----

----

| x | ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 [NO FEE      REQUIRED] |
|---|-----------------------------------------------------------------------------------------------------------------------|

|   | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 [NO FEE      REQUIRED] |
|----------------|---------------------------------------------------------------------------------------------------------------------------|

|                                      |                                                                                                            |
|-------------------------------------------|-----------------------------------------------------------------------------------------------------------------|
| 92-0009235                                | 19300 International Boulevard, Seattle, Washington 98188Telephone:      (206) 392-5040 |
| (I.R.S.      Employer Identification No.) |

|   |   |
|--------|--------|

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TABL

|                     |                                                                                                                              |                                                     |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|
| PART I                   |        4                                                                                       |
| ITEM 1.             | OUR BUSINESS                                                                                                                      |        4              |
|                     | WHERE YOU CAN FIND MORE INFORMATION                                                                                          |        4              |
|                     | OUR OPERATIONS                                                                                                                    |        4              |
| ITEM 1A.            | RISK FACTORS                                                                                                                      |        5              |
| ITEM 1B.            | UNRESOLVED STAFF COMMENTS                                                                                                         |        9              |
|   ITEM 2. | PROPERTIES                                                                                                                        |        9              |
|                     | AIRCRAFT                                                                                                                          |        9              |
|                     | GROUND FACILITIES AND SERVICES                                                                                                    |        10             |
|   ITEM 3. | LEGAL PROCEEDINGS                                                                                                                 |        10             |
| PART II                  |        10                                                                                      |
|   ITEM 5. | MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED      STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY      SECURITIES |        10             |
|   ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION      AND RESULTS OF OPERATIONS                                  |        11             |
|                     | OVERVIEW                                                                                                                          |        11             |
|                     | YEAR IN REVIEW                                                                                                                    |        11             |
|                     | RESULTS OF OPERATIONS                                                                                                             |        14             |
|                     | 2009 COMPARED WITH 2008                                                                                                           |        14             |
|                     | Nonoperating Income (Expense)                                                                                                     |          21 |
|                     | Income Tax Expense (Benefit)                                                                                                      |          21 |
| ITEM 7A.            | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET      RISK                                                                    |          21 |
|                     | MARKET RISK – AIRCRAFT FUEL                                                                                                 |          21 |
|                     | FINANCIAL MARKET RISK                                                                                                             |          22 |
|   ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY      DATA                                                                                  |          22 |
|                     | SELECTED QUARTERLY FINANCIAL    INFORMATION                                                                                       |          22 |
|                     | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING      FIRM                                                                      |          23 |
|                     | BALANCE SHEETS                                                                                                                    |          24 |
|                     | STATEMENTS OF OPERATIONS                                                                                                     |          26 |
|                     | STATEMENTS OF SHAREHOLDER’S EQUITY                                                                                          |          27 |
|                     | STATEMENTS OF CASH FLOWS                                                                                                     |          29 |
|                     | NOTES TO FINANCIAL STATEMENTS                                                                                                     |          30 |
|   ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON      ACCOUNTING AND FINANCIAL DISCLOSURE                                         |          53 |
| ITEM 9A.            | CONTROLS AND PROCEDURES                                                                                                           |          53 |
|                     | EVALUATION OF DISCLOSURE CONTROLS AND      PROCEDURES                                                                             |          53 |
|                     | CHANGES IN INTERNAL CONTROL OVER FINANCIAL      REPORTING                                                                         |          53 |
|                     | MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL      REPORTING                                                       |          53 |
| ITEM 9B.            | OTHER INFORMATION                                                                                                                 |          53 |
| PART IV                  |          53                                                                          |
| ITEM 15.            | EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                                           |          53 |
| SIGNATURES               |          54                                                                          |

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Table of Contents

PART I

| ITEM 1.   OUR  BUSINESS |
|----------------------------------------|

WHER

| ALASKA      RANKED “HIGHEST IN CUSTOMER SATISFACTION AMONG TRADITIONAL NETWORK      CARRIERS” IN BOTH 2009      AND 2008 BY      J.D. POWER ANDASSOCIATES. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

OUR

|                                                        |   | 2009   |   |   | 2008   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| West      Coast                                             |   |   | 36     | %      |   |   | 41 | % |
| Within      Alaska and between Alaska and the U.S. mainland |   |   | 21     | %      |   |   | 23 | % |
| Transcon/midcon                                             |   |   | 23     | %      |   |   | 20 | % |
| Mexico                                                      |   |   | 9      | %      |   |   | 8 | % |
| Hawaii                                                      |   |   | 9      | %      |   |   | 5 | % |
| Canada                                                      |   |   | 2      | %      |   |   | 3 | % |
| Total                                                       |   |   | 100    | %      |   |   | 100 | % |

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| ITEM 1A.    RISK  FACTORS |
|-----------------------------------------------|

|   | • | limit      our ability to obtain additional financing to fund our future capital      expenditures, acquisitions, working capital or other    purposes; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | require      us to dedicate a material portion of our operating cash flow to fund lease      payments and interest payments on indebtedness, thereby reducing funds      available for other purposes; and |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   | • | limit      our ability to withstand competitive pressures and reduce our flexibility      in responding to changing business and economic conditions, including      reacting to the current economicslowdown. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | significantly      reduce passenger traffic and yields as a result of a potentially dramatic      drop in demand for air travel; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------|

|   | • | significantly      increase security and insurancecosts; |
|--------|---------|----------------------------------------------------------|

|   | • | make      war risk or other insurance unavailable or extremely      expensive; |
|--------|---------|--------------------------------------------------------------------------------|

|   | • | increase      fuel costs and the volatility of fuelprices; |
|--------|---------|------------------------------------------------------------|

|   | • | increase      costs from airport shutdowns, flight cancellations and delays resulting      from security breaches and perceived safety threats;  and |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | result      in a grounding of commercial air traffic by the  FAA. |
|--------|---------|-------------------------------------------------------------------|

|   | • | air      traffic congestion at airports or other air traffic control      problems; |
|--------|---------|-------------------------------------------------------------------------------------|

|   | • | adverse      weather conditions; |
|--------|---------|----------------------------------|

|   | • | increased      security measures or breaches insecurity; |
|--------|---------|----------------------------------------------------------|

|   | • | international      or domestic conflicts or terrorist activity;and |
|--------|---------|--------------------------------------------------------------------|

|   | • | other      changes in business conditions. |
|--------|---------|--------------------------------------------|

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Table of Contents

| ITEM 1B.     UNRESOLVED      STAFF COMMENTS |
|---------------------------------------------------------------------------|

|                                                                   |
|------------------------------------------------------------------------|
| ITEM 2.             PROPERTIES |

AIR

| Aircraft      Type        |      |   | PassengerCapacity |   |    | Owned  |   |   | Leased |   |   | Total  |    |   | AverageAge      inYears |   |
|---------------------------|-----------|--------|-------------------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|-------------------------|--------|
| Boeing:              |      |   |              |   |    |   |   |   |   |   |   |   |    |   |                    |   |   |   |   |   |   |
|         737-400 |      |   |              | 144    |    |   |   | 3      |   |   |   | 24     |    |   |                    | 27     |   |   |   | 14.1 |   |
|                      | 737-400C* |   |              |   | 72      |   |   |   | 5      |   |   |   | — |   |                    |   | 5 |   |   |   | 17.3 |   |
|                      | 737-400F* |   |              |   | — |   |   |   | 1      |   |   |   | — |   |                    |   | 1 |   |   |   | 10.8 |   |
|                      | 737-700   |   |              |   | 124     |   |   |   | 17     |   |   |   | 2       |   |                    |   | 19 |   |   |   | 9.1 |   |
|                      | 737-800   |   |              |   | 157     |   |   |   | 41     |   |   |   | 10      |   |                    |   | 51 |   |   |   | 2.3 |   |
|                      | 737-900   |   |              |   | 172     |   |   |   | 12     |   |   |   | — |   |                    |   | 12 |   |   |   | 7.4 |   |
| Total                     |      |   |              |   |    |   |   | 79     |   |   |   | 36     |    |   |                    | 115    |   |   |   | 7.5 |   |

| * | C=Combination      freighter/passenger; F=Freighter |
|---|-----------------------------------------------------|

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|   |      |   | 31-Mar-10 |   |   | 30-Jun-10 |   |   | 30-Sep-10 |   |   | 31-Dec-10 |   |
|--------|-----------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
|   | 737-400   |   |      |   | 24     |      |   |   | 24        |   |   |      | 24     |   |   |   | 23 |   |
|   | 737-400C* |   |      |   | 5      |      |   |   | 5         |   |   |      | 5      |   |   |   | 5 |   |
|   | 737-400F* |   |      |   | 1      |      |   |   | 1         |   |   |      | 1      |   |   |   | 1 |   |
|   | 737-700   |   |      |   | 19     |      |   |   | 19        |   |   |      | 18     |   |   |   | 17 |   |
|   | 737-800   |   |      |   | 51     |      |   |   | 55        |   |   |      | 55     |   |   |   | 55 |   |
|   | 737-900   |   |      |   | 12     |      |   |   | 12        |   |   |      | 12     |   |   |   | 12 |   |
| Totals |      |   |      | 112    |   |      |   | 116    |      |   |   | 115       |   |   |   | 113 |   |

| * | C=Combination      freighter/passenger; F=Freighter |
|---|-----------------------------------------------------|

GR

|                                                                               |
|------------------------------------------------------------------------------------|
| ITEM 3.        LEGAL      PROCEEDINGS |

PART II

|                                                                                                                                                             |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ITEM 5.    MARKET FOR THE REGISTRANT’S      COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY      SECURITIES |

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Table of Contents

| ITEM 7.     MANAGEMENT’S DISCUSSION      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF    OPERATIONS |
|------------------------------------------------------------------------------------------------------------------------------------------|

OV

|   | • | Year in      Review—highlights from 2009 outlining some of the major events that      happened during the year and how they affected our financial      performance. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Results of      Operations—an in-depth analysis of the results of our operations      for 2009 compared to 2008.  We believe this analysis will help      the reader better understand our statements of operations. Financial and      statistical data are also included here. This section includes      forward-looking statements regarding our view of  2010. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

YEA

|   | • | a      7.8% decline in mainline passenger revenue because of demand weakness      stemming from the economic recession;and |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------|

|   | • | a      one-time benefit of $42.3 million recorded in 2008 associated with a      change in our Mileage Plan terms. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------|

|   | • | our      new $15 first bag service charge, which went into effect on July 7,      2009.  In 2009, the fee generated $39.7 million of incremental      revenue. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | a      $39.7 million improvement in Mileage Plan commission revenues included in      “Other-net.” |
|--------|---------|----------------------------------------------------------------------------------------------------------------|

|   | • | We      improved our operational performance again in 2009 as measured by on-time      arrivals and completion rate as reported to the Department of      Transportation (DOT). We led the ten largest carriers in on-time      performance for eight months of theyear. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | For      the second year in a row, we ranked “Highest in Customer Satisfaction      among Traditional Network Carriers” in 2009 by J.D. Power and      Associates. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | We      won the 2008 “Program of the Year” Freddie award for our Mileage Plan      program in 2009.  This is the fifth time that we have won this      highest award and the second year in a row.  We also won top      honors for “Best Web Site,” “Best Elite-Level Program,” and “Best Member      Communications.” |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  • | During      the year, we reached agreements with several of our labor groups that      provide for improved productivity and a common gain-sharing      formula.  See “Update on Labor Negotiations” below for further      discussion. |
|--------|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | For      the year, our employees earned $61.6 million in incentive pay for meeting      certain operational and financial goals. We also contributed nearly $150      million to our defined benefit pensionplans. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Average      pilot wages increased approximately 14% effective April 1,      2009.  The contract also provides for step increases of 1.5% on      the first two anniversary dates of the contract and 1.8% on the third      anniversary. |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Participation      in PBP. |
|---------|----------------------------|

| • | The      defined-benefit pension plan for pilots is now closed to new      entrants.  Newly hired pilots will participate in a      defined-contribution plan that includes a company contribution equal to      13.5% of eligible wages.  Incumbents had the option of (1)      remaining in the defined-benefit pension plan, (2) moving to a new blended      option with lower service credit under the defined benefit plan and higher      401(k) contribution or (3) voluntarily freezing service credit in the      existing defined benefit plan in exchange for a higher 401(k)      contribution.    |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Upon      retirement, pilots are now allowed to receive a cash payment of an amount      equivalent to 25% of their accrued sick leave balance multiplied by their      hourly rate. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | The      new contract provides for better productivity and flexibility.  We      expect to realize savings from these productivity enhancements when we      resume capacity growth. |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| New      Non-Stop Route                      | Frequency                                                                     | Start      Date |
|----------------------------------------------|-------------------------------------------------------------------------------|-----------------|
| Between      Bellingham, Wash. and Las Vegas | 4 x      weekly                                                               | 6/25/2009       |
| Between      Portland, Ore. and Maui         |             Daily | 7/3/2009        |
| Between      Seattle and Austin, Tex.        |             Daily | 8/3/2009        |
| Between      San Jose and Austin             |             Daily | 9/2/2009        |
| Between      Seattle and Houston             |             Daily | 9/23/2009       |
| Between      Seattle and Atlanta             |             Daily | 10/23/2009      |
| Between      Oakland, Calif. and Maui        | 4 x      weekly                                                               | 11/9/2009       |
| Between      Oakland and Kona                | 3 x      weekly                                                               | 11/10/2009      |
| Service      between Portland and Chicago    |             Daily | 11/16/2009      |

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RE

200

|   | • | Both periods include adjustments to reflect timing      of gain and loss recognition resulting from mark-to-market fuel hedge      accounting.  For 2009, we recognized net mark-to-market gains of      $73.7 million, compared to net losses of $118.9 million in      2008. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 2009 included the new pilot contract transition      costs of $35.8 million. |
|--------|---------|------------------------------------------------------------------------------|

|   | • | 2008 included fleet transition costs of $47.5      million related to the transition out of the MD-80      fleet. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------|

|   | • | 2008 included realized losses on the early      termination of fuel-hedge contracts originally scheduled to settle in 2009      and 2010 of $41.5 million. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 2008 included a $42.3 million benefit related to a      change in the terms of our Mileage Plan  program. |
|--------|---------|-----------------------------------------------------------------------------------------------------------|

|   | • | 2008 included restructuring charges of $12.9      million related to the reduction in work  force. |
|--------|---------|----------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   | • | 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 anddecision-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 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. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                   |   | Years      Ended December 31 |   |
|--------------------------------------------------------|--------|------------------------------|--------|
| (in millions)                                          |   | 2009                         |   |   | 2008 |   |
| Income      before income taxes, excluding items below |   | $                            | 145.9  |   |   | $ | 25.2 |   |
| Change      in Mileage Plan terms                      |   |                         | --     |   |   |   | 42.3 |   |
| New      pilot contract transition costs               |   |                         | (35.8  | ) |   |   | -- |   |
| Restructuring      charges                             |   |                         | --     |   |   |   | (12.9 | ) |
| Fleet      transition costs – MD-80              |   |                         | --     |   |   |   | (47.5 | ) |
| Mark-to-market      fuel hedge adjustments             |   |                         | 73.7   |   |   |   | (118.9 | ) |
| Realized      losses on hedge portfolio restructuring  |   |                         | --     |   |   |   | (41.5 | ) |
|                                                   |   |                         |   |   |   |   |   |   |
| Income      (loss) before income taxes as reported     |   | $                            | 183.8  |   |   | $ | (153.3 | ) |

