<PAGE>

                                                                   EXHIBIT 10.12

                              ALASKA AIRLINES, INC.

                                       and

                             ALASKA AIR GROUP, INC.

                              Seattle, Washington

                          SUPPLEMENTARY RETIREMENT PLAN

                              FOR ELECTED OFFICERS

                          as amended November 7, 1994

                       1981 VERSION APPLICABLE TO OFFICERS

                        FIRST ELECTED AFTER JUNE 1, 1981

<PAGE>

                                     PREFACE

         This Supplementary Retirement Plan for Elected Officers is an unfunded
retirement plan maintained by Alaska Airlines, Inc. and Alaska Air Group, Inc.
for the purpose of providing deferred compensation for a select group of
management.

         The benefits of this Plan constitute a general obligation of both
Employers. The Participants in this Plan shall have no claim against any assets
of either Employer under the Plan except as specifically provided herein.

                                       1

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                                    SECTION 1

                                   DEFINITIONS

         1.1      "Employee" shall mean any person who is customarily employed
by either Employer for 20 or more hours per week and for five or more months per
year and who is compensated on a salary basis.

         1.2      "Elected Officer" shall mean a nonflight officer elected by
the Board of Directors of the officer's Employer pursuant to the Bylaws.

         1.3      "Participant" shall mean:

                  (a)      an Elected Officer who is enrolled in the Plan

                  (b)      former Elected Officer who is partially or fully
                  vested hereunder, and

                  (c)      a retiree hereunder.

         1.4      "Normal Retirement Date" shall mean the first day of the month
coincident with or next following the later of:

                  (a)      the Participant's 60th birthday, and

                  (b)      his date of termination of employment with his
                  Employer; but only if, at such date, he has completed at least
                  15 years of Continuous Service, of which at least the last
                  five years shall be as an Elected Officer, or if he has been
                  an Elected Officer for his last ten years of Continuous
                  Service.

                                       2

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         1.5      "Early Retirement Date" shall mean the first day of any month
prior to Normal Retirement Date and consented to by the officer's Employer,
occurring subsequent to both:

                  (a)      the Participant's 55th birthday, and

                  (b)      his completion of either 15 years of Continuous
                  Service, at least the last five of which shall be as an
                  Elected Officer, or the last ten years of his Continuous
                  Service as an Elected Officer.

         1.6      "Final Average Compensation" shall mean the average monthly
compensation, including any salary deferrals under Alaskasaver but excluding
bonuses, for the last 60 months of service (or such lesser number of months, as
applicable, if the total service as an Elected Officer is less than 60 months)
prior to election by the Participant to receive an early lump-sum distribution
pursuant to Section 3.1(f) hereof or termination of employment, as the case may
be.

         1.7      "Continuous Service" shall mean Continuous Service with
either Employer, as defined in Section 2.2 hereof.

         1.8      "Actuarial Equivalent" shall mean of equal value when computed
in accordance with the actuarial assumptions most recently adopted by the
Employers.

         1.9      "Administrative Committee" shall mean that Committee appointed
by the Chairman of the Board of Directors of Alaska Air Group, Inc. to
administer the Plan. The Committee will consist of three or more members, all of
whom shall be Elected Officers. The members of the Committee will serve without
compensation at the pleasure of the Chairman of the Board, who shall be
designated the Chairman of the Committee. The Committee shall act by a majority
of its members to

                                       3

<PAGE>

determine all questions arising in the administration, interpretation and
application of the Plan. The Committee shall have all powers necessary to carry
out the provisions of the Plan.

         In making its determinations, the Committee shall follow uniform rules
which shall be consistently applied so that all Participants similarly situated
will be treated alike.

         The Committee will record its proceedings and maintain copies of the
minutes of its meetings.

         1.10     "Employer" shall mean Alaska Airlines, Inc. or Alaska Air
Group, Inc., as the context requires, and "Employers" shall refer to both
companies.

         1.11     "Plan" shall mean Alaska Airlines, Inc. and Alaska Air Group,
Inc. Supplementary Retirement Plan for Elected Officers.

         1.12     "Change in Control" shall occur whenever:

                  (a)      the Board of Directors of Alaska Air Group, Inc. (or,
                  if approval of such Board is not required as a matter of law,
                  the shareholders of Alaska Air Group, Inc.) shall approve

                           (1)      any consolidation or merger of Alaska Air
                           Group, Inc. in which Alaska Air Group, Inc. is not
                           the continuing or surviving corporation or pursuant
                           to which shares of common stock of Alaska Air Group,
                           Inc. would be converted into cash, securities or
                           other property, other than a merger of Alaska Air
                           Group, Inc. in which the holders of common stock of
                           Alaska Air Group, Inc. immediately prior to the
                           merger have the same proportionate

                                       4

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                           ownership of common stock of the surviving
                           corporation immediately after the merger;

                           (2)      any sale, lease, exchange or other transfer
                           (in one transaction or a series of related
                           transactions) of all, or substantially all, the
                           assets of either Employer; or

                           (3)      the adoption of any plan or proposal for the
                           liquidation or dissolution of either Employer.

                  (b)      at any time during a period of two consecutive years,
                  individuals who at the beginning of such period constituted
                  the Board of Directors of Alaska Air Group, Inc. ("Incumbent
                  Directors") shall cease for any reason to constitute at least
                  a majority thereof, unless each new director during such
                  two-year period was nominated or elected by the Incumbent
                  Directors, or a committee of the Incumbent Directors (new
                  directors nominated or elected by the Incumbent Directors or
                  by a committee of the Incumbent Directors shall also be deemed
                  to be Incumbent Directors); or

                  (c)      any person [as such term is used in Section 13(d) of
                  the Securities Exchange Act of 1934, as amended (the "Exchange
                  Act")] shall, as a result of a tender or exchange offer, open
                  market purchases, privately negotiated purchases or otherwise,
                  have become the beneficial owner (within the meaning of Rule
                  13d-3 under the Exchange Act), directly or indirectly, of the
                  then outstanding securities of Alaska Air Group, Inc.
                  ordinarily (and apart from rights accruing under special
                  circumstances) having the right to vote in the election of
                  directors ("Voting Securities" to be calculated as provided in
                  paragraph (d) of such Rule 13d-3 in the case of rights to
                  acquire common stock of Alaska Air Group, Inc.)

