs      (000,000) "capacity"                         |   |                                   | 5,541  |   |   |   | 5,520  |     |   |   | 0.4 |   |
| Passenger      load factor                             |   |                                   | 80.7   | %      |   |   | 75.7   | %        |   | 5.0 | pts  |
| Yield      per passenger mile                          |   |                                   | 13.13  | ¢ |   |   | 12.92  | ¢   |   |   | 1.6 |   |
| Operating      revenue per ASM                         |   |                                   | 11.93  | ¢ |   |   | 10.71  | ¢   |   |   | 11.4 |   |
| Passenger      revenue per ASM                         |   |                                   | 10.59  | ¢ |   |   | 9.78   | ¢   |   |   | 8.3 |   |
| Operating      expenses per ASM                        |   |                                   | 11.50  | ¢ |   |   | 10.81  | ¢   |   |   | 6.4 |   |
| Operating      expenses per ASM, excluding fuel        |   |                                   | 8.40   | ¢ |   |   | 8.42   | ¢   |   |   | (0.2 | ) |
| Aircraft      fuel cost per gallon                     |   | $                                      | 2.38   |   |   | $      | 1.80   |     |   |   | 32.3 |   |
| Economic      fuel cost per gallon                     |   | $                                      | 2.25   |   |   | $      | 1.91   |     |   |   | 17.8 |   |
| Fuel      gallons (000,000)                            |   |                                   | 72.3   |   |   |   | 73.3   |     |   |   | (1.4 | ) |
| Average      number of full-time equivalent employees  |   |                                   | 8,537  |   |   |   | 9,021  |     |   |   | (5.4 | ) |
| Aircraft      utilization (blk hrs/day)                |   |                                   | 9.3    |   |   |   | 9.9    |     |   |   | (6.1 | ) |
| Average      aircraft stage length (miles)             |   |                                   | 1,068  |   |   |   | 1,016  |     |   |   | 5.1 |   |
| Operating      fleet at period-end                     |   |                                   | 112    |   |   |   | 112    |     |   |   | - |   |
|                                                   |   |                                   |   |   |   |   |   |     |   |   |   |   |
| Purchased      Capacity Operating Statistics:          |   |                                   |   |   |   |   |   |     |   |   |   |   |
| RPMs      (000,000)                                    |   |                                   | 271    |   |   |   | 215    |     |   |   | 26.0 |   |
| ASMs      (000,000)                                    |   |                                   | 369    |   |   |   | 316    |     |   |   | 16.8 |   |
| Passenger      load factor                             |   |                                   | 73.4   | %      |   |   | 68.0   | %        |   | 5.4 | pts  |
| Yield      per passenger mile                          |   |                                   | 28.23  | ¢ |   |   | 28.74  | ¢   |   |   | (1.8 | ) |
| Operating      revenue per ASM                         |   |                                   | 20.73  | ¢ |   |   | 19.56  | ¢   |   |   | 6.0 |   |
| Operating      expenses per ASM                        |   |                                   | 19.65  | ¢ |   |   | 19.84  | ¢   |   |   | (1.0 | ) |
|                                                   |   |                                   |   |   |   |   |   |     |   |   |   |   |
|                                                   |   |                                   |   |   |   |   |   |     |   |   |   |   |
| NM      = Not Meaningful                               |   |                                   |   |   |   |   |   |     |   |   |   |   |

----

|                                        |   | Three      Months Ended March 31 |   |
|---------------------------------------------|--------|----------------------------------|--------|
| (in      millions)                          |   | 2010                             |   |   | 2009 |   |   | %      Change |   |
| Passenger      revenue - mainline           |   | $                                | 587.0  |   |   | $ | 539.8 |   |   |   | 8.7 |   |
| Freight      and mail                       |   |                             | 22.0   |   |   |   | 18.3 |   |   |   | 20.2 |   |
| Other      - net                            |   |                             | 52.1   |   |   |   | 33.2 |   |   |   | 56.9 |   |
| Total      mainline operating revenues      |   | $                                | 661.1  |   |   | $ | 591.3 |   |   |   | 11.8 |   |
| Passenger      revenue - purchased capacity |   |                             | 76.5   |   |   |   | 61.8 |   |   |   | 23.8 |   |
| Total      Operating Revenues               |   | $                                | 737.6  |   |   | $ | 653.1 |   |   |   | 12.9 |   |