----

Table of Contents

| FINANCIAL AND STATISTICAL DATA                                                                                                              |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                        |   | Three Months Ended December    31 |   |   | Year Ended December 31 |   |
| Financial      Data (in      millions):                                                                                                     |   | 2009 |   |   | 2008 |   |   | % Change |   |   | 2009 |   |   | 2008 |   |   | % Change |   |   | 2007 |   |   | % Change |   |
| Operating      Revenues:                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Passenger                                                                                                                                   |   | $ | 594.5 |   |   | $ | 602.5 |   |   |   | (1.3 | ) |   | $ | 2,438.8 |   |   | $ | 2,643.7 |   |   |   | (7.8 | ) |   | $ | 2,547.2 |   |   |   | 3.8 |   |
| Freight      and mail                                                                                                                       |   |   | 22.5 |   |   |   | 22.2 |   |   |   | 1.4 |   |   |   | 91.5 |   |   |   | 99.3 |   |   |   | (7.9 | ) |   |   | 94.2 |   |   |   | 5.4 |   |
| Other      - net                                                                                                                            |   |   | 50.8 |   |   |   | 34.0 |   |   |   | 49.4 |   |   |   | 187.3 |   |   |   | 135.2 |   |   |   | 38.5 |   |   |   | 147.1 |   |   |   | (8.1 | ) |
| Change      in Mileage Plan terms                                                                                                           |   |   | - |   |   |   | - |   |   | NM |   |   |   | - |   |   |   | 42.3 |   |   | NM |   |   |   | - |   |   | NM |   |
| Total      mainline operating revenues                                                                                                      |   |   | 667.8 |   |   |   | 658.7 |   |   |   | 1.4 |   |   |   | 2,717.6 |   |   |   | 2,920.5 |   |   |   | (6.9 | ) |   |   | 2,788.5 |   |   |   | 4.7 |   |
| Passenger      - purchased capacity                                                                                                         |   |   | 77.0 |   |   |   | 66.9 |   |   |   | 15.1 |   |   |   | 288.4 |   |   |   | 300.8 |   |   |   | (4.1 | ) |   |   | 281.4 |   |   |   | 6.9 |   |
| Total      Operating Revenues                                                                                                               |   |   | 744.8 |   |   |   | 725.6 |   |   |   | 2.6 |   |   |   | 3,006.0 |   |   |   | 3,221.3 |   |   |   | (6.7 | ) |   |   | 3,069.9 |   |   |   | 4.9 |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Expenses:                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Wages      and benefits                                                                                                                     |   |   | 197.7 |   |   |   | 183.8 |   |   |   | 7.6 |   |   |   | 792.6 |   |   |   | 742.7 |   |   |   | 6.7 |   |   |   | 753.9 |   |   |   | (1.5 | ) |
| Variable      incentive pay                                                                                                                 |   |   | 17.6 |   |   |   | 5.0 |   |   |   | 252.0 |   |   |   | 61.6 |   |   |   | 15.8 |   |   |   | 289.9 |   |   |   | 13.5 |   |   |   | 17.0 |   |
| Aircraft      fuel, including hedging gains and losses                                                                                      |   |   | 143.1 |   |   |   | 298.4 |   |   |   | (52.0 | ) |   |   | 549.0 |   |   |   | 1,162.4 |   |   |   | (52.8 | ) |   |   | 737.5 |   |   |   | 57.6 |   |
| Aircraft      maintenance                                                                                                                   |   |   | 40.5 |   |   |   | 38.5 |   |   |   | 5.2 |   |   |   | 169.9 |   |   |   | 150.6 |   |   |   | 12.8 |   |   |   | 149.8 |   |   |   | 0.5 |   |
| Aircraft      rent                                                                                                                          |   |   | 27.2 |   |   |   | 23.8 |   |   |   | 14.3 |   |   |   | 109.0 |   |   |   | 106.2 |   |   |   | 2.6 |   |   |   | 112.8 |   |   |   | (5.9 | ) |
| Landing      fees and other rentals                                                                                                         |   |   | 42.4 |   |   |   | 40.8 |   |   |   | 3.9 |   |   |   | 166.8 |   |   |   | 167.7 |   |   |   | (0.5 | ) |   |   | 170.1 |   |   |   | (1.4 | ) |
| Contracted      services                                                                                                                    |   |   | 30.3 |   |   |   | 29.7 |   |   |   | 2.0 |   |   |   | 118.9 |   |   |   | 130.2 |   |   |   | (8.7 | ) |   |   | 124.1 |   |   |   | 4.9 |   |
| Selling      expenses                                                                                                                       |   |   | 27.9 |   |   |   | 20.4 |   |   |   | 36.8 |   |   |   | 104.7 |   |   |   | 116.0 |   |   |   | (9.7 | ) |   |   | 129.3 |   |   |   | (10.3 | ) |
| Depreciation      and amortization                                                                                                          |   |   | 45.9 |   |   |   | 42.7 |   |   |   | 7.5 |   |   |   | 178.5 |   |   |   | 165.9 |   |   |   | 7.6 |   |   |   | 142.3 |   |   |   | 16.6 |   |
| Food      and beverage service                                                                                                              |   |   | 12.8 |   |   |   | 11.2 |   |   |   | 14.3 |   |   |   | 47.7 |   |   |   | 48.3 |   |   |   | (1.2 | ) |   |   | 46.9 |   |   |   | 3.0 |   |
| Other                                                                                                                                       |   |   | 41.9 |   |   |   | 40.1 |   |   |   | 4.5 |   |   |   | 161.2 |   |   |   | 170.3 |   |   |   | (5.3 | ) |   |   | 173.1 |   |   |   | (1.6 | ) |
| New      pilot contract transition costs                                                                                                    |   |   | - |   |   |   | - |   |   | NM |   |   |   | 35.8 |   |   |   | - |   |   | NM |   |   |   | - |   |   | NM |   |
| Restructuring      charges                                                                                                                  |   |   | - |   |   |   | 9.2 |   |   | NM |   |   |   | - |   |   |   | 12.9 |   |   | NM |   |   |   | - |   |   | NM |   |
| Fleet      transition costs - MD-80                                                                                                         |   |   | - |   |   |   | - |   |   | NM |   |   |   | - |   |   |   | 47.5 |   |   | NM |   |   |   | - |   |   | NM |   |
| Total      mainline operating expenses                                                                                                      |   |   | 627.3 |   |   |   | 743.6 |   |   |   | (15.6 | ) |   |   | 2,495.7 |   |   |   | 3,036.5 |   |   |   | (17.8 | ) |   |   | 2,553.3 |   |   |   | 18.9 |   |
| Purchased      capacity costs                                                                                                               |   |   | 75.2 |   |   |   | 66.9 |   |   |   | 12.4 |   |   |   | 281.5 |   |   |   | 313.7 |   |   |   | (10.3 | ) |   |   | 302.8 |   |   |   | 3.6 |   |
| Total      Operating Expenses                                                                                                               |   |   | 702.5 |   |   |   | 810.5 |   |   |   | (13.3 | ) |   |   | 2,777.2 |   |   |   | 3,350.2 |   |   |   | (17.1 | ) |   |   | 2,856.1 |   |   |   | 17.3 |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Income (Loss)                                                                                                                |   |   | 42.3 |   |   |   | (84.9 | ) |   | NM |   |   |   | 228.8 |   |   |   | (128.9 | ) |   | NM |   |   |   | 213.8 |   |   | NM |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                                                                                                                        |   |   | 9.4 |   |   |   | 13.1 |   |   |   |   |   |   |   | 38.6 |   |   |   | 51.3 |   |   |   |   |   |   |   | 64.8 |   |   |   |   |   |
| Interest      expense                                                                                                                       |   |   | (20.6 | ) |   |   | (25.0 | ) |   |   |   |   |   |   | (88.1 | ) |   |   | (92.5 | ) |   |   |   |   |   |   | (86.2 | ) |   |   |   |   |
| Interest      capitalized                                                                                                                   |   |   | 1.6 |   |   |   | 4.1 |   |   |   |   |   |   |   | 7.3 |   |   |   | 20.2 |   |   |   |   |   |   |   | 25.7 |   |   |   |   |   |
| Other      - net                                                                                                                            |   |   | 2.5 |   |   |   | (0.7 | ) |   |   |   |   |   |   | (2.8 | ) |   |   | (3.4 | ) |   |   |   |   |   |   | (3.1 | ) |   |   |   |   |
|                                                                                                                                        |   |   | (7.1 | ) |   |   | (8.5 | ) |   |   |   |   |   |   | (45.0 | ) |   |   | (24.4 | ) |   |   |   |   |   |   | 1.2 |   |   |   |   |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (Loss) Before Income Tax                                                                                                        |   | $ | 35.2 |   |   | $ | (93.4 | ) |   | NM |   |   | $ | 183.8 |   |   | $ | (153.3 | ) |   | NM |   |   | $ | 215.0 |   |   | NM |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mainline      Operating Statistics:                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue      passengers (000)                                                                                                               |   |   | 3,765 |   |   |   | 3,772 |   |   |   | (0.2 | ) |   |   | 15,561 |   |   |   | 16,809 |   |   |   | (7.4 | ) |   |   | 17,558 |   |   |   | (4.3 | ) |
| RPMs      (000,000) "traffic"                                                                                                               |   |   | 4,550 |   |   |   | 4,302 |   |   |   | 5.8 |   |   |   | 18,362 |   |   |   | 18,712 |   |   |   | (1.9 | ) |   |   | 18,451 |   |   |   | 1.4 |   |
| ASMs      (000,000) "capacity"                                                                                                              |   |   | 5,675 |   |   |   | 5,590 |   |   |   | 1.5 |   |   |   | 23,144 |   |   |   | 24,218 |   |   |   | (4.4 | ) |   |   | 24,208 |   |   |   | 0.0 |   |
| Passenger      load factor                                                                                                                  |   |   | 80.2 | % |   |   | 77.0 | % |   | 3.2 | pts  |   |   | 79.3 | % |   |   | 77.3 | % |   | 2.0 | pts  |   |   | 76.2 | % |   | 1.1 | pts  |
| Yield      per passenger mile                                                                                                               |   |   | 13.07 | ¢ |   |   | 14.01 | ¢ |   |   | (6.7 | ) |   |   | 13.28 | ¢ |   |   | 14.13 | ¢ |   |   | (6.0 | ) |   |   | 13.81 | ¢ |   |   | 2.3 |   |
| Operating      revenues per ASM "RASM"                                                                                                      |   |   | 11.77 | ¢ |   |   | 11.78 | ¢ |   |   | (0.1 | ) |   |   | 11.74 | ¢ |   |   | 12.06 | ¢ |   |   | (2.7 | ) |   |   | 11.52 | ¢ |   |   | 4.7 |   |
| Change      in Mileage Plan terms per ASM                                                                                                   |   |   | - |   |   |   | - |   |   | NM |   |   |   | - |   |   |   | 0.17 | ¢ |   | NM |   |   |   | - |   |   | NM |   |
| Passenger      revenue per ASM “PRASM”                                                                                          |   |   | 10.48 | ¢ |   |   | 10.78 | ¢ |   |   | (2.8 | ) |   |   | 10.54 | ¢ |   |   | 10.92 | ¢ |   |   | (3.5 | ) |   |   | 10.52 | ¢ |   |   | 3.7 |   |
| Operating      expenses per ASM                                                                                                             |   |   | 11.05 | ¢ |   |   | 13.30 | ¢ |   |   | (16.9 | ) |   |   | 10.78 | ¢ |   |   | 12.54 | ¢ |   |   | (14.0 | ) |   |   | 10.55 | ¢ |   |   | 18.9 |   |
| Operating      expenses per ASM, excluding fuel, new pilot contract transition costs,      restructuring charges and fleet transition costs |   |   | 8.53 | ¢ |   |   | 7.80 | ¢ |   |   | 9.4 |   |   |   | 8.26 | ¢ |   |   | 7.49 | ¢ |   |   | 10.2 |   |   |   | 7.50 | ¢ |   |   | (0.1 | ) |
| Aircraft      fuel cost per gallon                                                                                                          |   | $ | 1.91 |   |   | $ | 3.95 |   |   |   | (51.6 | ) |   | $ | 1.81 |   |   | $ | 3.48 |   |   |   | (48.0 | ) |   | $ | 2.08 |   |   |   | 67.3 |   |
| Economic      fuel cost per gallon                                                                                                          |   | $ | 2.26 |   |   | $ | 2.52 |   |   |   | (10.3 | ) |   | $ | 2.05 |   |   | $ | 3.00 |   |   |   | (31.7 | ) |   | $ | 2.20 |   |   |   | 36.4 |   |
| Fuel      gallons (000,000)                                                                                                                 |   |   | 75.0 |   |   |   | 75.5 |   |   |   | (0.7 | ) |   |   | 304.9 |   |   |   | 333.8 |   |   |   | (8.7 | ) |   |   | 354.3 |   |   |   | (5.8 | ) |
| Average      number of full-time equivalent employees                                                                                       |   |   | 8,701 |   |   |   | 9,156 |   |   |   | (5.0 | ) |   |   | 8,915 |   |   |   | 9,628 |   |   |   | (7.4 | ) |   |   | 9,679 |   |   |   | (0.5 | ) |
| Aircraft      utilization (blk hrs/day)                                                                                                     |   |   | 9.3 |   |   |   | 10.0 |   |   |   | (7.0 | ) |   |   | 9.8 |   |   |   | 10.6 |   |   |   | (7.5 | ) |   |   | 10.9 |   |   |   | (2.8 | ) |
| Average      aircraft stage length (miles)                                                                                                  |   |   | 1,058 |   |   |   | 995 |   |   |   | 6.3 |   |   |   | 1,034 |   |   |   | 979 |   |   |   | 5.6 |   |   |   | 926 |   |   |   | 5.7 |   |
| Operating      fleet at period-end                                                                                                          |   |   | 115 |   |   |   | 110 |   |   |   | 5      a/c |   |   |   | 115 |   |   |   | 110 |   |   |   | 5      a/c |   |   |   | 115 |   |   |   | (5 | )      a/c |
| Purchased      Capacity Operating Statistics:                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| RPMs      (000,000)                                                                                                                         |   |   | 276 |   |   |   | 227 |   |   |   | 21.6 |   |   |   | 1,053 |   |   |   | 1,100 |   |   |   | (4.3 | ) |   |   | 1,099 |   |   |   | 0.1 |   |
| ASMs      (000,000)                                                                                                                         |   |   | 373 |   |   |   | 316 |   |   |   | 18.0 |   |   |   | 1,431 |   |   |   | 1,469 |   |   |   | (2.6 | ) |   |   | 1,453 |   |   |   | 1.1 |   |
| Passenger      load factor                                                                                                                  |   |   | 74.0 | % |   |   | 71.8 | % |   | 2.2 | pts  |   |   | 73.6 | % |   |   | 74.9 | % |   | (1.3 | )pts  |   |   | 75.6 | % |   | (0.7 | )pts  |
| Yield      per passenger mile                                                                                                               |   |   | 27.90 | ¢ |   |   | 29.47 | ¢ |   |   | (5.3 | ) |   |   | 27.39 | ¢ |   |   | 27.35 | ¢ |   |   | 0.1 |   |   |   | 25.61 | ¢ |   |   | 6.8 |   |
| RASM                                                                                                                                        |   |   | 20.64 | ¢ |   |   | 21.17 | ¢ |   |   | (2.5 | ) |   |   | 20.15 | ¢ |   |   | 20.48 | ¢ |   |   | (1.6 | ) |   |   | 19.37 | ¢ |   |   | 5.7 |   |
| Operating      expenses per ASM                                                                                                             |   |   | 20.16 | ¢ |   |   | 21.17 | ¢ |   |   | (4.8 | ) |   |   | 19.67 | ¢ |   |   | 21.35 | ¢ |   |   | (7.9 | ) |   |   | 20.84 | ¢ |   |   | 2.4 |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NM      = Not Meaningful                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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|                                            |   | Years Ended December 31 |    |
|-------------------------------------------------|--------|----------------------------------------|---------|
| (in      millions)                              |   | 2009                                   |    |   | 2008 |   |   | %      Change |   |
| Passenger      revenue—mainline           |   | $                                      | 2,438.8 |   |   | $ | 2,643.7 |   |   |   | (7.8 | ) |
| Freight      and mail                           |   |                                   | 91.5    |   |   |   | 99.3 |   |   |   | (7.9 | ) |
| Other—net                                 |   |                                   | 187.3   |   |   |   | 135.2 |   |   |   | 38.5 |   |
| Change      in Mileage Plan terms               |   |                                   | ----    |   |   |   | 42.3 |   |   | NM |   |
|                                            |   |                                   |    |   |   |   |   |   |   |   |   |   |
| Total      mainline operating revenues          |   | $                                      | 2,717.6 |   |   | $ | 2,920.5 |   |   |   | (6.9 | ) |
|                                            |   |                                   |    |   |   |   |   |   |   |   |   |   |
| Passenger      revenue—purchased capacity |   |                                   | 288.4   |   |   |   | 300.8 |   |   |   | (4.1 | ) |
|                                            |   |                                   |    |   |   |   |   |   |   |   |   |   |
| Total      operating revenues                   |   | $                                      | 3,006.0 |   |   | $ | 3,221.3 |   |   |   | (6.7 | ) |