                                       5

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                  representing 20% or more of the combined voting power of the
                  then outstanding Voting Securities.

         Unless the Board of Directors of Alaska Air Group, Inc. shall determine
otherwise, a Change in Control shall not be deemed to have occurred by reason of
any corporate reorganization, merger, consolidation, transfer of assets,
liquidating distribution or other transaction entered into solely by and between
Alaska Air Group, Inc. and Alaska Airlines, Inc., or any affiliates thereof,
provided such transaction has been approved by two-thirds of the Incumbent
Directors, as defined above, then in office and voting.

                                       6

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                                    SECTION 2

                                   ELIGIBILITY

         2.1      Eligibility for Benefits.

         Each Employee who has completed 15 years of Continuous Service with the
Employer and has been an Elected Officer for at least the last five years of his
Continuous Service, or who has been an Elected Officer for his last ten years of
Continuous Service, may, subject to the terms and conditions herein, be eligible
for benefits under this Plan. A Participant shall be entitled to benefits under
the Plan upon:

                  (a)      satisfaction of the service requirement contained in
                  the prior sentence, and elsewhere herein, and

                  (b)      meeting all other requirements of the Plan as
                  determined by the Administrative Committee.

         Notwithstanding any of the foregoing, in the event of a Change in
Control, an Elected Officer, without regard to age, is eligible to receive a
benefit under this Plan in accordance with Section 3.1(f) and 3.2(d).

         2.2      Continuous Service.

         Continuous Service of any person shall begin on the date such person
first becomes an Employee of either Employer and shall continue so long as he
remains an Employee of either Employer. Continuous Service shall not be deemed
to have been interrupted by reason of transfer between Employers, as provided in
Section 4.3 hereof, temporary layoff, or leave of absence authorized by the
officer's Employer for any purpose, including sickness, accident or other
casualty. Any Employee who

                                       7

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enters the military service of the United States during a national emergency or
through the operation of a compulsory military service law shall be deemed to be
on authorized leave of absence during the period of his military service and for
any period thereafter in which his reemployment rights are guaranteed by law.

         Any Employee who fails to return to active employment at or before the
expiration of an authorized leave of absence shall be deemed to have terminated
his employment as of the date of commencement of his leave of absence; provided,
however, should he fail to return to work because of death or disability, his
Continuous Service shall be deemed to have continued until the date of his death
or disability. The Employers, in granting leaves of absence under this section,
shall follow uniform rules which shall be consistently applied.

         2.3      Forfeiture of Benefits for Cause.

         All other provisions of this Plan notwithstanding, all rights to
benefits are forfeited under the following circumstances:

                  (a)      Forfeiture Due to Misconduct.

                           Termination of employment due to misconduct shall
                  result in the forfeiture of all rights to benefits under this
                  Plan. A termination of employment due to misconduct shall be
                  deemed to have occurred if the reason for termination, by
                  resignation or discharge, was the Employee's admission to, or
                  his Employer's substantiation, of acts of (1) embezzlement,
                  dishonesty, or other fraud, conviction of felony, or
                  conspiracy against either Employer or (2) if such termination
                  occurred prior to any Change in Control, any willful or
                  intentional injury to either Employer, its property or
                  employees in connection with the business or affairs of either
                  Employer.

                                       8

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                           The Administrative Committee shall make the
                  determination as to whether the provisions of this section
                  shall be operative in any case. Such decision shall be final,
                  conclusive and binding on all concerned, subject only to the
                  right of appeal as outlined in Section 6.1.

                  (b)      Forfeiture on Entry into Competition.

                           Solicitation of business substantially similar to
                  that provided by either Employer, or employment with another
                  airline serving any of the same area served by any subsidiary
                  of Alaska Air Group, Inc. shall be deemed to be competing with
                  the Employer unless the Participant's Employer shall have
                  issued its prior written consent. Except after a Change in
                  Control, any Participant found by the Administrative Committee
                  to be competing with either Employer shall forfeit any and all
                  unpaid benefits under the Plan. The determination of competing
                  activity shall not be operative until the person deemed to be
                  competing and subject to forfeiture shall have been provided
                  30 days' prior written notice of the pending forfeiture. If,
                  at the expiration of the 30 days following notice, the
                  competing activity is still being conducted, the forfeiture
                  shall become fully operative. This Section 2.3(b) shall be of
                  no further force or effect after a Change in Control.

                  (c)      Prior to a Change in Control, any Participant who
                  shall terminate employment with the Employers prior to age 50
                  by reason other than medical disability, with proof thereof
                  satisfactory to the Administrative Committee, shall be deemed
                  to have forfeited all rights under this Plan. After a Change
                  in Control, any Participant, regardless of age, who shall
                  terminate employment with the Employers by any reason other
                  than for misconduct under Section 2.3(a)(1) shall not be
                  deemed to have forfeited any rights under this Plan.

                                       9

<PAGE>

                                    SECTION 3

                                    BENEFITS

         3.1      Retirement Benefits.

                  (a)      General.

                           Benefits under the Plan shall be payable in the form
                  of a monthly income or, after a Change in Control and at the
                  Participant's option, a lump-sum distribution. The method by
                  which such benefits are paid will depend upon the payment
                  option selected by the Participant or his beneficiary. A
                  Participant's monthly income shall not commence prior to his
                  termination of employment with the Employers; provided,
                  however, that a Participant may elect and receive a lump-sum
                  distribution prior to termination in the event of a Change in
                  Control.

                  (b)      Normal Retirement.

                           If the Participant terminates employment with the
                  Employers on or after his Normal Retirement Date, his benefit
                  under the Plan shall commence as of the first day of the month
                  coinciding with or next following his date of termination. If
                  the benefit is to be payable under the normal option described
                  in Section 3.1(d), such monthly benefit shall be equal to 50%
                  of the Participant's Final Average Compensation, or such
                  lesser percentage of Final Average Compensation as is
                  appropriate based on the Participant's years of service as
                  outlined in Section 3.2(b) and (c), less any monthly benefit
                  received under the Federal Social Security System. The amount
                  of such monthly benefit shall change in accordance with
                  changes in the social security benefits for which a
                  Participant is eligible and in accordance with Section
                  3.1(e).