----

|                             |   | Three      Months Ended March 31 |   |
|----------------------------------|--------|----------------------------------|--------|
| (in      millions)               |   | 2010                             |   |   | 2009 |   |   | %      Change |   |
| Mainline      fuel expense       |   | $                                | 171.7  |   |   | $ | 131.9 |   |   |   | 30.2 |   |
| Mainline      non-fuel expenses  |   |                             | 465.3  |   |   |   | 464.8 |   |   |   | 0.1 |   |
| Mainline      operating expenses |   |                             | 637.0  |   |   |   | 596.7 |   |   |   | 6.8 |   |
| Purchased      capacity costs    |   |                             | 72.5   |   |   |   | 62.7 |   |   |   | 15.6 |   |
| Total      Operating Expenses    |   | $                                | 709.5  |   |   | $ | 659.4 |   |   |   | 7.6 |   |

|                                                      |   | Three      Months Ended March 31 |   |
|-----------------------------------------------------------|--------|----------------------------------|--------|
| (in      millions)                                        |   | 2010                             |   |   | 2009 |   |   | %      Change |   |
| Wages                                                     |   | $                                | 133.8  |   |   | $ | 134.6 |   |   |   | (0.6 | ) |
| Pension      and defined-contribution retirement benefits |   |                             | 21.2   |   |   |   | 29.1 |   |   |   | (27.1 | ) |
| Medical      benefits                                     |   |                             | 21.7   |   |   |   | 18.9 |   |   |   | 14.8 |   |
| Other      benefits and payroll taxes                     |   |                             | 14.5   |   |   |   | 14.8 |   |   |   | (2.0 | ) |
| Total      wages and benefits                             |   | $                                | 191.2  |   |   | $ | 197.4 |   |   |   | (3.1 | ) |

----

|                                                                                       |   | Three      Months Ended March 31 |   |
|--------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
| (in      millions, except per-gallon amounts)                                              |   | 2010                             |   |   | 2009 |   |   | %      Change |   |
| Fuel      gallons consumed                                                                 |   |                             | 72.3   |   |   |   | 73.3 |   |   |   | (1.4 | ) |
| Raw      price per gallon                                                                  |   | $                                | 2.25   |   |   | $ | 1.62 |   |   |   | 38.9 |   |
| Total      raw fuel expense                                                                |   | $                                | 162.7  |   |   | $ | 118.8 |   |   |   | 37.0 |   |
| Net      impact on fuel expense from losses arising from      fuel-hedging activities |   |                             | 9.0    |   |   |   | 13.1 |   |   | NM |   |
| Aircraft      fuel expense                                                                 |   | $                                | 171.7  |   |   | $ | 131.9 |   |   |   | 30.2 |   |

----

|                                                                                                  |   | Three      Months Ended March 31 |   |
|-------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
| (in      millions, except per-gallon amounts)                                                         |   | 2010                             |   |   | 2009 |   |   | %      Change |   |
| Raw      fuel expense                                                                                 |   | $                                | 162.7  |   |   | $ | 118.8 |   |   |   | 37.0 |   |
| Plus      or minus: net of cash received from settled hedges and      premium expense recognized |   |                             | (0.3   | ) |   |   | 21.4 |   |   | NM |   |
| Economic      fuel expense                                                                            |   | $                                | 162.4  |   |   | $ | 140.2 |   |   |   | 15.8 |   |
| Fuel      gallons consumed                                                                            |   |                             | 72.3   |   |   |   | 73.3 |   |   |   | (1.4 | ) |
| Economic      fuel cost per gallon                                                                    |   | $                                | 2.25   |   |   | $ | 1.91 |   |   |   | 17.8 |   |

|                                                  |   | Three      Months Ended March 31 |   |
|-------------------------------------------------------|--------|----------------------------------|--------|
|                                                  |   | 2010                             |   |   | 2009 |   |   | %      Change |   |
| Total      mainline operating expenses per ASM (CASM) |   |                             | 11.50  | ¢ |   |   | 10.81 | ¢ |   |   | 6.4 |   |
| Less      the following components:                   |   |                             |   |   |   |   |   |   |   |   |   |   |
| Aircraft      fuel cost per ASM                       |   |                             | 3.10   | ¢ |   |   | 2.39 | ¢ |   |   | 29.7 |   |
| CASM,      excluding fuel                             |   |                             | 8.40   | ¢ |   |   | 8.42 | ¢ |   |   | (0.2 | ) |