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|                             |   | Years Ended      December 31 |    |
|----------------------------------|--------|-----------------------------------|---------|
| (in      millions)               |   | 2009                              |    |   | 2008 |   |   | %      Change |   |
| Mainline      fuel expense       |   | $                                 | 549.0   |   |   | $ | 1,162.4 |   |   |   | (52.8 | ) |
| Mainline      non-fuel expenses  |   |                              | 1,946.7 |   |   |   | 1,874.1 |   |   |   | 3.9 |   |
|                             |   |                              |    |   |   |   |   |   |   |   |   |   |
| Mainline      operating expenses |   | $                                 | 2,495.7 |   |   | $ | 3,036.5 |   |   |   | (17.8 | ) |
| Purchased      capacity costs    |   |                              | 281.5   |   |   |   | 313.7 |   |   |   | (10.3 | ) |
|                             |   |                              |    |   |   |   |   |   |   |   |   |   |
| Total      Operating Expenses    |   | $                                 | 2,777.2 |   |   | $ | 3,350.2 |   |   |   | (17.1 | ) |

|                                                      |   | Years Ended      December 31 |   |
|-----------------------------------------------------------|--------|-----------------------------------|--------|
| (in      millions)                                        |   | 2009                              |   |   | 2008 |   |   | %      Change |   |
| Wages                                                     |   | $                                 | 540.4  |   |   | $ | 547.1 |   |   |   | (1.2 | ) |
| Pension      and defined-contribution retirement benefits |   |                              | 114.8  |   |   |   | 68.7 |   |   |   | 67.1 |   |
| Medical      benefits                                     |   |                              | 83.3   |   |   |   | 72.3 |   |   |   | 15.2 |   |
| Other      benefits and payroll taxes                     |   |                              | 54.1   |   |   |   | 54.6 |   |   |   | (0.9 | ) |
|                                                      |   |                              |   |   |   |   |   |   |   |   |   |   |
| Total      wages and benefits                             |   | $                                 | 792.6  |   |   | $ | 742.7 |   |   |   | 6.7 |   |

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|                                                                                              |   | Years Ended      December 31 |   |
|---------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
| (in millions, except      per-gallon amounts)                                                     |   | 2009                              |   |   | 2008 |   |   | %      Change |   |
| Fuel      gallons consumed                                                                        |   |                              | 304.9  |   |   |   | 333.8 |   |   |   | (8.7 | ) |
| Raw      price per gallon                                                                         |   | $                                 | 1.88   |   |   | $ | 3.31 |   |   |   | (43.2 | ) |
|                                                                                              |   |                              |   |   |   |   |   |   |   |   |   |   |
| Total      raw fuel expense                                                                       |   | $                                 | 572.3  |   |   | $ | 1,103.8 |   |   |   | (48.2 | ) |
|                                                                                              |   |                              |   |   |   |   |   |   |   |   |   |   |
| Net      impact on fuel expense from (gains) and losses arising from fuel-hedging      activities |   |                              | (23.3  | ) |   |   | 58.6 |   |   | NM |   |
|                                                                                              |   |                              |   |   |   |   |   |   |   |   |   |   |
| Aircraft      fuel expense                                                                        |   | $                                 | 549.0  |   |   | $ | 1,162.4 |   |   |   | (52.8 | ) |

| NM | =      Not meaningful |
|----|-----------------------|

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|                                                                                             |   | Years Ended      December 31 |   |
|--------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
| (in      millions, except per-gallon amounts)                                                    |   | 2009                              |   |   | 2008 |   |   | %      Change |   |
| Raw      fuel expense                                                                            |   | $                                 | 572.3  |   |   | $ | 1,103.8 |   |   |   | (48.2 | ) |
| Plus      or minus: net of cash received from settled hedges and premium expense      recognized |   |                              | 50.4   |   |   |   | (101.8 | ) |   | NM |   |
|                                                                                             |   |                              |   |   |   |   |   |   |   |   |   |   |
| Economic      fuel expense                                                                       |   | $                                 | 622.7  |   |   | $ | 1,002.0 |   |   |   | (37.9 | ) |
|                                                                                             |   |                              |   |   |   |   |   |   |   |   |   |   |
| Fuel      gallons consumed                                                                       |   |                              | 304.9  |   |   |   | 333.8 |   |   |   | (8.7 | ) |
|                                                                                             |   |                              |   |   |   |   |   |   |   |   |   |   |
| Economic      fuel cost per gallon                                                               |   | $                                 | 2.05   |   |   | $ | 3.00 |   |   |   | (31.7 | ) |

| NM | =      Not meaningful |
|----|-----------------------|

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|                                                  |   | Years Ended      December 31 |   |
|-------------------------------------------------------|--------|-----------------------------------|--------|
|                                                  |   | 2009                              |   |   | 2008 |   |   | %      Change |   |
| Total      mainline operating expenses per ASM (CASM) |   |                              | 10.78  | ¢ |   |   | 12.54 | ¢ |   |   | (14.0 | ) |
| Less      the following components:                   |   |                              |   |   |   |   |   |   |   |   |   |   |
| Aircraft      fuel costs per ASM                      |   |                              | 2.37   | ¢ |   |   | 4.80 | ¢ |   |   | (50.6 | ) |
| New      pilot contract transition costs per ASM      |   |                              | 0.15   | ¢ |   |   | --- |   |   | NM |   |
| Restructuring      costs per ASM                      |   |                              | ---    |   |   |   | 0.05 | ¢ |   | NM |   |
| Fleet      transition charges per ASM            |   |                              | ---    |   |   |   | 0.20 | ¢ |   | NM |   |
| CASM,      excluding fuel and noted items             |   |                              | 8.26   | ¢ |   |   | 7.49 | ¢ |   |   | 10.2 |   |

| NM | =      Not meaningful |
|----|-----------------------|

| • | 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 by management. |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Cost per ASM excluding fuel and certain special      items is one of the most important measures used by managements of both      Alaska and Horizon and by our 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 evaluatedseparately. |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | Cost per ASM excluding fuel (and other items as      specified in our plan documents) is an important metric for the PBP      incentive plan that covers the majority of our      employees. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 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. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Disclosure of the individual impact of certain      noted items provides investors the ability to measure and monitor      performance both with and without these special items. We believe that      disclosing the impact of certain items such as fleet transition costs, new      pilot contract transition costs, and restructuring charges is important      because it provides information on significant items that are not      necessarily indicative of future performance. Industry analysts and      investors consistently measure our performance without these items for      better comparability between periods and among other      airlines. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Although      we disclose our “mainline” passenger unit revenue for Alaska, we do not      (nor are we able to) evaluate mainline unit revenue 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 revenue 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. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

NO

INCO

|                                                                                          |
|-----------------------------------------------------------------------------------------------|
| ITEM 7A.    QUANTITATIVE AND      QUALITATIVE DISCLOSURE ABOUT MARKETRISK |

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Mark

Fina

| ITEM 8.    FINANCIAL STATEMENTS AND      SUPPLEMENTARY DATA |
|---------------------------------------------------------------------------------|

SE

| (in      millions, except per share) |   | 1st      Quarter |   |   | 2nd      Quarter |   |   | 3rd      Quarter |   |   | 4th      Quarter |   |
|--------------------------------------|--------|------------------|--------|--------|------------------|--------|--------|------------------|--------|--------|------------------|--------|
|                                 | 2009   |             |   | 2008   |             |   | 2009   |             |   | 2008   |             |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
| Operating      revenues              |   | $                | 653.1  |   |             | $      | 733.4  |             |   | $      | 749.3            |   |   | $ | 820.4 |   |   | $ | 858.8 |   |   | $ | 941.9 |   |   | $ | 744.8 |   |   | $ | 725.6 |   |
| Operating      income (loss)         |   |             | (6.3   | )      |             |   | (37.4  | )                |   |   | 56.1             |   |   |   | 91.6 |   |   |   | 136.7 |   |   |   | (98.2 | ) |   |   | 42.3 |   |   |   | (84.9 | ) |
| Net      income (loss)               |   |             | (12.1  | )      |             |   | (25.6  | )                |   |   | 25.8             |   |   |   | 56.2 |   |   |   | 77.3 |   |   |   | (69.3 | ) |   |   | 18.7 |   |   |   | (57.7 | ) |

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RE

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BA

| As of December 31 (in      millions)                            |   | 2009   |    |   | 2008   |   |
|-----------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| ASSETS                                                          |   |   |    |   |   |   |
| Current      Assets                                             |   |   |    |   |   |   |
| Cash      and cash equivalents                                  |   | $      | 164.2   |   |   | $      | 283.0 |   |
| Marketable      securities                                      |   |   | 1,027.9 |   |   |   | 794.3 |   |
|   Total      cash and marketable securities           |   |   | 1,192.1 |   |   |   | 1,077.3 |   |
| Receivables      from related companies                         |   |   | 274.6   |   |   |   | 285.9 |   |
| Receivables      - less allowance for doubtful accounts of $1.5 |   |   | 104.7   |   |   |   | 98.9 |   |
| Inventories      and supplies - net                             |   |   | 27.3    |   |   |   | 26.7 |   |
| Deferred      income taxes                                      |   |   | 110.1   |   |   |   | 146.7 |   |
| Fuel      hedge contracts                                       |   |   | 54.0    |   |   |   | 13.7 |   |
| Prepaid      expenses and other current assets                  |   |   | 47.7    |   |   |   | 30.1 |   |
| Total      Current Assets                                       |   |   | 1,810.5 |   |   |   | 1,679.3 |   |
|                                                            |   |   |    |   |   |   |   |   |
| Property      and Equipment                                     |   |   |    |   |   |   |   |   |
| Aircraft      and other flight equipment                        |   |   | 3,035.6 |   |   |   | 2,898.5 |   |
| Other      property and equipment                               |   |   | 540.1   |   |   |   | 519.8 |   |
| Deposits      for future flight equipment                       |   |   | 169.2   |   |   |   | 237.6 |   |
|                                                            |   |   | 3,744.9 |   |   |   | 3,655.9 |   |
| Less      accumulated depreciation and amortization             |   |   | 1,136.6 |   |   |   | 1,009.8 |   |
| Total      Property and Equipment - Net                         |   |   | 2,608.3 |   |   |   | 2,646.1 |   |
|                                                            |   |   |    |   |   |   |   |   |
| Fuel      Hedge Contracts                                       |   |   | 42.2    |   |   |   | 29.8 |   |
|                                                            |   |   |    |   |   |   |   |   |
| Other      Assets                                               |   |   | 80.3    |   |   |   | 73.4 |   |
|                                                            |   |   |    |   |   |   |   |   |
| Total      Assets                                               |   | $      | 4,541.3 |   |   | $      | 4,428.6 |   |

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Table of Contents

ALASKA AIRLINES, INC.

| As of December 31 (in millions except share      amounts)                      |   | 2009   |    |   | 2008   |   |
|--------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| LIABILITIES      AND SHAREHOLDER’S EQUITY                                |   |   |    |   |   |   |
| Current      Liabilities                                                       |   |   |    |   |   |   |
| Accounts      payable                                                          |   | $      | 52.9    |   |   | $      | 49.4 |   |
| Payables      to related companies                                             |   |   | 73.2    |   |   |   | 53.5 |   |
| Accrued      aircraft rent                                                     |   |   | 50.8    |   |   |   | 60.2 |   |
| Accrued      wages, vacation and payroll taxes                                 |   |   | 132.7   |   |   |   | 101.2 |   |
| Other      accrued liabilities                                                 |   |   | 506.4   |   |   |   | 510.7 |   |
| Air      traffic liability                                                     |   |   | 365.9   |   |   |   | 372.2 |   |
| Fuel      hedge contracts liability                                            |   |   | -       |   |   |   | 20.0 |   |
| Current      portion of long-term debt                                         |   |   | 131.2   |   |   |   | 225.1 |   |
| Total      Current Liabilities                                                 |   |   | 1,313.1 |   |   |   | 1,392.3 |   |
|                                                                           |   |   |    |   |   |   |   |   |
| Long-Term      Debt, Net of Current Portion                                    |   |   | 1,376.6 |   |   |   | 1,334.1 |   |
| Other      Liabilities and Credits                                             |   |   |    |   |   |   |   |   |
| Deferred      income taxes                                                     |   |   | 104.7   |   |   |   | 2.0 |   |
| Deferred      revenue                                                          |   |   | 410.5   |   |   |   | 394.1 |   |
| Obligation      for pension and postretirement medical benefits                |   |   | 421.0   |   |   |   | 584.7 |   |
| Other      liabilities                                                         |   |   | 112.6   |   |   |   | 126.4 |   |
|                                                                           |   |   | 1,048.8 |   |   |   | 1,107.2 |   |
| Commitments      and Contingencies                                             |   |   |    |   |   |   |   |   |
| Shareholder’s      Equity                                                |   |   |    |   |   |   |   |   |
| Common      stock, $1 par value                                                |   |   |    |   |   |   |   |   |
|   Authorized:      1,000      shares   |   |   |    |   |   |   |   |   |
|   Issued      and outstanding:  2009 and 2008 - 500 shares |   |   | -       |   |   |   | - |   |
|   Capital      in excess of par value                                |   |   | 649.9   |   |   |   | 640.1 |   |
| Accumulated      other comprehensive loss                                      |   |   | (240.0  | )      |   |   | (328.3 | ) |
| Retained      earnings                                                         |   |   | 392.9   |   |   |   | 283.2 |   |
|                                                                           |   |   | 802.8   |   |   |   | 595.0 |   |
| Total      Liabilities and Shareholder’s Equity                          |   | $      | 4,541.3 |   |   | $      | 4,428.6 |   |