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                  (c)      Early Retirement.

                           With the consent of his Employer, a Participant may
                  retire at an Early Retirement Date. If the benefit is to be
                  payable under the normal option described in Section 3.1(d),
                  below, such monthly benefit shall be equal to that benefit
                  determined as under Section 3.1(b), reduced to the Actuarial
                  Equivalent of that benefit had it commenced on the
                  Participant's Normal Retirement Date. Such monthly benefit
                  shall change subsequent to the date of benefit commencement
                  as described in Section 3.1 (b).

                  (d)      Forms of Benefit Payment.

                           At any time prior to his date of benefit
                  commencement, a Participant may elect, in appropriate written
                  form, a payment option under which his benefits under the Plan
                  shall be payable, If the Participant makes no election of a
                  payment option prior to his date of benefit commencement, and
                  if a Participant is married at the date of benefit
                  commencement, his benefits shall be payable under the joint &
                  survivor option with spouse as beneficiary, 100% continued. If
                  the Participant is not married at the date of benefit
                  commencement, and no election of a payment option has been
                  made, his benefits shall be payable per the 10-year certain &
                  life specified below.

                           The payment options available under the Plan are as
                  follows:

                           (1)      Normal Option.

                                    Under this option, the Participant's monthly
                           benefit is the full amount determined under Section
                           3.1 (b) or (c). Such benefit shall be payable from
                           his date of benefit commencement and shall terminate
                           with the payment which is due on the first day of his
                           month of death.

                                       11

<PAGE>

                           (2)      Joint & Survivor Option.

                                    Under this Option, the Participant's monthly
                           benefit is in the amount determined under Section
                           3.1(b) or (c), actuarially reduced, Such reduced
                           benefit is payable to the first day of the month of
                           the Participant's death. If the Participant's spouse
                           survives the Participant, a percentage of such
                           benefit shall continue to the spouse for her
                           lifetime. Such percentage shall be 100%, 75%, or 50%
                           at the election of the Participant.

                           (3)      10-Year Certain & Life.

                                    Under this option, the Participant's monthly
                           benefit is in the amount determined under Section
                           3.1(b) or (c), actuarially reduced. Such reduced
                           benefit is payable so long as the Participant shall
                           live and shall terminate with the payment due on the
                           first day of his month of death; except that if the
                           Participant dies before receiving 120 monthly
                           payments, such payments shall continue to the
                           beneficiary specified by the Participant until a
                           total of 120 monthly payments have been made.

                  (e)      Adjusted Retirement Benefits.

                           (1)      As of each January 1 and July 1, benefits
                           being paid under this Plan pursuant to Section
                           3.1(d)(l), (2) or (3) will be adjusted as provided in
                           subparagraph 3.1(e)(2) and the adjusted benefit
                           resulting therefrom shall be payable during the
                           following six months.

                           (2)      The amount of each Participant's adjusted
                           benefit shall be the same proportion of his initial
                           retirement benefit, before adjustment, that (i) bears
                           to (ii) if greater than one.

                                       12

<PAGE>

                                    (i)      The average of the Consumer Price
                                    Index figures for the 24-month period ending
                                    with the May or November immediately
                                    preceding the date as of which the
                                    determination is to be made.

                                    (ii)     The average of the Consumer Price
                                    Index figures for the 24-month period ending
                                    with the month immediately preceding the
                                    Participant's retirement date.

                  (f)      Change in Control.

                           Notwithstanding any other provision of this Section
                  3.1, in the event of a Change in Control a lump-sum method of
                  distributing benefits to which a Participant is entitled under
                  Section 3.2(d) shall be available to Participants, including
                  Participants who are still employed by either Employer and
                  Participants who are retired; provided, however, that no
                  benefits shall be payable to Participants terminated for cause
                  pursuant to Section 2.3(a)(1). In order to calculate the
                  amount to be used for purposes of determining a Participant's
                  vested lump-sum distribution amount under Section 3.2(d), the
                  present value of payments which, making standard actuarial
                  assumptions, would have otherwise been payable to the
                  Participant after the date of such lump-sum distribution under
                  Section 3.1(b) or 3.1(c), as the case may be, shall first be
                  calculated.

                           A number of assumptions shall be made for purposes of
                  that calculation. First, in the case of a terminated
                  Participant, the calculation will assume the Participant would
                  have retired at his Normal Retirement Date (as that term was
                  defined at the time the Participant became an Elected
                  Officer). In the case of a Participant who is not terminated,
                  the calculation will assume the Participant would have

                                       13

<PAGE>

                  retired at the later of the Participant's age at the time of
                  distribution or his 60th birthday, Second, a cost of living
                  adjustment shall be estimated under Section 3.1(e), making
                  standard actuarial assumptions. Third, it shall be assumed
                  that the Participant will receive monthly social security
                  benefits beginning at age sixty-two equal to monthly social
                  security benefits to which he would have been entitled had the
                  Participant been age 62 and retired on the date of termination
                  or on the date of distribution of the lump-sum, as the case
                  may be.

                           The amount upon which the Participant's vested
                  lump-sum distribution amount calculated pursuant to Section
                  3.2(d) will be based is equal to the present value on the date
                  of distribution of the foregoing amount.

                           The Participant may elect such lump-sum method by
                  filing an appropriate election with the Administrative
                  Committee at any time after such Change in Control. Such
                  election shall be made on a form supplied by the
                  Administrative Committee, which form shall further provide
                  that the Participant acknowledges that the lump-sum amount
                  calculated pursuant to this Section 3.1(f) and Section 3.2(d)
                  represents the entire distribution the Participant is entitled
                  to receive under the Plan and that, upon receipt of such
                  lump-sum amount, the Participant will have no further claim to
                  benefits under the Plan. The Participant's Employer shall make
                  such distribution on the date elected by the Participant, but
                  in no event shall his Employer be required to make such
                  lump-sum distribution any sooner than 30 days after receipt by
                  the Administrative Committee of an election of a lump-sum
                  distribution.

                                       14

<PAGE>

         3.2      Termination Benefits and Vesting.

                  (a)      Subject to Section 2.3, in the event a Participant
                  terminates employment with the Employers for any reason other
                  than retirement in accordance with Section 3.1 hereof or after
                  a Change in Control, then his interest and rights in this Plan
                  shall, subject to the terms and conditions herein, be
                  determined in accordance with Sections 3.2 (b) and (c).