|   | · | By      eliminating fuel expense and certain special items from our unit cost      metrics, we believe that we have better visibility into the results of our      non-fuel cost-reduction initiatives.  Our industry is highly      competitive and is characterized by high fixed costs, so even a small      reduction in non-fuel operating costs can result in a significant      improvement in operating results.  In addition, we believe that      all domestic carriers are similarly impacted by changes in jet fuel costs      over the long run, so it is important for management (and thus investors)      to understand the impact of (and trends in) company-specific cost drivers      such as labor rates and productivity, airport costs, maintenance costs,      etc., which are more controllable bymanagement. |
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|   | · | Cost      per ASM excluding fuel and certain special items is one of the most      important measures used by management of both Alaska and Horizon and by      the Board of Directors in assessing quarterly and annual cost      performance.  For Alaska Airlines, these decision-makers      evaluate operating results of the “mainline” operation, which includes the      operation of the B737 fleet branded in Alaska Airlines      livery.  The revenue and expenses associated with purchased      capacity are evaluated separately. |
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|   | · | Cost      per ASM excluding fuel (and other items as specified in our plan      documents) is an important metric for the employee incentive plan that      covers the majority of ouremployees. |
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|   | · | Cost      per ASM excluding fuel and certain special items is a measure commonly      used by industry analysts, and we believe it is the basis by which they      compare our airlines to others in the industry.  The measure is      also the subject of frequent questions from  investors. |
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|   | · | Although      we disclose our “mainline” passenger unit revenues, we do not (nor are we      able to) evaluate mainline unit revenues excluding the impact that changes      in fuel costs have had on ticket prices.  Fuel expense      represents a large percentage of our total mainline operating      expenses.  Fluctuations in fuel prices often drive changes in      unit revenues in the mid-to-long term.  Although we believe it      is useful to evaluate non-fuel unit costs for the reasons noted above, we      would caution readers of these financial statements not to place undue      reliance on unit costs excluding fuel as a measure or predictor of future      profitability because of the significant impact of fuel costs on our      business. |
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ITEM 4.        CONTROLS 

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PART II.       OTHER

ITEM 1.        LEGAL

ITEM 1A.     RISK 

ITEM 5.        OTHER

ITEM 6.       EXHIBITS

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SIGNATUR

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EXHIBIT INDEX

| Exhibit      No. |    Description |
|------------------|-------------------------------|

| 10.1 | Credit      Agreement, dated March 31, 2010, among Alaska Airlines, Inc., as borrower,      Wells Fargo Capital Finance, LLC as agent, U.S. Bank National Association      as documentation agent, and other lenders (Wells Fargo Credit Agreement) -      (Filed as Exhibit 10.1 to Alaska Air Group, Inc.’s {Commission File No.      1-8957} Quarterly Report on Form 10-Q for the period ended March 31, 2010,      filed on May 5, 2010 and incorporated herein by      reference.) |
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| 10.2 | Credit      Agreement, dated March 31, 2010, among Alaska Airlines, Inc., as borrower,      Citibank, N.A., as administrative agent, Bank of America, N.A. as      syndication agent, and other lenders (Citibank Credit Agreement) - (Filed      as Exhibit 10.2 to Alaska Air Group, Inc.’s {Commission File No. 1-8957}      Quarterly Report on Form 10-Q for the period ended March 31, 2010, filed      on May 5, 2010 and incorporated herein by  reference.) |
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| 31.1 * | Section 302 Certification of Chief Executive Officer      Pursuant to 18 U.S.C. Section1350 |
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| 31.2 * | Section 302 Certification of Chief Financial Officer      Pursuant to 18 U.S.C. Section1350 |
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| 32.1 * | Section 906 Certification of Chief Executive Officer      Pursuant to 18 U.S.C. Section 1350 (furnished, not    filed.) |
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| 32.2 * | Section 906 Certification of Chief Financial Officer      Pursuant to 18 U.S.C. Section 1350 (furnished, not    filed.) |
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