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Table of Contents

ST

| Year Ended December 31      (in      millions)         |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|--------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Operating      Revenues                                |   |   |    |   |   |   |    |   |   |
| Passenger                                              |   | $      | 2,438.8 |   |   | $      | 2,643.7 |   |   | $ | 2,547.2 |   |
| Freight      and mail                                  |   |   | 91.5    |   |   |   | 99.3    |   |   |   | 94.2 |   |
| Other      - net                                       |   |   | 187.3   |   |   |   | 135.2   |   |   |   | 147.1 |   |
| Change      in Mileage Plan terms                      |   |   | -       |   |   |   | 42.3    |   |   |   | - |   |
| Total      mainline operating revenues                 |   |   | 2,717.6 |   |   |   | 2,920.5 |   |   |   | 2,788.5 |   |
| Passenger      – purchased capacity              |   |   | 288.4   |   |   |   | 300.8   |   |   |   | 281.4 |   |
| Total      Operating Revenues                          |   |   | 3,006.0 |   |   |   | 3,221.3 |   |   |   | 3,069.9 |   |
|                                                   |   |   |    |   |   |   |    |   |   |   |   |   |
| Operating      Expenses                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Wages      and benefits                                |   |   | 792.6   |   |   |   | 742.7   |   |   |   | 753.9 |   |
| Variable      incentive pay                            |   |   | 61.6    |   |   |   | 15.8    |   |   |   | 13.5 |   |
| Aircraft      fuel, including hedging gains and losses |   |   | 549.0   |   |   |   | 1,162.4 |   |   |   | 737.5 |   |
| Aircraft      maintenance                              |   |   | 169.9   |   |   |   | 150.6   |   |   |   | 149.8 |   |
| Aircraft      rent                                     |   |   | 109.0   |   |   |   | 106.2   |   |   |   | 112.8 |   |
| Landing      fees and other rentals                    |   |   | 166.8   |   |   |   | 167.7   |   |   |   | 170.1 |   |
| Contracted      services                               |   |   | 118.9   |   |   |   | 130.2   |   |   |   | 124.1 |   |
| Selling      expenses                                  |   |   | 104.7   |   |   |   | 116.0   |   |   |   | 129.3 |   |
| Depreciation      and amortization                     |   |   | 178.5   |   |   |   | 165.9   |   |   |   | 142.3 |   |
| Food      and beverage service                         |   |   | 47.7    |   |   |   | 48.3    |   |   |   | 46.9 |   |
| Other                                                  |   |   | 161.2   |   |   |   | 170.3   |   |   |   | 173.1 |   |
| New      pilot contract transition costs               |   |   | 35.8    |   |   |   | -       |   |   |   | - |   |
| Restructuring      charges                             |   |   | -       |   |   |   | 12.9    |   |   |   | - |   |
| Fleet      transition costs - MD-80                    |   |   | -       |   |   |   | 47.5    |   |   |   | - |   |
| Total      mainline operating expenses                 |   |   | 2,495.7 |   |   |   | 3,036.5 |   |   |   | 2,553.3 |   |
| Purchased      capacity costs                          |   |   | 281.5   |   |   |   | 313.7   |   |   |   | 302.8 |   |
| Total      Operating Expenses                          |   |   | 2,777.2 |   |   |   | 3,350.2 |   |   |   | 2,856.1 |   |
| Operating      Income (Loss)                           |   |   | 228.8   |   |   |   | (128.9  | )      |   |   | 213.8 |   |
|                                                   |   |   |    |   |   |   |    |   |   |   |   |   |
| Nonoperating      Income (Expense)                     |   |   |    |   |   |   |    |   |   |   |   |   |
| Interest      income                                   |   |   | 38.6    |   |   |   | 51.3    |   |   |   | 64.8 |   |
| Interest      expense                                  |   |   | (88.1   | )      |   |   | (92.5   | )      |   |   | (86.2 | ) |
| Interest      capitalized                              |   |   | 7.3     |   |   |   | 20.2    |   |   |   | 25.7 |   |
| Other      - net                                       |   |   | (2.8    | )      |   |   | (3.4    | )      |   |   | (3.1 | ) |
|                                                   |   |   | (45.0   | )      |   |   | (24.4   | )      |   |   | 1.2 |   |
| Income      (loss) before income tax                   |   |   | 183.8   |   |   |   | (153.3  | )      |   |   | 215.0 |   |
| Income      tax expense (benefit)                      |   |   | 74.1    |   |   |   | (56.9   | )      |   |   | 80.2 |   |
| Net      Income (Loss)                                 |   | $      | 109.7   |   |   | $      | (96.4   | )      |   | $ | 134.8 |   |

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Table of Contents

ALASKA AIRLINES, INC.

STA

|                                                                     |   |   |   |   | Capital      in |   |   | Accumulated      Other |   |   |     |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|-----------------|--------|--------|------------------------|--------|--------|----------|--------|--------|--------|--------|
|                                                                     |   | Common |   |   | Excess      of  |   |   | Comprehensive          |   |   | Retained |   |   |   |   |
| (in millions)                                                            |   | Stock  |   |   | Par      Value  |   |   | Loss                   |   |   | Earnings |   |   | Total  |   |
| Balances      at December 31, 2006                                       |   | $      | --     |   |            | $      | 620.0  |                   |   | $      | (191.4   | )      |   | $      | 244.8  |   |   | $ | 673.4 |   |
| 2007      net income                                                     |   |   |   |   |            |   |   |                   |   |   |     |   |   | $      | 134.8  |   |   |   | 134.8 |   |
| Other      comprehensive income (loss):                                  |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
| Related      to marketable securities:                                   |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
|   Change      in fair value                                    |   |   |   |   |            |   |   |                   |   |   | 3.2      |   |   |   |   |   |   |   |   |   |
|   Reclassification      to earnings                            |   |   |   |   |            |   |   |                   |   |   | 2.0      |   |   |   |   |   |   |   |   |   |
|   Income      tax effect                                       |   |   |   |   |            |   |   |                   |   |   | (1.9     | )      |   |   |   |   |   |   |   |   |
|                                                                     |   |   |   |   |            |   |   |                   |   |   | 3.3      |   |   |   |   |   |   |   | 3.3 |   |
| Related      to employee benefit plans:                                  |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
| Pension      liability adjustment, net of $29.6 tax effect               |   |   |   |   |            |   |   |                   |   |   | 49.8     |   |   |   |   |   |   |   | 49.8 |   |
| Postretirement      medical liability adjustment, net of $2.5 tax effect |   |   |   |   |            |   |   |                   |   |   | 4.1      |   |   |   |   |   |   |   | 4.1 |   |
| Officers      supplemental retirement plan, net of $0.5 tax effect       |   |   |   |   |            |   |   |                   |   |   | 0.9      |   |   |   |   |   |   |   | 0.9 |   |
|                                                                     |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
| Total      comprehensive income                                          |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   | 192.9 |   |
|                                                                     |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
| Stock-based      compensation                                            |   |   |   |   |            |   | 10.5   |                   |   |   |     |   |   |   |   |   |   |   | 10.5 |   |
| Impact      of issuance of Air Group stock under stock plans             |   |   |   |   |            |   | (0.2   | )                      |   |   |     |   |   |   |   |   |   |   | (0.2 | ) |
| Balances      at December 31, 2007                                       |   | $      | --     |   |            | $      | 630.3  |                   |   | $      | (133.3   | )      |   | $      | 379.6  |   |   | $ | 876.6 |   |
| 2008      net loss                                                       |   |   |   |   |            |   |   |                   |   |   |     |   |   |   | (96.4  | ) |   |   | (96.4 | ) |
| Other      comprehensive income (loss):                                  |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
|   Related      to marketable securities:                       |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
|   Change      in fair value                                    |   |   |   |   |            |   |   |                   |   |   | (8.7     | )      |   |   |   |   |   |   |   |   |
|   Reclassification      to earnings                            |   |   |   |   |            |   |   |                   |   |   | (0.2     | )      |   |   |   |   |   |   |   |   |
|   Income      tax effect                                       |   |   |   |   |            |   |   |                   |   |   | 3.3      |   |   |   |   |   |   |   |   |   |
|                                                                     |   |   |   |   |            |   |   |                   |   |   | (5.6     | )      |   |   |   |   |   |   | (5.6 | ) |
|   Related      to employee benefit plans:                      |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
| Pension      liability adjustment, net of $113.5 tax effect              |   |   |   |   |            |   |   |                   |   |   | (188.9   | )      |   |   |   |   |   |   | (188.9 | ) |
| Postretirement      medical liability adjustment, net of $0.5 tax effect |   |   |   |   |            |   |   |                   |   |   | (0.8     | )      |   |   |   |   |   |   | (0.8 | ) |
| Officers      supplemental retirement plan, net of $0.1 tax effect       |   |   |   |   |            |   |   |                   |   |   | 0.3      |   |   |   |   |   |   |   | 0.3 |   |
|                                                                     |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
| Total      comprehensive loss                                            |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   | (291.4 | ) |
|                                                                     |   |   |   |   |            |   |   |                   |   |   |     |   |   |   |   |   |   |   |   |   |
| Stock-based      compensation                                            |   |   |   |   |            |   | 10.8   |                   |   |   |     |   |   |   |   |   |   |   | 10.8 |   |
| Impact      of issuance of Air Group stock under stock plans             |   |   |   |   |            |   | (1.0   | )                      |   |   |     |   |   |   |   |   |   |   | (1.0 | ) |
| Balances      at December 31, 2008                                       |   | $      | --     |   |            | $      | 640.1  |                   |   | $      | (328.3   | )      |   | $      | 283.2  |   |   | $ | 595.0 |   |

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Table of Contents

|                                                                     |   |   |   |   |            |   |   | Accumulated   |   |   |     |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|-----------------|--------|--------|---------------|--------|--------|----------|--------|--------|--------|--------|
| STATEMENTEQUITY                                                          |   |   |   |   | Capital      in |   |   | Other         |   |   |     |   |   |   |   |
|                                                                     |   | Common |   |   | Excess      of  |   |   | Comprehensive |   |   | Retained |   |   |   |   |
| (In millions)                                                            |   | Stock  |   |   | Par      Value  |   |   | Loss          |   |   | Earnings |   |   | Total  |   |
| Balances      at December 31, 2008                                       |   | $      | --     |   |            | $      | 640.1  |          |   | $      | (328.3   | )      |   | $      | 283.2  |   |   | $ | 595.0 |   |
| 2009      net income                                                     |   |   |   |   |            |   |   |          |   |   |     |   |   |   | 109.7  |   |   |   | 109.7 |   |
| Other      comprehensive income (loss):                                  |   |   |   |   |            |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |
| Related      to marketable securities:                                   |   |   |   |   |            |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |
|   Change      in fair value                                    |   |   |   |   |            |   |   |          |   |   | 20.4     |   |   |   |   |   |   |   |   |   |
|   Reclassification      to earnings                            |   |   |   |   |            |   |   |          |   |   | (2.5     | )      |   |   |   |   |   |   |   |   |
|   Income      tax effect                                       |   |   |   |   |            |   |   |          |   |   | (6.7     | )      |   |   |   |   |   |   |   |   |
|                                                                     |   |   |   |   |            |   |   |          |   |   | 11.2     |   |   |   |   |   |   |   | 11.2 |   |
| Related      to employee benefit plans:                                  |   |   |   |   |            |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |
| Pension      liability adjustment, net of $42.3 tax effect               |   |   |   |   |            |   |   |          |   |   | 71.9     |   |   |   |   |   |   |   | 71.9 |   |
| Postretirement      medical liability adjustment, net of $2.3 tax effect |   |   |   |   |            |   |   |          |   |   | 3.9      |   |   |   |   |   |   |   | 3.9 |   |
| Officers      supplemental retirement plan, net of $0.2 tax effect       |   |   |   |   |            |   |   |          |   |   | (0.2     | )      |   |   |   |   |   |   | (0.2 | ) |
|                                                                     |   |   |   |   |            |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |
| Related      to interest rate derivative instruments:                    |   |   |   |   |            |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |
| Change      in fair value                                                |   |   |   |   |            |   |   |          |   |   | 2.4      |   |   |   |   |   |   |   |   |   |
| Income      tax effect                                                   |   |   |   |   |            |   |   |          |   |   | (0.9     | )      |   |   |   |   |   |   |   |   |
|                                                                     |   |   |   |   |            |   |   |          |   |   | 1.5      |   |   |   |   |   |   |   | 1.5 |   |
| Total      comprehensive income                                          |   |   |   |   |            |   |   |          |   |   |     |   |   |   |   |   |   |   | 198.0 |   |
|                                                                     |   |   |   |   |            |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |
| Stock-based      compensation                                            |   |   |   |   |            |   | 10.2   |          |   |   |     |   |   |   |   |   |   |   | 10.2 |   |
| Impact      of issuance of Air Group stock under stock plans             |   |   |   |   |            |   | (0.4   | )             |   |   |     |   |   |   |   |   |   |   | (0.4 | ) |
| Balances      at December 31, 2009                                       |   | $      | --     |   |            | $      | 649.9  |          |   | $      | (240.0   | )      |   | $      | 392.9  |   |   | $ | 802.8 |   |

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Table of Contents

ALASKA AIRLINES, INC.