                  (b)      To be vested in the Plan at termination as outlined
                  in Section 3.2(a), or at retirement as outlined in Section
                  3.1(b), a Participant must be age 50 or older and must have
                  satisfied one of the following service requirements:

                           (1)      15 years of Continuous Service, the last
                           five of which were as an Elected Officer, or

                           (2)      Ten years of service as an Elected Officer,
                           or

                           (3)      Service as an Elected Officer after age 50,
                           for which immediate vesting at the rate of 10% per
                           year is credited.

                  (c)      If a Participant fulfills the requirements set forth
                  in (b) above, and is living on his 60th birthday, he shall be
                  entitled to receive a monthly benefit thereafter and
                  continuing for the duration of his eligibility. The amount of
                  such benefit shall be computed as follows:

                           (1)      The result of the application of the formula
                           specified in Section 3.1(b) hereof shall first be
                           determined.

                           (2)      For Participants with service as an Elected
                           Officer prior to age 50, the amount of benefit shall
                           be a percentage of the result obtained in (1) above
                           and determined in accordance with the following
                           schedule:

                                       15

<PAGE>

<TABLE>
<CAPTION>
  Service Completed
As an Elected Officer          Percentage
---------------------          ----------
<S>                            <C>
Less than 5 years                  0%

5 years                           50%
6 years                           60%
7 years                           70%
8 years                           80%
9 years                           90%
10 years                         100%
</TABLE>

                           (3)      Participants 50 years of age and older who
                           have not satisfied the service requirements set forth
                           in 3.2(b)(1) or (2) will nonetheless automatically be
                           credited with 10% per year for each year of service
                           as an Elected Officer after age 50, and the amount of
                           benefit shall be that total percentage times the
                           result obtained in (1) above.

                  (d)      Subject to Section 2.3, after a Change in Control, in
                  lieu of the monthly benefits calculated pursuant to Section
                  3.2(b) and (c) a Participant, without regard to age, shall be
                  entitled to receive a lump-sum distribution pursuant to
                  Section 3.1(f), or, at his option and after termination,
                  monthly benefits, all calculated as follows:

                           (1)      A determination shall first be made, in the
                           case of monthly benefits, of the result of the
                           application of the formula specified in Section 3.1
                           (c) as if such Participant had retired at an Early
                           Retirement Date, or, in the case of a lump-sum
                           distribution, of the result of the application of the
                           formula specified in Section 3.1 (f).

                           (2)      The amount of benefit shall be a percentage
                           of the result obtained in (1) above determined in
                           accordance with the following schedule:

                                       16

<PAGE>

<TABLE>
<CAPTION>
  Service Completed
As an Elected Officer              Percentage
---------------------              ----------
<S>                                <C>
1 year                                 10%
2 years                                20%
3 years                                30%
4 years                                40%
5 years                                50%
6 years                                60%
7 years                                70%
8 years                                80%
9 years                                90%
10 years                              100%
</TABLE>

         3.3      Death Benefits to Beneficiary.

         In the event a Participant dies prior to the commencement of any
benefits for which he is eligible under this Plan, benefits shall be paid to the
Participant's beneficiary as determined by Section 3.1(d), beginning on the
first day of the month following the date of the Participant's death, with
appropriate actuarial reduction, or as determined by Section 3.1 (f).

         3.4      Benefits Related to Salaried Retirement Plan,

         In the event that a retirement benefit to be paid under the Alaska Air
Group Salaried Retirement Plan exceeds the maximum annual benefit which may be
paid under a qualified retirement plan as determined by relevant tax code, such
excess amount shall be paid by the Supplementary Retirement Plan for Elected
Officers. Such amount shall be paid in the same manner as selected by the
Participant for other benefits payable under the Alaska Air Group Salaried
Retirement Plan and shall not reduce or effect the benefit amount payable under
this Plan in any way.

                                       17

<PAGE>

                                    SECTION 4

           SUCCESSOR-RELATED CORPORATIONS AND PARTICIPATING EMPLOYERS

         4.1      Successor Corporations.

         If at any time there should be a successor corporation to either
Employer, including but not limited to an entity resulting from merger, stock
trade or any similar buy-out arrangement or from any other Change in Control, or
should there be any similar entity succeeding to either Employer's business, it
or they shall assume the obligations of this Plan for Participants hereunder,
and such successor shall be included within the meaning of the word "Employer"
and the word "Employers."

         4.2      Employer Participation.

         In the event at any time there be any subsidiary or subsidiaries of
either Employer or any affiliated company which would desire to be included as
an Employer under this Plan, it may elect to be joined to and adopt this Plan by
entering into an agreement with the Employers and shall thereafter be included
within the definition of the word "Employer" and the word "Employers."

         4.3      Transfer to Related Corporations.

         If an Employee is transferred between the Employers or between either
Employer and its partners, subsidiaries, affiliates, predecessors or acquired
companies or their parents, subsidiaries, affiliates or predecessors, he shall
continue to be an Employee for all purposes while employed by any such new
employer. In addition, he shall immediately be considered as having been an
Employee of his new Employer for the period of time that he has been an Employee
of any Employer.

                                       18

<PAGE>

                                    SECTION 5

                       AMENDMENT AND TERMINATION OF PLAN

         5.1      Amendment.

         Alaska Air Group, Inc. shall have the right at any time and from time
to time to amend, in whole or in part, any or all of the provisions of this Plan
by action of its Board of Directors. However, no such amendment shall reduce the
amount of benefit received or accrued by any Participant.

         5.2      Termination.

         Alaska Air Group, Inc. shall have the right at any time to terminate
this Plan by action of its Board of Directors. On termination of the Plan, each
Participant's benefit, based upon his Final Average Compensation determined as
of the date of termination of the Plan (calculated as if he had terminated
employment as of the date of termination of the Plan), shall become fully vested
and nonforfeitable.

                                       19

<PAGE>

                                    SECTION 6

                                  MISCELLANEOUS

         6.1      Participants' Rights; Acquittance.

         Neither the establishment of the Plan created hereby nor the
modification thereof, nor the payment of any benefits shall be construed as
giving to any person any legal or equitable rights against either Employer,
their officers, directors or Employees, except as herein provided.