STA

| Year Ended December      31 (in      millions)                               |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cash      flows from operating activities:                                   |   |   |   |   |   |   |   |   |   |
| Net      income (loss)                                                       |   | $      | 109.7  |   |   | $      | (96.4  | )      |   | $ | 134.8 |   |
| Adjustments      to reconcile net income (loss) to net cash                  |   |   |   |   |   |   |   |   |   |   |   |   |
|  provided      by operating activities:                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|    Non-cash      impact of pilot contract transition costs    |   |   | 15.5   |   |   |   | -      |   |   |   | - |   |
|    Restructuring      charges                                 |   |   | -      |   |   |   | 12.9   |   |   |   | - |   |
|    Fleet      transition costs                                |   |   | -      |   |   |   | 47.5   |   |   |   | - |   |
|    Depreciation      and amortization                         |   |   | 178.5  |   |   |   | 165.9  |   |   |   | 142.3 |   |
|    Stock-based      compensation                              |   |   | 10.2   |   |   |   | 10.8   |   |   |   | 10.5 |   |
|    Changes      in fair values of open fuel hedge contracts   |   |   | (72.7  | )      |   |   | 71.0   |   |   |   | (35.4 | ) |
|    Changes      in deferred income taxes                      |   |   | 77.6   |   |   |   | (66.1  | )      |   |   | 48.0 |   |
|    (Increase)      decrease in receivables - net              |   |   | 5.5    |   |   |   | 110.2  |   |   |   | (317.1 | ) |
|    Increase      in prepaid expenses and other current assets |   |   | (14.7  | )      |   |   | (13.9  | )      |   |   | 10.8 |   |
|    Increase      (decrease) in air traffic liability          |   |   | (6.3   | )      |   |   | 7.6    |   |   |   | 53.2 |   |
|    Increase      (decrease) in other current liabilities      |   |   | 41.0   |   |   |   | 6.6    |   |   |   | 75.5 |   |
|    Increase      (decrease) in deferred revenue and other-net |   |   | (59.7  | )      |   |   | (9.1   | )      |   |   | 71.6 |   |
| Net      cash provided by operating activities                               |   |   | 284.6  |   |   |   | 247.0  |   |   |   | 194.2 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property      and equipment additions:                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|   Aircraft      and aircraft purchase deposits                     |   |   | (293.7 | )      |   |   | (246.1 | )      |   |   | (523.1 | ) |
|   Other      flight equipment                                      |   |   | (26.3  | )      |   |   | (42.3  | )      |   |   | (37.0 | ) |
|   Other      property and equipment                                |   |   | (37.6  | )      |   |   | (35.4  | )      |   |   | (46.3 | ) |
| Total      property and equipment additions                                  |   |   | (357.6 | )      |   |   | (323.8 | )      |   |   | (606.4 | ) |
| Proceeds      from disposition of assets                                     |   |   | 0.8    |   |   |   | 6.8    |   |   |   | 61.4 |   |
| Purchases      of marketable securities                                      |   |   | (942.6 | )      |   |   | (766.0 | )      |   |   | (1,149.3 | ) |
| Sales      and maturities of marketable securities                           |   |   | 725.0  |   |   |   | 579.6  |   |   |   | 1,321.1 |   |
| Restricted      deposits and other                                           |   |   | (7.6   | )      |   |   | 8.3    |   |   |   | (2.2 | ) |
| Net      cash used in investing activities                                   |   |   | (582.0 | )      |   |   | (495.1 | )      |   |   | (375.4 | ) |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds      from issuance of long-term debt                                |   |   | 188.9  |   |   |   | 658.5  |   |   |   | 281.9 |   |
| Proceeds      from sale-leaseback transactions, net                          |   |   | 230.0  |   |   |   | -      |   |   |   | - |   |
| Long-term      debt payments                                                 |   |   | (240.3 | )      |   |   | (331.7 | )      |   |   | (127.2 | ) |
| Net      cash provided by financing activities                               |   |   | 178.6  |   |   |   | 326.8  |   |   |   | 154.7 |   |
| Net      change in cash and cash equivalents                                 |   |   | (118.8 | )      |   |   | 78.7   |   |   |   | (26.5 | ) |
| Cash      and cash equivalents at beginning of year                          |   |   | 283.0  |   |   |   | 204.3  |   |   |   | 230.8 |   |
| Cash      and cash equivalents at end of year                                |   | $      | 164.2  |   |   | $      | 283.0  |   |   | $ | 204.3 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental      disclosure of cash paid during the year for:               |   |   |   |   |   |   |   |   |   |   |   |   |
|   Interest      (net of amount capitalized)                        |   | $      | 82.2   |   |   | $      | 68.2   |   |   | $ | 58.9 |   |
|   Income      taxes                                                |   |   | -      |   |   |   | 0.5    |   |   |   | 8.4 |   |

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NO

| Alaska      Airlines, Inc. |
|----------------------------|

| December 31,      2009 |
|-----------------------------|

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Table of Contents

| Aircraft      and related flight equipment:        |                                                                   |
|----------------------------------------------------|------------------------------------------------------------------------|
| Boeing      737-400/700/800/900                    | 20      years                                                          |
| Buildings                                          | 25-30      years                                                       |
| Minor      building and land improvements          | 10      years                                                          |
| Capitalized      leases and leasehold improvements | Shorter of lease term orestimated      useful life |
| Computer      hardware and software                | 3-5      years                                                         |
| Other      furniture and equipment                 | 5-10      years                                                        |

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| Balance      Sheet Captions         |   | 2009   |   |   | 2008   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|
| Current      Liabilities:           |   |   |   |   |   |   |
| Other      accrued liabilities      |   | $      | 267.9  |   |   | $      | 280.4 |   |
| Other      Liabilities and Credits: |   |   |   |   |   |   |   |   |
| Deferred      revenue               |   |   | 410.6  |   |   |   | 394.1 |   |
| Other      liabilities              |   |   | 13.2   |   |   |   | 15.9 |   |
|                                |   |   |   |   |   |   |   |   |
| Total                               |   | $      | 691.7  |   |   | $      | 690.4 |   |

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|                                   |   | 2009   |    |   | 2008   |   |   | 2007   |   |
|----------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
| Passenger      revenues                |   | $      | 175.1   |   |   | $      | 144.2  |   |   | $ | 115.6 |   |
| Other-net      revenues                |   |   | 151.5   |   |   |   | 101.5  |   |   |   | 112.0 |   |
| Change      in Mileage Plan      terms |   |   | — |   |   |   | 42.3   |   |   |   | — |   |
|                                   |   |   |    |   |   |   |   |   |   |   |   |   |
| Total      Mileage Plan revenues  |   | $      | 326.6   |   |   | $      | 288.0  |   |   | $ | 227.6 |   |

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|                                                                    |   |   |   |   |   |   |    |   |   |
|-------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
|                                                                    |   | 2009   |   |   | 2008   |   |    | 2007   |   |
| Raw      or “into-plane” fuel cost                          |   | $      | 572.3  |   |   | $      | 1,103.8 |   |   | $ | 825.7 |   |
| (Gains)      or losses in value and settlements of fuel hedge contracts |   |   | (23.3  | )      |   |   | 58.6    |   |   |   | (88.2 | ) |
|                                                                    |   |   |   |   |   |   |    |   |   |   |   |   |
| Aircraft      fuel expense                                              |   | $      | 549.0  |   |   | $      | 1,162.4 |   |   | $ | 737.5 |   |

|                     |                                         |                            |                                          |
|--------------------------|----------------------------------------------|---------------------------------|-----------------------------------------------|
|                     | Approximate%      ofExpectedFuelRequirements | GallonsHedged(in millions) | ApproximateCrude      OilPrice      perBarrel |
| First Quarter 2010       | 50%                                          | 36.2                            | $69                                           |
| Second Quarter 2010      | 50%                                          | 38.1                            | $69                                           |
| Third Quarter 2010       | 50%                                          | 40.1                            | $74                                           |
| Fourth Quarter 2010      | 50%                                          | 37.0                            | $83                                           |
| Full Year 2010 | 50%                                          | 151.4                           | $74                                           |
|                     |                                         |                            |                                          |
| First Quarter 2011       | 50%                                          | 37.3                            | $87                                           |
| Second Quarter 2011      | 41%                                          | 32.5                            | $83                                           |
| Third Quarter 2011       | 36%                                          | 29.6                            | $86                                           |
| Fourth Quarter 2011      | 22%                                          | 16.5                            | $84                                           |
| Full Year 2011           | 37%                                          | 115.9                           | $85                                           |
|                     |                                         |                            |                                          |
| First Quarter 2012       | 23%                                          | 17.9                            | $87                                           |
| Second Quarter 2012      |  7%                                     | 5.8                             | $86                                           |
| Third Quarter 2012       |  6%                                     | 5.3                             | $97                                           |
| Fourth Quarter 2012      | 6%                                           | 4.4                             | $93                                           |
| Full Year 2012           | 10%                                          | 33.4                            | $89                                           |

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| Accrual      for Severance and Related      Costs |   | 2009   |    |   | 2008   |   |   | 2007   |   |
|---------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
| Balance      at beginning of year                 |   | $      | 7.2     |   |   | $      | 0.7    |   |   | $ | 19.9 |   |
| Restructuring      charges and adjustments        |   |   | — |   |   |   | 12.9   |   |   |   | — |   |
| Cash      payments                                |   |   | (7.2    | )      |   |   | (6.4   | )      |   |   | (19.2 | ) |
|                                              |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance      at end of year                       |   | $      | — |   |   | $      | 7.2    |   |   | $ | 0.7 |   |

|                             |   | 2009   |    |   | 2008   |   |
|----------------------------------|--------|--------|---------|--------|--------|--------|
| Cost:                            |   |   |    |   |   |   |
| U.S.      government securities  |   | $      | 376.7   |   |   | $      | 329.1 |   |
| Asset-backed      obligations    |   |   | 215.4   |   |   |   | 198.0 |   |
| Other      corporate obligations |   |   | 421.8   |   |   |   | 263.7 |   |
|                             |   |   |    |   |   |   |   |   |
|                             |   | $      | 1,013.9 |   |   | $      | 790.8 |   |
|                             |   |   |    |   |   |   |   |   |
| Fair      value:                 |   |   |    |   |   |   |   |   |
| U.S.      government securities  |   | $      | 381.2   |   |   | $      | 342.8 |   |
| Asset-backed      obligations    |   |   | 214.7   |   |   |   | 187.7 |   |
| Other      corporate obligations |   |   | 432.0   |   |   |   | 263.8 |   |
|                             |   |   |    |   |   |   |   |   |
|                             |   | $      | 1,027.9 |   |   | $      | 794.3 |   |

|                                    |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Proceeds      from sales and maturities |   | $      | 725.0  |   |   | $      | 579.6  |   |   | $ | 1,321.1 |   |
| Gross      realized gains               |   |   | 7.0    |   |   |   | 7.2    |   |   |   | 4.8 |   |
| Gross      realized losses              |   |   | 2.3    |   |   |   | 3.8    |   |   |   | 2.9 |   |

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|                             |   |                  |   |   | Unrealized      Losses   |   |   |                        |   |   |                         |   |
|----------------------------------|--------|-----------------------|--------|--------|--------------------------|--------|--------|-----------------------------|--------|--------|------------------------------|--------|
|                             |   | Unrealized      Gains |   |   | Less      than 12 months |   |   | Greater      than 12 months |   |   | Total      Unrealized Losses |   |   | Less:      Credit Loss Recorded in Earnings |   |   | Net      Unrealized Losses in AOCL |   |   | Net      Unrealized Gains/(Losses) in AOCL |   |   | Fair      Value of Securities with Unrealized Losses |   |
| U.S.      Government Securities  |   | $                     | 4.7    |   |                     | $      | (0.2   | )                           |   | $      | —                      |   |   | $ | (0.2 | ) |   | $ | — |   |   | $ | (0.2 | ) |   | $ | 4.5 |   |   | $ | 76.8 |   |
| Asset-backed      obligations    |   |                  | 2.4    |   |                     |   | (0.2   | )                           |   |   | (5.1                         | )      |   |   | (5.3 | ) |   |   | (2.2 | ) |   |   | (3.1 | ) |   |   | (0.7 | ) |   |   | 61.2 |   |
| Other      corporate obligations |   |                  | 10.4   |   |                     |   | (0.2   | )                           |   |   | —                      |   |   |   | (0.2 | ) |   |   | — |   |   |   | (0.2 | ) |   |   | 10.2 |   |   |   | 37.7 |   |
| Total                            |   | $                     | 17.5   |   |                     | $      | (0.6   | )                           |   | $      | (5.1                         | )      |   | $ | (5.7 | ) |   | $ | (2.2 | ) |   | $ | (3.5 | ) |   | $ | 14.0 |   |   | $ | 175.7 |   |

|                             |   |            |   |   | Unrealized      Losses       |   |    |                            |   |   |    |   |
|----------------------------------|--------|-----------------|--------|--------|------------------------------|--------|---------|---------------------------------|--------|--------|---------|--------|
|                             |   | UnrealizedGains |   |   | Less than12 months |   |    | Greater than12      months |   |   | Total   |   |   | NetUnrealizedLosses/Gainsin      AOCI |   |   | Fair Value ofSecurities withUnrealizedLosses |   |
| U.S.      Government Securities  |   | $               | 10.5   |   |                         | $      | — |                            |   | $      | — |   |   | $ | — |   |   | $ | 10.5 |   |   | $ | — |   |
| Asset-backed      obligations    |   |            | 0.7    |   |                         |   | (9.3    | )                               |   |   | (2.4    | )      |   |   | (11.7 | ) |   |   | (11.0 | ) |   |   | 138.6 |   |
| Other      corporate obligations |   |            | 1.8    |   |                         |   | (4.3    | )                               |   |   | (1.0    | )      |   |   | (5.3 | ) |   |   | (3.5 | ) |   |   | 154.8 |   |
|                             |   |            |   |   |                         |   |    |                            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                            |   | $               | 13.0   |   |                         | $      | (13.6   | )                               |   | $      | (3.4    | )      |   | $ | (17.0 | ) |   | $ | (4.0 | ) |   | $ | 293.4 |   |

|                                                 |   | 2009   |    |   | 2008   |   |
|------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Fixed-rate      notes payable due through 2022*      |   | $      | 1,160.9 |   |   | $      | 1,192.1 |   |
| Variable-rate      notes payable due through 2019*   |   |   | 346.9   |   |   |   | 252.2 |   |
| Bank      line-of-credit facility expiring in 2010*  |   |   | --      |   |   |   | 75.0 |   |
| Pre-delivery      payment facility expiring in 2011* |   |   | --      |   |   |   | 39.9 |   |
|                                                 |   |   |    |   |   |   |   |   |
| Long-term      debt                                  |   |   | 1,507.8 |   |   |   | 1,559.2 |   |
| Less      current portion                            |   |   | (131.2  | )      |   |   | (225.1 | ) |
|                                                 |   |   |    |   |   |   |   |   |
|                                                 |   | $      | 1,376.6 |   |   | $      | 1,334.1 |   |

| * | The      weighted-average fixed-interest rate was 6.2% as of December 31, 2009      and 2008. The weighted-average variable-interest rate, including the      interest rate on the pre-delivery payment and bank line-of-credit      facilities, was 2.7% and 4.0% as of December 31, 2009 and 2008,      respectively. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                          |   | Total  |    |
|-------------------------------|--------|--------|---------|
| 2010                          |   | $      | 131.2   |   |
| 2011                          |   |   | 165.4   |   |
| 2012                          |   |   | 209.0   |   |
| 2013                          |   |   | 167.1   |   |
| 2014                          |   |   | 132.5   |   |
| Thereafter                    |   |   | 702.6   |   |
|                          |   |   |    |   |
| Total      principal payments |   | $      | 1,507.8 |   |

|                      |   | Operating      Leases |   |
|---------------------------|--------|-----------------------|--------|
|                      |   | Aircraft              |   |   | Facilities |   |
| 2010                      |   |                  | 114.3  |   |   |   | 47.0 |   |
| 2011                      |   |                  | 98.3   |   |   |   | 36.1 |   |
| 2012                      |   |                  | 102.3  |   |   |   | 32.1 |   |
| 2013                      |   |                  | 95.8   |   |   |   | 8.0 |   |
| 2014                      |   |                  | 88.5   |   |   |   | 4.6 |   |
| Thereafter                |   |                  | 218.4  |   |   |   | 61.2 |   |
|                      |   |                  |   |   |   |   |   |   |
| Total      lease payments |   | $                     | 717.6  |   |   | $ | 189.0 |   |