         Should a Participant contest a decision by the Administrative
Committee, the Participant may appeal to the Alaska Air Group Board of Directors
for review and reconsideration of such decision.

         6.2      Delegation of Authority by Employer.

         Whenever either Employer under the terms of this Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by the Administrative Committee or any officer duly authorized by its
Board of Directors to so act.

         6.3      Limitation on Liability; Legal Actions; Payment of Expenses.

         It is expressly understood and agreed by each Employee who becomes a
Participant hereunder that except for their willful neglect or fraud, the
Employers shall not in any way be subject to any suit or litigation or to any
legal liability for any cause or reason or thing whatsoever in connection with
this Plan or its operation. Release is hereby granted the Employers and all
their officers, directors and agents from any and all liability or obligation.

                                       20

<PAGE>

         In any action or proceeding involving the Plan, the Employers shall be
the only necessary parties and no Employees or former Employees of either
Employer or their beneficiaries or any other person having or claiming to have
an interest under the Plan shall be entitled to any notice or process.

         Any final judgment which is not appealed or appealable that may be
entered in any such action or proceeding shall be binding and conclusive on the
parties hereto and all persons having or claiming to have any interest under the
Plan.

         6.4      No Assignment by Participant.

         The provisions hereof are intended as personal protection for the
Participants. No Participant shall have any right to assign, anticipate or
hypothecate any benefits. No benefits under the Plan shall be subject to the
claims of any creditor of any Participant excepting only as to debts owed to
either Employer at the time benefits become payable.

         6.5 Unlocated Recipients.

         If, after notice of benefits is provided, the intended recipient shall
fail to disclose his existence, he shall be determined to be an unlocated
recipient. All benefits due an unlocated recipient shall be placed in escrow for
a period of two years, At the end of two years, the Employers may, if they have
not received any request for payment from the unlocated recipient, treat all
accumulated benefits due as forfeited and the Plan's liability to the unlocated
recipient as ended. Notice of benefits shall be deemed to be provided when the
responsible Employer shall have sent notice thereof to the intended recipient at
the time benefits shall first become due. Notice shall be sent by registered
mail to the most recent address of the intended recipient then on file with the
Employers.

                                       21
<PAGE>

         6.6      Required Information.

         Each Participant under the Plan shall provide such information to the
Employers as they shall require in order to properly determine the amount of
benefits payable hereunder or to establish the Participant's continuing
eligibility to receive benefits hereunder. Such information shall include but
not be limited to the amount of social security benefits being received by the
Participant.

         If the Participant's Employer requests such information in writing and
if such information is not provided within 45 days of such request, benefits
under the Plan may be suspended until such information is received by the
Participant's Employer.

         6.7      Use of Terms.

         The use of specific gender pronouns such as he, him, she, her, his and
hers are meant to refer to individuals of both sexes.

         This Plan was established and adopted on October 1, 1986 and amended
through November 7, 1994.

                                         ALASKA AIR GROUP, INC.

                                         By:____________________________________

                                         ALASKA AIRLINES, INC.

                                         By:____________________________________

                                       22

<PAGE>

                          SUPPLEMENTARY RETIREMENT PLAN
                              FOR ELECTED OFFICERS

The 1976, 1977 and 1981 plans were rewritten in late 1994 to incorporate all
amendments relevant to each of the plans as described under tabs labeled "First
Amendment" through "Eighth Amendment". Also includes the following amendments
approved by the Board subsequent to the October 12, 1983 "Eighth Amendment".

THE AMENDMENTS DESCRIBED BELOW WERE INCORPORATED IN ALL THREE VERSIONS OF THE
PLAN:

         09/13/84          Changed definition of "Final Average Compensation" to
                           include any salary deferrals under Alaskasaver.

         12/02/86          Amended plan effective October 1, 1986 to include all
                           prior amendments and to incorporate change of control
                           provisions as described in Exhibit A.

         01/21/87          Amended the last sentence of the second paragraph of
                           Section 3.l(f) to add "would have been entitled had
                           the Participant been age sixty-two and retired on the
                           date..."

         03/20/87          Clarified use of gender pronouns to refer to
                           individuals of both sexes.

         05/07/91          Added Section 3.4 "Benefits Related to Salaried
                           Retirement Plan" to specify that benefits to be paid
                           under the Salaried Retirement Plan which exceed the
                           maximum annual benefit that can be paid under a
                           qualified retirement plan (as determined by relevant
                           tax code) will be paid from the Plan.

         11/07/94          Amended Sections 3.1(b) and 3.2(b) to clarify that
                           benefits are subject to full vesting provisions no
                           matter when a participant retires.

THE FOLLOWING AMENDMENT WAS INCORPORATED IN THE 1981 VERSION OF THE PLAN ONLY:

         06/02/87          Amended Section 2.3 (c) to clarify benefits are
                           preserved for participants terminated for any cause
                           regardless of age after a change in control but not
                           prior to a change in control.

<PAGE>

Supplementary Retirement Plan for Elected Officers
Page 2

                           The formula for determining lump-sum distributions
                           under Section 3.1(f) was clarified at this same time
                           as authorized by the Board in January 1987
                           discussions.

                           (In calculating a lump-sum distribution under change
                           in control, the following assumptions will be made: A
                           terminated participant would have retired on his
                           normal retirement date; a participant who is still
                           working would have retired at the later of his or her
                           age at distribution or his or her 60th birthday; the
                           participant will receive monthly social security
                           benefits beginning at 62 equal to the social security
                           benefit to which he or she would have been entitled
                           at age 62 had he or she retired on the date of
                           termination or distribution.)

THOSE OFFICERS (OR BENEFICIARIES) RECEIVING A BENEFIT OR CURRENTLY VESTED UNDER
THE 1976 VERSION OF THE PLAN ARE:

         Willard Allen (retired)                 Bruce R. Kennedy (retired)
         Ross W. Anderson (retired)              Keith Kennedy (retired)
         O. F. Benecke (beneficiary: Clara)      James Laferriere (receiving
                                                 benefit)
         Henry Bierds (deceased/no beneficiary)  Barry Maulding (vested)
         Levi Blatter (deceased/no beneficiary)  Mary McNealy (receiving
                                                 benefit)
         Elsie Brislawn (receiving benefit)      L. H. Peterson (retired)
         Ron Cosgrave (retired)                  Gus Robinson (retired)
         Bob Ellis (beneficiary: Margaret)       J. Simmons (deceased/no
                                                 beneficiary)
         Robert E. Gray (retired)                Merle K. Smith (beneficiary:
                                                 Bertha)
         James A. Johnson (retired)              Ed Weber (deceased/no
                                                 beneficiary)

THE OFFICER PARTIALLY UNDER THE 1977 VERSION OF THE PLAN IS:

         Raymond J. Vecci (will retire 1/1/96)

<PAGE>

Supplementary Retirement Plan for Elected Officers
Page 3

THOSE OFFICERS RECEIVING A BENEFIT, VESTED OR ELIGIBLE TO VEST UNDER THE 1981
VERSION OF THE PLAN ARE:

         George D. Bagley                  Charles Loughran (age vested @ 40%)
         John R. Fowler                    Timothy R. Metcalf
         Patrick L. Glenn (retired)        Frederick P. Schubel (retired)
         Steven G. Hamilton                Kenneth F. Skidds (retired)
         Kathleen H. Iskra                 Douglas L. Versteeg (retired)
         Harry G. Lehr                     J. Ray Vingo (retired)
         John F. Kelly (100% vested)       Edward R. White
         Marjorie E. Laws (100% vested)

<PAGE>

                                                                       EXHIBIT A

               Supplementary Retirement Plan for Elected Officers
               of Alaska Air Group, Inc. and Alaska Airlines, Inc.
                                  April 7, 1987

         The Supplementary Retirement Plan for Elected Officers was designed to
attract and retain highly qualified individuals to serve as officers of the
Company by providing a generous retirement benefit at the end of an officer's
years of service.

         As merger and consolidation activities within the airline industry have
heightened, the Board of Directors has become increasingly concerned that the
intended benefits of a number of officers would be unprotected should their
positions be affected by a takeover or "Change in Control" of the Company. Thus,
the Board of Directors adopted amendments to the Plan that add protection for
Participants in the event of a Change in Control.

         Because individual officers participate in differing versions of the
Plan, depending upon when they first became eligible, the separate Plan
documents for each version must be redone to reflect the recent amendments. We
are in the process of producing restated Plan documents and will provide updated
copies to each officer as soon as they are completed. In the meantime, however,
these changes are now legally effective.

         The amendments were highlighted in the current Proxy Statement and, for
your information, are outlined in detail below. With these amendments, the Plan:

<PAGE>

Officers Supplementary Retirement Plan                                    Page 2
April 7, 1987

-        Provides that an officer will automatically become vested at the rate
         of 10% per year of service as an elected officer in the event of a
         Change in Control. Without a Change in Control, Participants continue
         to vest only as they accumulate the years of continuous service
         dictated by the applicable Plan version, or reach age 50, after which
         they vest at 10% per year.

-        Allows a Participant, regardless of age, to select a lump-sum payment
         of Plan benefits at any time after a Change in Control. This lump-sum
         will be available 30 days after a Participant selects that method of
         distribution, even if the Participant's employment with the Company
         continues.

         The lump-sum distribution will be actuarially equivalent to the amount
         which would otherwise be paid over a Participant's lifetime. By
         allowing a lump-sum payment even prior to termination, the Participant
         is protected from the actions of a subsequent management that might be
         less inclined to honor the terms of the Plan.

-        Previously, the Plan provided that benefits would be forfeited for any
         kind of "misconduct," ranging from criminal acts to less serious deeds.
         The amended Plan provides that, after a Change in Control, a
         Participant would not forfeit benefits if terminated for "misconduct"
         other than dishonesty or criminal acts. In some hostile takeover
         situations such provisions have been used by

<PAGE>

Officers Supplementary Retirement Plan                                    Page 3
April 7, 1987

         acquirors to delay commencement of benefits and, in some cases, to deny
         benefits where officers have simply spoken out against the actions of
         the new management.

-        Provides that a Participant does not lose benefits for competing with
         the Company after a Change in Control. Without this change, an officer
         forced to resign as a result of a Change in Control would lose benefits
         under the Plan if he or she subsequently were employed by a competing
         airline. Benefits are still subject to forfeiture for competitive
         activities prior to a Change in Control.

-        Defines a Change in Control as including: consolidation or merger of
         the Company; sale or lease of substantially all assets; liquidation of
         the Company; a change in a majority of Board members; or the
         acquisition of 20% or more of the Company's common stock by any entity.

         The definition does not differentiate between "friendly" or "hostile"
         Changes in Control, since it is impossible to draw any meaningful
         distinction.

         Effective October 1, 1986, Alaska Air Group also adopted the Plan,
making it applicable to elected officers of the holding company as well as
elected officers of Alaska Airlines.

<PAGE>

Officers Supplementary Retirement Plan                                    Page 4
April 7, 1987

         To the extent that these changes provide benefits which the Participant
would not otherwise have received, those benefits could be subject to IRS
"golden parachute" rules. Participants should seek the advice of their
individual tax advisors.
<PAGE>

                                 FIRST AMENDMENT
                                     TO THE
                ALASKA AIRLINES, INC. AND ALASKA AIR GROUP, INC.
               SUPPLEMENTARY RETIREMENT PLAN FOR ELECTED OFFICERS
                   (WHO ARE FIRST ELECTED AFTER JUNE 1, 1981)

         The Alaska Airlines, Inc. and Alaska Air Group, Inc. Supplementary
Retirement Plan For Elected Officers (who are first elected after June 1, 1981)
as amended and restated effective November 7, 1994 (the "1981 Plan"), is amended
as follows, effective August 28, 2002 unless otherwise provided below:

I.       Section 1.8 Actuarial Equivalent is amended by inserting the words ",
         except as provided in Section 3.1(g)." at the end of the sentence.

II.      Section 3.1(a) General is amended by deleting the first two sentences
         in their entirety and replacing them with the following:

                  Unless a Participant elects a lump-sum benefit under
                  Section 3.1(f) after a Change in Control or Section
                  3.1(g), benefits under the Plan shall be payable in
                  the form of monthly payments. The form in which
                  benefits are paid will depend upon the Participant's
                  elections (if any) under Section 3.1(d), 3.1(g) and
                  3.1(f), if applicable.