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|                            |   | 2009   |   |   | 2008   |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|
| Asset      category:            |   |   |   |   |   |   |
| Money      market fund          |   |   | 10     | %      |   |   | -- | % |
| Domestic      equity securities |   |   | 45     |   |   |   | 49 |   |
| Non-U.S.      equity securities |   |   | 18     |   |   |   | 21 |   |
| Fixed      income securities    |   |   | 27     |   |   |   | 30 |   |
|                            |   |   |   |   |   |   |   |   |
| Plan      assets                |   |   | 100    | %      |   |   | 100 | % |

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| Domestic      equities: |   |   | 50 | % |
|-------------------------|--------|--------|----|---|
| Non-U.S.      equities: |   |   | 20 | % |
| Fixed      income:      |   |   | 30 | % |

|                                   |   | 2009   |   |   | 2008   |   |   | Level  |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Fund      type:                        |   |   |   |   |   |   |   |   |   |
| Money      market fund                 |   | $      | 90.6   |   |   | $      | ---    |   |   |   | 1 |   |
| U.S.      equity market fund           |   |   | 408.0  |   |   |   | 316.3  |   |   |   | 2 |   |
| Non-U.S.      equity fund              |   |   | 164.4  |   |   |   | 136.7  |   |   |   | 2 |   |
| U.S.      debt index fund              |   |   | 147.6  |   |   |   | 153.6  |   |   |   | 2 |   |
| Government/credit      bond index fund |   |   | 96.3   |   |   |   | 43.4   |   |   |   | 2 |   |
| Plan      assets                       |   | $      | 906.9  |   |   | $      | 650.0  |   |   |   |   |   |

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|                                             |   | Qualified |    |   | Nonqualified |   |
|--------------------------------------------------|--------|-----------|---------|--------|--------------|--------|
|                                             |   | 2009      |    |   | 2008         |   |   | 2009 |   |   | 2008 |   |
| Projected      benefit obligation (PBO)          |   |      |    |   |         |   |   |   |   |   |   |   |
| Beginning      of year                           |   | $         | 1,094.9 |   |         | $      | 1,056.9 |   |   | $ | 36.0 |   |   | $ | 34.9 |   |
| Service      cost                                |   |      | 44.2    |   |         |   | 46.6 |   |   |   | 0.7 |   |   |   | 0.9 |   |
| Interest      cost                               |   |      | 66.9    |   |         |   | 62.7 |   |   |   | 2.2 |   |   |   | 2.1 |   |
| Plan      amendments                             |   |      | (29.6   | )      |         |   | (0.5 | ) |   |   | — |   |   |   | — |   |
| Curtailment      (gain) loss                     |   |      | — |   |         |   | (2.9 | ) |   |   | — |   |   |   | — |   |
| Actuarial      (gain) loss                       |   |      | 47.3    |   |         |   | (31.1 | ) |   |   | 0.6 |   |   |   | (0.1 | ) |
| Transfer      to pilot long-term disability plan |   |      | (3.0    | )      |         |   | — |   |   |   | — |   |   |   | — |   |
| Benefits      paid                               |   |      | (40.9   | )      |         |   | (36.8 | ) |   |   | (2.2 | ) |   |   | (1.8 | ) |
|                                             |   |      |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| End      of year                                 |   | $         | 1,179.8 |   |         | $      | 1,094.9 |   |   | $ | 37.3 |   |   | $ | 36.0 |   |
|                                             |   |      |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Plan      assets at fair value                   |   |      |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Beginning      of year                           |   | $         | 650.0   |   |         | $      | 910.6 |   |   | $ | — |   |   | $ | — |   |
| Actual      return on plan assets                |   |      | 150.0   |   |         |   | (275.5 | ) |   |   | — |   |   |   | — |   |
| Employer      contributions                      |   |      | 147.8   |   |         |   | 51.7 |   |   |   | 2.2 |   |   |   | 1.8 |   |
| Benefits      paid                               |   |      | (40.9   | )      |         |   | (36.8 | ) |   |   | (2.2 | ) |   |   | (1.8 | ) |
|                                             |   |      |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| End      of year                                 |   | $         | 906.9   |   |         | $      | 650.0 |   |   | $ | — |   |   | $ | — |   |
|                                             |   |      |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Funded      status (unfunded)                    |   | $         | (272.9  | )      |         | $      | (444.9 | ) |   | $ | (37.3 | ) |   | $ | (36.0 | ) |
|                                             |   |      |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Percent      funded                              |   |      | 76.9    | %      |         |   | 59.4 | % |   |   | — |   |   |   | — |   |

|                                     |   | 2009      |    |   | 2008         |   |
|------------------------------------------|--------|-----------|---------|--------|--------------|--------|
|                                     |   | Qualified |    |   | Nonqualified |   |   | Qualified |   |   | Nonqualified |   |
| Accrued      benefit liability-current   |   | $         | — |   |         | $      | 2.5 |   |   | $ | — |   |   | $ | 2.5 |   |
| Accrued      benefit liability-long term |   |      | 272.9   |   |         |   | 34.8 |   |   |   | 444.9 |   |   |   | 33.5 |   |
|                                     |   |      |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Total      liability recognized          |   | $         | 272.9   |   |         | $      | 37.3 |   |   | $ | 444.9 |   |   | $ | 36.0 |   |

|                                    |   | 2009      |   |   | 2008         |   |
|-----------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                    |   | Qualified |   |   | Nonqualified |   |   | Qualified |   |   | Nonqualified |   |
| Prior      service cost (credit)        |   | $         | (17.5  | )      |         | $      | 0.1 |   |   | $ | 16.3 |   |   | $ | 0.2 |   |
| Net      loss                           |   |      | 395.0  |   |         |   | 4.8 |   |   |   | 475.4 |   |   |   | 4.3 |   |
|                                    |   |      |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Amount      recognized in AOCI (pretax) |   | $         | 377.5  |   |         | $      | 4.9 |   |   | $ | 491.7 |   |   | $ | 4.5 |   |

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|                                    |   | Qualified |    |   | Nonqualified |   |
|-----------------------------------------|--------|-----------|---------|--------|--------------|--------|
|                                    |   | 2009      |    |   | 2008         |   |   | 2007 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |
| Service      cost                       |   | $         | 44.2    |   |         | $      | 46.6 |   |   | $ | 49.7 |   |   | $ | 0.7 |   |   | $ | 0.9 |   |   | $ | 1.1 |   |
| Interest      cost                      |   |      | 66.9    |   |         |   | 62.7 |   |   |   | 60.9 |   |   |   | 2.2 |   |   |   | 2.1 |   |   |   | 1.9 |   |
| Expected      return on assets          |   |      | (51.3   | )      |         |   | (71.8 | ) |   |   | (66.3 | ) |   |   | — |   |   |   | — |   |   |   | — |   |
| Amortization      of prior service cost |   |      | 4.3     |   |         |   | 4.4 |   |   |   | 4.9 |   |   |   | 0.1 |   |   |   | 0.1 |   |   |   | 0.1 |   |
| Curtailment      loss                   |   |      | — |   |         |   | 0.5 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Recognized      actuarial loss          |   |      | 28.9    |   |         |   | 5.6 |   |   |   | 13.4 |   |   |   | 0.1 |   |   |   | 0.2 |   |   |   | 0.3 |   |
|                                    |   |      |    |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      pension expense                |   | $         | 93.0    |   |         | $      | 48.0 |   |   | $ | 62.6 |   |   | $ | 3.1 |   |   | $ | 3.3 |   |   | $ | 3.4 |   |

|                  |   | Qualified |   |   | Nonqualified |   |
|-----------------------|--------|-----------|--------|--------|--------------|--------|
| 2010                  |   | $         | 36.4   |   |         | $      | 2.5 |   |
| 2011                  |   |      | 48.8   |   |         |   | 2.2 |   |
| 2012                  |   |      | 50.0   |   |         |   | 2.4 |   |
| 2013                  |   |      | 57.2   |   |         |   | 2.5 |   |
| 2014                  |   |      | 64.7   |   |         |   | 2.7 |   |
| 2015–      2019 |   | $         | 394.9  |   |         | $      | 17.3 |   |

|                                               |   | 2009   |    |   | 2008   |   |
|----------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Accumulated      postretirement benefit obligation |   |   |    |   |   |   |
| Beginning      of year                             |   | $      | 109.9   |   |   | $      | 101.7 |   |
| Service      cost                                  |   |   | 5.6     |   |   |   | 4.2 |   |
| Interest      cost                                 |   |   | 7.8     |   |   |   | 5.6 |   |
| Plan      amendments                               |   |   | 4.1     |   |   |   | — |   |
| Curtailments                                       |   |   | — |   |   |   | (0.5 | )   |
| Actuarial      (gain) loss                         |   |   | (6.7    | )      |   |   | 1.9 |   |
| Transfer      to pilot long-term disability plan   |   |   | (0.6    | )      |   |   | — |   |
| Benefits      paid                                 |   |   | (2.8    | )      |   |   | (3.0 | ) |
|                                               |   |   |    |   |   |   |   |   |
| End      of year                                   |   | $      | 117.3   |   |   | $      | 109.9 |   |
|                                               |   |   |    |   |   |   |   |   |
| Plan      assets at fair value                     |   |   |    |   |   |   |   |   |
| Beginning      of year                             |   | $      | — |   |   | $      | — |   |
| Employer      contributions                        |   |   | 2.8     |   |   |   | 3.0 |   |
| Benefits      paid                                 |   |   | (2.8    | )      |   |   | (3.0 | ) |
|                                               |   |   |    |   |   |   |   |   |
| End      of year                                   |   | $      | — |   |   | $      | — |   |
|                                               |   |   |    |   |   |   |   |   |
| Funded      status (unfunded)                      |   | $      | (117.3  | )      |   | $      | (109.9 | ) |

----

Table of Contents

|                                     |   | 2009   |   |   | 2008   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|
| Accrued      benefit liability-current   |   | $      | 4.2    |   |   | $      | 4.4 |   |
| Accrued      benefit liability-long term |   |   | 113.1  |   |   |   | 105.5 |   |
|                                     |   |   |   |   |   |   |   |   |
| Total      liability recognized          |   | $      | 117.3  |   |   | $      | 109.9 |   |

|                                    |   | 2009   |   |   | 2008   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|
| Prior      service cost                 |   | $      | 2.6    |   |   | $      | 1.4 |   |
| Net      loss                           |   |   | 15.7   |   |   |   | 23.1 |   |
|                                    |   |   |   |   |   |   |   |   |
| Amount      recognized in AOCI (pretax) |   | $      | 18.3   |   |   | $      | 24.5 |   |

|                                    |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Service      cost                       |   | $      | 5.6    |   |   | $      | 4.2    |   |   | $ | 4.6 |   |
| Interest      cost                      |   |   | 7.8    |   |   |   | 5.6    |   |   |   | 6.3 |   |
| Amortization      of prior service cost |   |   | 2.9    |   |   |   | (0.3   | )      |   |   | (0.3 | ) |
| Recognized      actuarial loss          |   |   | 0.8    |   |   |   | 0.5    |   |   |   | 2.4 |   |
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      periodic benefit cost          |   | $      | 17.1   |   |   | $      | 10.0   |   |   | $ | 13.0 |   |

| 2010             |   |   | $      | 4.2  |   |
|------------------|--------|--------|--------|------|--------|
| 2011             |   |   |   | 4.8  |   |
| 2012             |   |   |   | 5.2  |   |
| 2013             |   |   |   | 5.9  |   |
| 2014             |   |   |   | 6.6  |   |
| 2015      - 2019 |   |   |   | 44.2 |   |

|                                                      |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Change      in service and interest cost                  |   |   |   |   |   |   |   |   |   |
| 1%      higher trend rate                                 |   | $      | 2.1    |   |   | $      | 1.4    |   |   | $ | 1.6 |   |
| 1%      lower trend rate                                  |   |   | (1.7   | )      |   |   | (1.2   | )      |   |   | (1.4 | ) |
| Change      in year-end postretirement benefit obligation |   |   |   |   |   |   |   |   |   |   |   |   |
| 1%      higher trend rate                                 |   | $      | 14.4   |   |   | $      | 13.3   |   |   | $ | 12.2 |   |
| 1%      lower trend rate                                  |   |   | (12.4  | )      |   |   | (11.5  | )      |   |   | (10.6 | ) |

----

Table of Contents

|   | • | Performance-Based Pay      (PBP) is a program that rewards all employees other than clerical, office      and passenger service employees (COPS) and station employees in      Mexico.  The program is based on four separate metrics related      to: (1) Air Group profitability, (2) safety,      (3) achievement of unit-cost goals, and (4) employee      engagement. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The      Profit Sharing      Plan is based on Air Group profitability and includes the employees      that don’t participate in PBP.   |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  • | The      Operational Performance      Rewards Program entitles all employees to quarterly payouts of up      to $300 per person if certain operational and customer service objectives      are met. |
|--------|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                              |   | 2009   |   |   | 2008   |
|---------------------------------------------------|--------|--------|--------|--------|--------|
| Airline      traffic receivables                  |   | $      | 54.9   |   |   | $ | 46.4 |   |
| Mileage      Plan receivables                     |   |   | 31.9   |   |   |   | 29.6 |   |
| Receivables      from fuel-hedging counterparties |   |   | 0.9    |   |   |   | — |   |
| Other      receivables                            |   |   | 18.5   |   |   |   | 24.4 |   |
| Allowance      for doubtful accounts              |   |   | (1.5   | )      |   |   | (1.5 | ) |
|                                              |   |   |   |   |   |   |   |   |   |
|                                              |   | $      | 104.7  |   |   | $ | 98.9 |   |

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Table of Contents

|                            |   | 2009   |   |   | 2008   |
|---------------------------------|--------|--------|--------|--------|--------|
| Prepaid      aircraft rent      |   | $      | 3.4    |   |   | $ | 3.4 |   |
| Prepaid      fuel               |   |   | 6.8    |   |   |   | 5.9 |   |
| Prepaid      engine maintenance |   |   | 13.3   |   |   |   | — |   |
| Other                           |   |   | 24.2   |   |   |   | 20.8 |   |
|                            |   |   |   |   |   |   |   |   |
|                            |   | $      | 47.7   |   |   | $ | 30.1 |   |

|                                                                  |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Restricted deposits      (primarily restricted      investments) |   | $      | 65.0   |   |   | $      | 57.4 |   |
| Deferred      costs and other*                                        |   |   | 15.3   |   |   |   | 16.0 |   |
|                                                                  |   |   |   |   |   |   |   |   |
|                                                                  |   | $      | 80.3   |   |   | $      | 73.4 |   |

| * | Deferred      costs and other includes deferred financing costs, long-term prepaid rent,      lease deposits and other items. |
|---|-------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | 2009   |   |   | 2008   |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Mileage Plan      current liabilities     |   | $      | 267.9  |   |   | $      | 280.4 |   |
| Pension      liability (nonqualified plans)    |   |   | 2.5    |   |   |   | 2.5 |   |
| Postretirement      medical benefits liability |   |   | 4.2    |   |   |   | 4.4 |   |
| Other*                                         |   |   | 231.8  |   |   |   | 223.4 |   |
|                                           |   |   |   |   |   |   |   |   |
|                                           |   | $      | 506.4  |   |   | $      | 510.7 |   |

| * | Other      consists of property and transportation taxes and accruals for ground      operations, facilities rent, maintenance, and fuel, among other      items. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Mileage      Plan liability                         |   | $      | 13.2   |   |   | $      | 15.9 |   |
| Uncertain      tax position liability (see Note 11) |   |   | 0.9    |   |   |   | 10.6 |   |
| Aircraft      rent-related                          |   |   | 23.3   |   |   |   | 55.5 |   |
| Other*                                              |   |   | 75.2   |   |   |   | 44.4 |   |
|                                                |   |   |   |   |   |   |   |   |
|                                                |   | $      | 112.6  |   |   | $      | 126.4 |   |

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Table of Contents

|                                                                                    |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Unrealized      loss (gain) on marketable securities considered      available-for-sale |   | $      | (8.7   | )      |   | $      | 2.5 |   |
| Related      to pension plans                                                           |   |   | 238.8  |   |   |   | 310.4 |   |
| Related      to postretirement medical benefits                                         |   |   | 11.4   |   |   |   | 15.4 |   |
| Related      to interest rate derivatives                                               |   |   | (1.5   | )      |   |   |  — |   |
|                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                    |   | $      | 240.0  |   |   | $      | 328.3 |   |

|                                                | 2009         | 2008           | 2007         |
|-----------------------------------------------------|--------------|----------------|--------------|
| Expected      volatility                            | 52%          | 42%            | 43%          |
| Expected      term                                  | 6 years | 5.7 years | 6 years |
| Risk-free      interest rate                        | 2.00%        | 2.96%          | 4.80%        |
| Expected      dividend yield                        | —      | —        | —      |
| Weighted-average      fair value of options granted | $14.00       | $10.98         | $19.27       |

----

Table of Contents

| (in      millions)                  |   | 2009   |    |   | 2008   |   |   | 2007   |   |
|-------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
| Stock      options                  |   | $      | 3.8     |   |   | $      | 4.3    |   |   | $ | 4.0 |   |
| Restricted      stock units         |   |   | 5.1     |   |   |   | 5.4    |   |   |   | 4.8 |   |
| Performance      share units        |   |   | — |   |   |   | (0.3   | )      |   |   | 0.3 |   |
| Employee      stock purchase plan   |   |   | 1.3     |   |   |   | 1.4    |   |   |   | 1.4 |   |
|                                |   |   |    |   |   |   |   |   |   |   |   |   |
| Total      stock-based compensation |   | $      | 10.2    |   |   | $      | 10.8   |   |   | $ | 10.5 |   |

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Table of Contents

|                                       |   | 2009   |    |   | 2008   |   |
|--------------------------------------------|--------|--------|---------|--------|--------|--------|
| Excess      of tax over book depreciation  |   | $      | 523.1   |   |   | $      | 477.1 |   |
| Fuel      hedge contracts                  |   |   | 9.1     |   |   |   | — |   |
| Other—net                            |   |   | 9.6     |   |   |   | 4.7 |   |
|                                       |   |   |    |   |   |   |   |   |
| Gross      deferred tax liabilities        |   |   | 541.8   |   |   |   | 481.8 |   |
|                                       |   |   |    |   |   |   |   |   |
| Mileage      Plan                          |   |   | (252.6  | )      |   |   | (255.3 | ) |
| Fuel      hedge contracts                  |   |   | — |   |   |   | (19.6 | ) |
| AMT      and other tax credits             |   |   | (56.8   | )      |   |   | (62.3 | ) |
| Leased      aircraft return provision      |   |   | (1.8    | )      |   |   | (5.2 | ) |
| Inventory      obsolescence                |   |   | (6.4    | )      |   |   | (5.7 | ) |
| Deferred      gains                        |   |   | (4.8    | )      |   |   | (5.9 | ) |
| Employee      benefits                     |   |   | (191.5  | )      |   |   | (244.7 | ) |
| Loss      carryforwards*                   |   |   | (12.9   | )      |   |   | (3.1 | ) |
| Other—net                            |   |   | (20.4   | )      |   |   | (24.7 | ) |
|                                       |   |   |    |   |   |   |   |   |
| Gross      deferred tax assets             |   |   | (547.2  | )      |   |   | (626.5 | ) |
|                                       |   |   |    |   |   |   |   |   |
| Net      deferred tax (assets) liabilities |   | $      | (5.4    | )      |   | $      | (144.7 | ) |
|                                       |   |   |    |   |   |   |   |   |
| Current      deferred tax asset            |   | $      | (110.1  | )      |   | $      | (146.7 | ) |
| Noncurrent      deferred tax liability     |   |   | 104.7   |   |   |   | 2.0 |   |
|                                       |   |   |    |   |   |   |   |   |
| Net      deferred tax (asset) liability    |   | $      | (5.4    | )      |   | $      | (144.7 | ) |

| * | Federal      loss carryforwards of $24.6 million ($8.6 million tax effected) expire      beginning in 2029.  State loss carryforwards of $91.7 million      ($4.3 million tax effected) expire beginning in 2010 and ending in      2029. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                           |   | 2009   |   |   | 2008   |   |    | 2007   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| Current      tax expense (benefit):                            |   |   |   |   |   |   |    |   |   |
| Federal                                                        |   | $      | (3.4   | )      |   | $      | 11.5    |   |   | $ | 28.4 |   |
| State                                                          |   |   | (1.2   | )      |   |   | — |   |   |   | 4.8 |   |
|                                                           |   |   |   |   |   |   |    |   |   |   |   |   |
| Total      current                                             |   |   | (4.6   | )      |   |   | 11.5    |   |   |   | 33.2 |   |
|                                                           |   |   |   |   |   |   |    |   |   |   |   |   |
| Deferred      tax expense (benefit):                           |   |   |   |   |   |   |    |   |   |   |   |   |
| Federal                                                        |   |   | 69.7   |   |   |   | (60.9   | )      |   |   | 44.5 |   |
| State                                                          |   |   | 9.0    |   |   |   | (7.5    | )      |   |   | 2.5 |   |
|                                                           |   |   |   |   |   |   |    |   |   |   |   |   |
| Total      deferred                                            |   |   | 78.7   |   |   |   | (68.4   | )      |   |   | 47.0 |   |
|                                                           |   |   |   |   |   |   |    |   |   |   |   |   |
| Total      tax expense (benefit) related to income      (loss) |   | $      | 74.1   |   |   | $      | (56.9   | )      |   | $ | 80.2 |   |

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Table of Contents

|                                 |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Income      (loss) before income tax |   | $      | 183.8  |   |   | $      | (153.3 | )      |   | $ | 215.0 |   |
| Expected      tax expense (benefit)  |   |   | 64.3   |   |   |   | (53.7  | )      |   |   | 75.2 |   |
| Nondeductible      expenses          |   |   | 2.6    |   |   |   | 2.6    |   |   |   | 2.8 |   |
| State      income taxes              |   |   | 5.4    |   |   |   | (4.9   | )      |   |   | 4.8 |   |
| Other—net*                     |   |   | 1.8    |   |   |   | (0.9   | )      |   |   | (2.6 | ) |
|                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Actual      tax expense (benefit)    |   | $      | 74.1   |   |   | $      | (56.9  | )      |   | $ | 80.2 |   |
|                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Effective      tax rate              |   |   | 40.3   | %      |   |   | 37.1   | %      |   |   | 37.3 | % |

| * | In      2007, other-net includes $1.0 million of tax benefits due to a favorable      decision in a matter with the State of California and $1.0 million of tax      benefits related to the recognition of California income tax credit      carryforwards. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Balance      at December 31, 2007                   |   | $      | 13.6    |   |
|----------------------------------------------------------|--------|--------|---------|--------|
| Gross      increases—tax positions in prior period |   |   | 0.8     |   |
| Gross      decreases—tax positions in prior period |   |   | (6.3    | )      |
| Gross      increases—current-period tax positions  |   |   | 2.5     |   |
| Settlements                                              |   |   | — |   |
| Lapse      of statute of limitations                     |   |   | — |   |
|                                                     |   |   |    |   |
| Balance      at December 31, 2008                   |   | $      | 10.6    |   |
|                                                     |   |   |    |   |
| Gross      increases—tax positions in prior period |   |   | — |   |
| Gross      decreases—tax positions in prior period |   |   | (9.8    | )      |
| Gross      increases—current-period tax positions  |   |   | 0.1     |   |
| Settlements                                              |   |   | — |   |
| Lapse      of statute of limitations                     |   |   | — |   |
|                                                     |   |   |    |   |
| Balance      at December 31, 2009                   |   | $      | 0.9     |   |

----

Table of Contents

|                           |   | Level 1 |   |   | Level 2 |   |    | Level 3 |   |   | Total   |   |
|--------------------------------|--------|--------------|--------|--------|--------------|--------|---------|--------------|--------|--------|---------|--------|
| Cash      and cash equivalents |   | $            | 164.2  |   |         | $      | — |         |   | $      | — |   |   | $ | 164.2 |   |
| Marketable      securities     |   |         | 108.9  |   |         |   | 919.0   |         |   |   | — |   |   |   | 1,027.9 |   |
|                           |   |         |   |   |         |   |    |         |   |   |    |   |   |   |   |   |
| Total                          |   | $            | 273.1  |   |         | $      | 919.0   |         |   | $      | — |   |   | $ | 1,192.1 |   |

|                           |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total   |   |
|--------------------------------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|---------|--------|
| Cash      and cash equivalents |   | $            | 257.1  |   |         | $      | 25.9   |         |   | $      | — |   |   | $ | 283.0 |   |
| Marketable      securities     |   |         | 68.3   |   |         |   | 726.0  |         |   |   | — |   |   |   | 794.3 |   |
|                           |   |         |   |   |         |   |   |         |   |   |    |   |   |   |   |   |
| Total                          |   | $            | 325.4  |   |         | $      | 751.9  |         |   | $      | — |   |   | $ | 1,077.3 |   |

----

Table of Contents

|                                          |   | CarryingAmount |    |   | FairValue |   |
|-----------------------------------------------|--------|----------------|---------|--------|-----------|--------|
| Long-term      debt at December 31, 2009 |   | $              | 1,507.8 |   |      | $      | 1,481.2 |   |
| Long-term      debt at December 31, 2008 |   | $              | 1,559.2 |   |      | $      | 1,696.9 |   |

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----

Table of Contents

| ITEM 9.   CHANGES IN AND      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL      DISCLOSURE |
|-------------------------------------------------------------------------------------------------------------------------|

| ITEM 9A.   CONTROLS AND      PROCEDURES |
|--------------------------------------------------------|

EVA

CH

MAN

| ITEM 9B.   OTHER  INFORMATION |
|----------------------------------------------|

PART 

|                                                                   |
|------------------------------------------------------------------------|
| ITEM 15.   EXHIBITS, FINANCIAL STATEMENT      SCHEDULES |

| 1. | Financial      Statement Schedules: Financial Statement Schedule II, Valuation      and Qualifying Accounts, for the years ended December 31, 2009, 2008      and 2007 on page 58. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | Exhibits: See Exhibit Index on page 55. |
|----|-----------------------------------------|

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SIG

|                       |                                                                                       |   |                              |   |
|----------------------------|--------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
| ALASKA      AIRLINES, INC. |                                                                                       |   |
|                       |                                                                                       |   |                              |
| By:                        | /s/    WILLIAM S. AYER         |   | Date:      February 24, 2010 |
|                       | William      S. Ayer,                                                                      |   |                              |   |
|                       | Chairman      and Chief Executive Officer                                                  |   |                              |   |

|                                                                                                                             |                                                                                                 |
|----------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------|
|                                                                                                                             |                                                                                                 |
| /S/    WILLIAM S. AYER         William      S. Ayer             | Chairman,      Chief Executive Officer and Director(Principal      Executive Officer)                |
|                                                                                                                             |                                                                                                 |
| /S/    GLENN S. JOHNSON         Glenn      S. Johnson           | Executive      Vice President/Finance and Chief Financial Officer (Principal Financial      Officer) |
|                                                                                                                             |                                                                                                 |
| /S/    BRANDON S. PEDERSEN         Brandon      S. Pedersen     | Vice      President/Finance and Controller(Principal      Accounting Officer)                        |
|                                                                                                                             |                                                                                                 |
| /S/    PATRICIA M. BEDIENT         Patricia      M. Bedient     | Director                                                                                             |
|                                                                                                                             |                                                                                                 |
| /S/    MARK R. HAMILTON         Mark      R. Hamilton           | Director                                                                                             |
|                                                                                                                             |                                                                                                 |
| /S/    JESSIE J. KNIGHT, JR.         Jessie      J. Knight, Jr. | Director                                                                                             |
|                                                                                                                             |                                                                                                 |
| /S/    DENNIS F. MADSEN       Dennis      F. Madsen                       | Director                                                                                             |
|                                                                                                                             |                                                                                                 |
| /S/    BYRON I. MALLOTT         Byron      I. Mallott           | Director                                                                                             |
|                                                                                                                             |                                                                                                 |