III.     The first paragraph of Section 3.1(d) Forms of Benefit Payment (flush
         language) is deleted in its entirety and replaced with the following:

         (1)      Election of Payment Form.

                  (i)      Time of Election.

                           At any time prior to the date a Participant's benefit
                           payments commence, a Participant may elect the normal
                           option under Section 3.1(d)(2), the joint and
                           survivor option under Section 3.1(d)(3), or the
                           10-year certain and life option under Section
                           3.1(d)(4), or change a previous election of one of
                           these options to another one of these options. Also,
                           a Participant may elect a lump-sum distribution under
                           Section 3.1(f) after a Change in Control, or a
                           post-retirement, lump-sum benefit under Section 3.1
                           (g) after the Participant has already begun receiving
                           monthly benefit payments under Section 3.1(d).

                                       1
<PAGE>

                  (ii)     Election Procedures.

                           Once benefit payments in a form under Section 3.1(d)
                           have commenced, the payment form cannot be changed by
                           the Participant or beneficiary, except as provided in
                           Sections 3.1(f) and 3.1(g). All payment-form
                           elections must be made in writing and in the form
                           prescribed by the Administrative Committee.

                  (iii)    Automatic Payment Form.

                           If a Participant fails to elect a payment option
                           prior to the date the Participant's benefit payments
                           commence and the Participant is married on that date,
                           the Participant's benefits will be paid in the form
                           of a joint and survivor option with monthly payments
                           to the Participant's spouse equal to 100% of the
                           Participant's monthly payments. If a Participant is
                           not married on the date benefit payments commence and
                           the Participant fails to elect a payment option prior
                           to that date, the Participant's benefits will be paid
                           in the form of a 10-year certain and life option.

IV.      Sections 3.1(d)(1) Normal Option, 3.1(d)(2) Joint and Survivor Option,
         and 3.1(d)(3) 10-Year Certain and Life Option are redesignated Sections
         3.1(d)(2),(3), and (4) respectively, and all references in the Plan to
         those sections are correspondingly revised.

V.       Section 3.1 Retirement Benefits is amended by inserting the following
         new subsection (g), immediately after Section 3.1(f):

         (g)      Post-Retirement Lump-Sum Benefit.

                  At any time after monthly benefit payments under Section
                  3.1(d) have begun, a Participant may elect to receive a
                  post-retirement, lump-sum benefit.

                  (1)      Definition.

                           A post-retirement, lump-sum benefit is one (1)
                           payment that is Actuarially Equivalent to the
                           remaining monthly benefit payments that otherwise
                           would be payable, reduced by ten percent (10%). Once
                           a lump sum is paid, the Participant, the
                           Participant's spouse and the Participant's
                           beneficiary have no further benefits or rights under
                           the Plan.

                  (2)      Actuarial Equivalent.

                           The amount of a post-retirement, lump-sum is
                           determined using standard actuarial assumptions to
                           estimate future cost of living

                                       2
<PAGE>

                           adjustments under Section 3.1(e) and any cost of
                           living adjustments under Section 3.4 that would have
                           been made to the Participant's monthly benefit, and
                           to reduce the adjusted monthly payments to present
                           value. Also, the lump-sum amount that is Actuarially
                           Equivalent to the remaining monthly benefits
                           otherwise payable is determined as follows:

                           (i)      for a Participant whose benefit is reduced
                                    by the Participant's social security
                                    benefit, the Actuarial Equivalent of the
                                    remaining benefits otherwise payable is
                                    determined assuming that the Participant's
                                    social security benefit does not increase
                                    after the first day of the most recent month
                                    for which a payment was made.

                           (ii)     for a Participant whose benefit is not
                                    reduced by a social security benefit, the
                                    Actuarial Equivalent of the remaining
                                    benefits otherwise payable is determined
                                    assuming that the Participant begins
                                    receiving monthly social security benefits
                                    on the later of the first day of the most
                                    recent month for which a payment was made,
                                    or the earliest date on which the
                                    Participant is eligible for a benefit from
                                    Social Security. The amount of the monthly
                                    social security benefit assumed to be
                                    received by the Participant is determined in
                                    accordance with the Social Security Act in
                                    effect as of the first day of the most
                                    recent month for which a payment was made
                                    and is based on the following assumptions:

                                    (A)      assuming the Participant's Wages
                                             (as defined in Internal Revenue
                                             Code Section 3121) exceed the
                                             taxable wage base provided under
                                             Section 230 of the Social Security
                                             Act for each calendar year
                                             beginning with the calendar year in
                                             which the Participant attained age
                                             twenty one (21) and ending with the
                                             last calendar year ending before
                                             the first day of the most recent
                                             month for which a payment was made;

                                    (B)      assuming the Participant has no
                                             Wages during or after the calendar
                                             year in which occurs the first day
                                             of the most recent month for which
                                             a payment was made; and

                                    (C)      assuming the social security
                                             benefits do not increase after the
                                             assumed social security benefit
                                             beginning date.

                                       3
<PAGE>

                  (3)      Election Procedures.

                           A post-retirement, lump sum can be elected only by a
                           Participant (not by a spouse or beneficiary). A
                           Participant's lump-sum election must be made in the
                           form and manner prescribed by the Administrative
                           Committee, and the election is subject to approval of
                           the Administrative Committee; Once a Participant
                           elects and receives a lump sum, the election cannot
                           be changed.

                  (4)      Right to Amend or Eliminate.

                           Notwithstanding Section 5.1, Alaska Air Group, Inc.
                           may amend or delete this Section 3.1(g) at any time,
                           if the Board of Directors of Alaska Air Group, Inc.
                           determines in its sole discretion that such amendment
                           is required by law or regulations or is necessary or
                           advisable to avoid unfavorable tax consequences. Any
                           amendment of this Section 3.1(g) shall be adopted by
                           the Board of Directors, made in writing, and executed
                           on behalf of Alaska Air Group, Inc. by its authorized
                           officer.

VI.      Section 6.1 Participant's Rights; Acquittance is amended by deleting
         the last sentence in its entirety.

VII.     The following new Section 6.8 Unfunded ERISA Plan is inserted
         immediately after Section 6.7 Use of Terms:

         6.8      Unfunded ERISA Plan.

                  This Plan shall constitute a plan which is unfunded and which
                  is maintained primarily for the purpose of providing deferred
                  compensation benefits for a select group of management or
                  highly compensated employees within the meaning of Sections
                  201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement
                  Income Security Act of 1974, as amended (ERISA). The
                  obligation to pay benefits under the Plan shall at all times
                  be an unfunded, unsecured obligation of the Employers. No
                  Participant or Beneficiary shall have any rights with respect
                  to any benefits except as a general, unsecured creditor of the
                  Employers.

VII.     Effective January 1, 2002, the following new Section 7 is inserted
         immediately after Section 6.8 Unfunded ERISA Plan:

                                       4
<PAGE>

                                    Section 7
                           Claims and Review Procedure

         7.1      Application for Benefits.

                  Any person or the person's authorized representative (the
                  "Claimant") may apply for, claim, or request information
                  about, Plan benefits by submitting a signed, written
                  application to the Administrative Committee.

         7.2      Denial of Application.

                  If the Administrative Committee denies an application in whole
                  or in part, the Administrative Committee shall notify the
                  Claimant in writing or electronically of the denial and the
                  Claimant's right to request a review of the denial. The notice
                  of denial shall set forth, in a manner calculated to be
                  understood by the Claimant:

                  (a)      specific reasons for the denial,

                  (b)      specific references to the applicable Plan provisions
                           on which the denial was based,

                  (c)      a description of any information or material
                           necessary to perfect the application and an
                           explanation of why such material is necessary,

                  (d)      an explanation of the Plan's review procedure and the
                           time limits for review, and

                  (e)      an statement of the Claimant's right to bring a civil
                           action under ERISA following an adverse determination
                           on review.

                  The denial notice will be given to the Claimant within ninety
                  (90) days after the Administrative Committee receives the
                  application unless special circumstances require an extension
                  of time for processing the application. In no event will an
                  extension exceed a period of ninety (90) days after the end of
                  the initial 90-day period. If an extension is required,
                  written notice of the extension shall be furnished to the
                  Claimant before the end of the initial 90-day period. The
                  extension notice will indicate the special circumstances
                  requiring an extension of time and the date by which the
                  Administrative Committee expects to render a decision. If a
                  written denial notice is not given to the Claimant within the
                  period prescribed by this Section 7.2, the application is
                  deemed to have been denied for purposes of section 7.4.

         7.3      Review Panel.

                                       5
<PAGE>

                  From time to time, the Company shall appoint a Review Panel.
                  The "Review Panel" will consist of three (3) or more
                  individuals who may be (but need not be) Employees of the
                  Company and shall be the named fiduciary with authority to act
                  on any appeal of a denied application. Members of the
                  Administrative Committee may be appointed to the Review Panel.
                  The Review Panel has discretionary authority to decide all
                  issues of fact or law. Any decision by the Review Panel that
                  is not established to be an abuse of discretion must be
                  upheld.

         7.4      Request for Review.

                  A Claimant whose application is, denied, in whole or in part,
                  may appeal the denial by submitting to the Review Panel a
                  written request for a review of the denial. The request for
                  review must be submitted to the Review Panel within sixty (60)
                  days after the Claimant receives written notice of the denial.
                  Upon request and free of charge, the Claimant shall be
                  permitted reasonable access to, and copies of, relevant
                  information and documents. The Review Panel shall give the
                  Claimant an opportunity to submit written information,
                  documents, records and comments in support of the appeal. In
                  making its decision, the Review Panel will take the Claimant's
                  submissions into account, regardless of whether this
                  information was available in considering the initial request.

         7.5      Decision on Review.

                  The Review Panel will deliver to the Claimant an electronic or
                  written decision within a reasonable time, but no later than
                  sixty (60) days after receipt of the Claimant's request for
                  review. In special circumstances, the period may be extended
                  up to an additional sixty (60) days. If an extension is
                  required, written notice of the extension will be furnished to
                  the Claimant before the end of the initial 60-day period. The
                  extension notice will indicate the special circumstances
                  requiring an extension of time and the date by which the
                  Review Panel expects to render a decision. If a written
                  decision is not given to the Claimant within the period
                  prescribed by this Section 7.5, the decision is deemed to be
                  adverse. If the decision is adverse, in whole or in part, the
                  decision shall set forth in a manner calculated to be
                  understood by the Claimant:

                  (a)      specific reasons for the adverse decision with
                           specific references to the applicable Plan provisions
                           on which the decision was based,

                  (b)      a statement that, upon request and free of charge,
                           the Claimant is entitled reasonable access to, and
                           copies of, relevant information and documents,

                                       6
<PAGE>

                  (c)      a description of any voluntary appeals procedures and
                           a statement of the Claimant's right to obtain
                           information about these procedures, and

                  (d)      a statement of the Claimant's right to bring a civil
                           action under ERISA.

         7.6      Rules and Procedures.

                  The Administrative Committee and the Review Panel shall
                  establish additional administrative processes in accordance
                  with this Section 7 and ERISA as they deem necessary or
                  appropriate, including safeguards to insure and verify that
                  decisions under this Section 7 are made in accordance with the
                  Plan document and are applied consistently to
                  similarly-situated Participants and beneficiaries. Additional
                  administrative processes may include, but are not limited to,
                  protocols, guidelines, periodic reviews and audits.

         7.7      Exhaustion of Administrative Remedies.

                  No legal or equitable action for benefits under the Plan shall
                  be brought unless and until the Claimant has satisfied the
                  procedures in this Section 7.

         IN WITNESS WHEREOF, the Compensation Committee of the Board of
Directors of Alaska Air Group, Inc. has caused this First Amendment of the 1981
Plan to be signed by its duly-authorized Chair, as of August 28, 2002.

Witness:                                           COMPENSATION COMMITTEE OF THE
                                                   BOARD OF DIRECTORS OF
                                                   ALASKA AIR GROUP, INC.

/s/ Keith Loveless                                 /s/ R. Marc Langland
----------------------------------                 -----------------------------
Keith Loveless                                     R. Marc Langland, Chair
Vice President of Legal &
Corporate Affairs, General Counsel

                                       7