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EXHIB

|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|       3.1 | Articles      of Incorporation of Alaska Airlines, Inc. as amended through March 7,      1991 (Filed as Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q      for the period ended June 30, 2002, filed on August 14, 2002 and      incorporated herein by reference.)                                                                                                                                                                 |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|       3.2 | Bylaws      of Registrant, as amended and in effect February 12, 2003 (Filed as      Exhibit 3.2 to Registrant’s Annual Report on Form 10-K for the year ended      December 31, 2004, filed on February 25, 2005 and incorporated herein by      reference.)                                                                                                                                                                                                  |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|       4.1 | Trust      Indenture and Security Agreement for Alaska Airlines Equipment Trust      Certificates, Series A and B (Filed as Exhibit 4(a)(1) to Amendment No. 1      to Registrant’s Registration Statement on Form S-3, Registration No.      33-46668, and incorporated herein by reference.)                                                                                                                                                                 |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|       4.2 | Trust      Indenture and Security Agreement for Alaska Airlines Equipment Trust      Certificates, Series C and D (Filed as Exhibit 4(a)(1) to Amendment No. 2      to Registrant’s Registration Statement on Form S-3, Registration No.      33-46668, and incorporated herein by reference.)                                                                                                                                                                 |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|       4.3 | Participation      Agreement for Alaska Airlines Equipment Trust Certificates, Series A and B      (Filed as Exhibit 4(b)(1) to Amendment No. 1 to Registrant’s Registration      Statement on Form S-3, Registration No. 33-46668, and incorporated herein      by reference.)                                                                                                                                                                                |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|       4.4 | Participation      Agreement for Alaska Airlines Equipment Trust Certificates, Series C and C      (Filed as Exhibit 4(b)(1) to Amendment No. 2 to Registrant’s Registration      Statement on Form S-3, Registration No. 33-46668, and incorporated herein      by reference.)                                                                                                                                                                                |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|       4.5 | Lease      Agreement for Alaska Airlines Equipment Trust Certificates (Filed as      Exhibit 4(b)(2) to Registrant’s Registration Statement on Form S-3,      Registration No. 33-46668, and incorporated herein by      reference.)                                                                                                                                                                                                                           |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     10.1#           | Credit      Agreement, dated March 25, 2005, among Alaska Airlines, Inc., as borrower,      Bank of America, N.A., as administrative agent, Citicorp USA, Inc., as      syndication agent, U.S. Bank National Association, as documentation agent,      and other lenders (Filed as Exhibit 10.1 to Registrant’s Quarterly Report      on Form 10-Q for the period ended March 31, 2005, filed on May 6,      2005 and incorporated herein by reference.) |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     10.1.1          | First      Amendment to March 25, 2005 Credit Agreement, dated September 29, 2005      (Filed as Exhibit 10.1.1 to Alaska Air Group, Inc.’s {Commission File No.      1-8957} Annual Report on Form 10-K for the year ended December 31, 2007,      filed on February 20, 2008 and incorporated herein by      reference.)                                                                                                                                     |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     10.1.2#         | Second      Amendment to March 25, 2005 Credit Agreement, dated April 25, 2007 (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, 2007,      filed on May 8, 2007 and incorporated herein by  reference.)                                                                                                                                             |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     10.1.3          | Third      Amendment to March 25, 2005 Credit Agreement, dated July 30, 2007 (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 September 30,      2007, filed on November 7, 2007 and incorporated herein by      reference.)                                                                                                                                  |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     10.1.4#         | Fourth      Amendment to March 25, 2005 Credit Agreement, dated      September 24, 2008 (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 September 30, 2008, filed on November 7, 2008 and      incorporated herein by reference.)                                                                                                             |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     10.2#           | Credit      Agreement, dated October 19, 2005, among Alaska Airlines, Inc., as      borrower, HSH Nordbank AG New York Branch, as security agent, and other      loan participants (Filed as Exhibit 10.1 to Registrant’s Quarterly Report      on Form 10-Q for the period ended September 30, 2005, filed on      November 9, 2005 and incorporated herein by reference.)                                                                               |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     10.2.1#         | First      Amendment to October 19, 2005 Credit Agreement, dated March 27, 2007      (Filed as Exhibit 10.2.1 to Alaska Air Group, Inc.’s {Commission File No.      1-8957} Annual Report on Form 10-K for the year ended December 31, 2007,      filed on February 20, 2008 and incorporated herein by      reference.)                                                                                                                                       |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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Table of Contents

|     10.2.2# | Second      Amendment to October 19, 2005 Credit Agreement, dated November 26, 2007      (Filed as Exhibit 10.2.2 to Alaska Air Group, Inc.’s {Commission File No.      1-8957} Annual Report on Form 10-K for the year ended December 31, 2007,      filed on February 20, 2008 and incorporated herein by      reference.)                                                                                                                                                          |
|---------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.3#   | Aircraft      General Terms Agreement, dated June 15, 2005, between the Boeing Company      and Alaska Airlines, Inc. (Filed as Exhibit 10.1 to Registrant’s Quarterly      Report on Form 10-Q for the period ended June 30, 2005, filed on      August 5, 2005 and incorporated herein by reference.)                                                                                                                                                                          |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.4#   | Purchase      Agreement No. 2497, dated June 15, 2005, between the Boeing Company and      Alaska Airlines, Inc. (Filed as Exhibit 10.2 to Registrant’s Quarterly      Report on Form 10-Q for the period ended June 30, 2005, filed on      August 5, 2005 and incorporated herein by reference.)                                                                                                                                                                               |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.5#   | Lease      Agreement, dated January 22, 1990, between International Lease Finance      Corporation and Alaska Airlines, Inc., summaries of 19 substantially      identical lease agreements and Letter Agreement #1, dated January 22, 1990      (Filed as Exhibit 10-14 to Alaska Air Group, Inc.’s {Commission File No.      1-8957} Annual Report on Form 10-K for the year ended December 31,      1990, filed on April 11, 1991 and incorporated herein by      reference.) |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.6*   | Alaska      Air Group Performance Based Pay Plan (formerly “Management Incentive      Plan”), as amended and restated December 2, 2009 (Filed as Exhibit 10.7 to      Alaska Air Group, Inc.’s {Commission File No. 1-8957} Annual Report on      Form 10-K for the year ended December 31, 2009, filed on February 19, 2010      and incorporated herein by reference.)                                                                                                  |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.7*   | Alaska      Air Group, Inc. 2008 Performance Incentive Plan (Filed as Exhibit 10.1 to      Alaska Air Group, Inc.’s {Commission File No. 1-8957} Current Report on      Form 8-K, filed on May 22, 2008 and incorporated herein by      reference.)                                                                                                                                                                                                                                   |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.7.1* | Alaska      Air Group, Inc. 2008 Performance Incentive Plan Form of Nonqualified Stock      Option Agreement (Filed as Exhibit 10.2 to Alaska Air Group, Inc.’s      {Commission File No. 1-8957} Current Report on Form 8-K, filed on May 22,      2008 and incorporated herein by reference.)                                                                                                                                                                                       |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.7.2* | Alaska      Air Group, Inc. 2008 Performance Incentive Plan Form of Stock Unit Award      Agreement (Filed as Exhibit 10.3 to Alaska Air Group, Inc.’s {Commission      File No. 1-8957} Current Report on Form 8-K, filed on May 22, 2008 and      incorporated herein by reference.)                                                                                                                                                                                                |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.7.3* | Alaska      Air Group, Inc. 2008 Performance Incentive Plan Form of Director Deferred      Stock Unit Award Agreement (Filed as Exhibit 10.4 to Alaska Air Group,      Inc.’s {Commission File No. 1-8957} Current Report on Form 8-K, filed on      May 22, 2008 and incorporated herein byreference.)                                                                                                                                                                          |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.7.4* | Alaska      Air Group, Inc. 2008 Performance Incentive Plan Nonqualified Stock Option      Agreement – Incentive Award (Filed as Exhibit 10.1 to Alaska Air Group,      Inc.’s {Commission File No. 1-8957} Current Report on Form 8-K, filed on      February 2, 2009 and incorporated herein by reference.)                                                                                                                                                                   |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.7.5* | Alaska      Air Group, Inc. 2008 Performance Incentive Plan Stock Unit Award Agreement      – Incentive Award (Filed as Exhibit 10.2 to Alaska Air Group, Inc.’s      {Commission File No. 1-8957} Current Report on Form 8-K, filed on February      2, 2009 and incorporated herein by reference.)                                                                                                                                                                            |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.7.6* | Alaska      Air Group, Inc. 2008 Performance Incentive Plan Stock Unit Award Agreement      (Filed as Exhibit 10.1 to Alaska Air Group, Inc.’s {Commission File No.      1-8957} Current Report on Form 8-K, filed on February 5, 2010 and      incorporated herein by reference.)                                                                                                                                                                                                    |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.7.7* | Alaska      Air Group, Inc. 2008 Performance Incentive Plan Nonqualified Stock Option      Agreement (Filed as Exhibit 10.2 to Alaska Air Group, Inc.’s {Commission      File No. 1-8957} Current Report on Form 8-K, filed on February 5, 2010 and      incorporated herein by reference.)                                                                                                                                                                                           |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.8*   | Alaska      Air Group, Inc. 2004 Long-Term Incentive Plan and original form of stock      option and restricted stock unit agreements (Filed as Exhibit 10.2 to      Registrant’s Annual Report on Form 10-K for the year ended December      31, 2004, filed on February 25, 2005 and incorporated herein by      reference.)                                                                                                                                                   |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     10.8.1* | Alaska      Air Group, Inc. 2004 Long-Term Incentive Plan Nonqualified Stock Option      Agreement (Filed as Exhibit 10.8.1 to Alaska Air Group, Inc.’s {Commission      File No. 1-8957} Annual Report on Form 10-K for the year ended December      31, 2007, filed on February 20, 2008 and incorporated herein by      reference.)                                                                                                                                                |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

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Table of Contents

|     10.8.2*     | Alaska      Air Group, Inc. 2004 Long-Term Incentive Plan Stock Unit Award Agreement      (Filed as Exhibit 10.8.2 to Alaska Air Group, Inc.’s {Commission File No.      1-8957} Annual Report on Form 10-K for the year ended December 31, 2007,      filed on February 20, 2008 and incorporated herein by      reference.)                                                                                                                                                                                                                                   |
|-------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.8.3*     | Alaska      Air Group, Inc. 2004 Long-Term Incentive Plan Performance Stock Unit Award      Agreement (Filed as Exhibit 10.3 to Alaska Air Group, Inc.’s {Commission      File No. 1-8957} Current Report on Form 8-K, filed on February 14, 2008      and incorporated herein by reference.)                                                                                                                                                                                                                                                                   |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.9*       | Alaska      Air Group, Inc. 1999 Long-Term Incentive Equity Plan (Filed as      Exhibit 99.1 to Alaska Air Group, Inc.’s Registration Statement on      Form S-8, Registration No. 333-87563, filed on September 22, 1999 and      incorporated herein by reference.)                                                                                                                                                                                                                                                                                 |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.10*      | Alaska      Air Group, Inc. 1997 Non Officer Long-Term Incentive Equity Plan (Filed as      Exhibit 99.2 to Alaska Air Group, Inc.’s Registration Statement on      Form S-8, Registration No. 333-39889, filed on November 10, 1997 and      incorporated herein by reference.)                                                                                                                                                                                                                                                                      |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.11*      | Alaska      Air Group, Inc. 1996 Long-Term Incentive Equity Plan (Filed as      Exhibit 99.1 to Alaska Air Group, Inc.’s Registration Statement on      Form S-8, Registration No. 333-09547, filed on August 5, 1996 and      incorporated herein by reference.)                                                                                                                                                                                                                                                                                     |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.12*      | Alaska      Air Group, Inc. Non Employee Director Stock Plan (Filed as      Exhibit 99.1 to Alaska Air Group, Inc.’s Registration Statement on      Form S-8, Registration No. 333-33727, filed on August 15, 1997 and      incorporated herein by reference.)                                                                                                                                                                                                                                                                                        |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.13*      | Alaska      Airlines, Inc. and Alaska Air Group, Inc. Supplementary Retirement Plan      for Elected Officers, as amended November 7, 1994 (Filed as Exhibit 10.15      to Alaska Air Group, Inc.’s {Commission File No. 1-8957} Annual Report on      Form 10-K for the year ended December 31, 1997, filed on February 10,      1998 and incorporated herein by reference.)                                                                                                                                                                              |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.14*      | Alaska      Air Group, Inc. 1995 Elected Officers Supplementary Retirement Plan, as      amended by First Amendment to the Alaska Air Group, Inc. 1995 Elected      Officers Supplementary Retirement Plan and Second Amendment to the Alaska      Air Group, Inc. 1995 Elected Officers Supplementary Retirement Plan (Filed      as Exhibit 10.13 to Amendment No. 1 to Alaska Air Group, Inc.’s      Registration Statement on Form S-1, Registration No. 333-107177,      filed on September 23, 2003 and incorporated herein by      reference.) |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.15*      | Form      of Alaska Air Group, Inc. Change of Control Agreement for named executive      officers, as amended and restated November 28, 2007 (Filed as Exhibit      10.16 to Alaska Air Group, Inc.’s {Commission File No. 1-8957} Annual      Report on Form 10-K for the year ended December 31, 2007, filed on      February 20, 2008 and incorporated herein byreference.)                                                                                                                                                                                  |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.16*      | Alaska      Air Group, Inc. Nonqualified Deferred Compensation Plan, as amended and      restated on December 1, 2005 (Filed as Exhibit 10.17 to Alaska Air Group,      Inc.’s {Commission File No. 1-8957} Annual Report on Form 10-K for the      year ended December 31, 2007, filed on February 20, 2008 and incorporated      herein by reference.)                                                                                                                                                                                                        |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     10.17*      | Separation      Agreement between Gregg Saretsky and Alaska Airlines, Inc. dated December      10, 2008 (Filed as Exhibit 10.1 to Alaska Air Group, Inc.’s {Commission      File No. 1-8957} Current Report on Form 8-K, filed on December 10,      2008 and incorporated herein by reference.)                                                                                                                                                                                                                                                            |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     12.1† | Statement of Computation of Ratio of Earnings to Fixed      Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     23.1† | Consent of Independent Registered Public Accounting Firm      (KPMG LLP)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     31.1† | Certification of Chief Executive Officer Pursuant to      Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     31.2† | Certification of Chief Financial Officer Pursuant to      Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     32.1† | Certification of Chief Executive Officer Pursuant to 18      U.S.C. Section 1350, as adopted pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     32.2† | Certification of Chief Financial Officer Pursuant to 18      U.S.C. Section 1350, as adopted pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                           |

| † | Filed      herewith. |
|---------|----------------------|

| * | Indicates      management contract or compensatory plan or  arrangement. |
|---|--------------------------------------------------------------------------|

| # | Pursuant      to 17 CFR 240.24b-2, confidential information has been omitted and filed      separately with the Securities and Exchange Commission pursuant to a      Confidential Treatment Application filed with the    Commission. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

Sched

| (in      millions)                                               |   | BeginningBalance |   |   | AdditionsChargedto Expense |   |   | Deductions |   |   | EndingBalance |   |
|------------------------------------------------------------------|--------|------------------|--------|--------|---------------------------------|--------|--------|------------|--------|--------|---------------|--------|
| Year      Ended December 31, 2007                           |   |             |   |   |                            |   |   |       |   |   |          |   |
| Reserve      deducted from asset to which it applies:            |   |             |   |   |                            |   |   |       |   |   |          |   |
| Allowance      for doubtful accounts                             |   | $                | 2.5    |   |                            | $      | 1.6    |       |   | $      | (2.5          | )      |   | $ | 1.6 |   |
| Obsolescence      allowance for flight equipment spare parts     |   | $                | 14.0   |   |                            | $      | 2.4    |       |   | $      | (1.3          | )      |   | $ | 15.1 |   |
|                                                             |   |             |   |   |                            |   |   |       |   |   |          |   |   |   |   |   |
| Year      Ended December 31, 2008                           |   |             |   |   |                            |   |   |       |   |   |          |   |   |   |   |   |
| Reserve      deducted from asset to which it applies:            |   |             |   |   |                            |   |   |       |   |   |          |   |   |   |   |   |
| Allowance      for doubtful accounts                             |   | $                | 1.6    |   |                            | $      | 1.5    |       |   | $      | (1.6          | )      |   | $ | 1.5 |   |
| Obsolescence      allowance for flight equipment spare parts     |   | $                | 15.1   |   |                            | $      | 1.1    |       |   | $      | (9.1          | )      |   | $ | 7.1 |   |
|                                                             |   |             |   |   |                            |   |   |       |   |   |          |   |   |   |   |   |
| Year      Ended December 31, 2009                           |   |             |   |   |                            |   |   |       |   |   |          |   |   |   |   |   |
| Reserve      deducted from asset to which it applies:            |   |             |   |   |                            |   |   |       |   |   |          |   |   |   |   |   |
| Allowance      for doubtful accounts                             |   | $                | 1.5    |   |                            | $      | 1.4    |       |   | $      | (1.4          | )      |   | $ | 1.5 |   |
| Obsolescence      allowance for flight equipment spare parts (a) |   | $                | 7.1    |   |                            | $      | 1.3    |       |   | $      | 0.0           |   |   | $ | 8.4 |   |

| (a) | Deductions      in 2008 are primarily related to the write off of the MD-80 and B737-200      parts allowances against their respective costs  bases. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

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