UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
FORM 10-K

(Mark One)

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ACT OF 	1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR

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

For the transition period from  . . . . . . . .  to  . . . . . . . .

Commission File Number  0-19978


ALASKA AIRLINES, INC.
(Exact name of registrant as specified in its charter)


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


19300 Pacific Highway South, Seattle, Washington 98188
(Address of Principal Executive Offices)

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

Securities registered pursuant to Section 12(g) of the Act:

Title of Class
Common Stock, $1.00 Par Value

	As of December 31, 1998, common shares outstanding totaled 500.  

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes    X    No ____

The registrant meets the conditions set forth in General Instructions (J)(1)(a)
and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced
disclosure format.  Items 4, 6, 10, 11, 12 and 13 have been omitted in
accordance with such Instruction J.

The registrant's parent, Alaska Air Group, Inc. (File No. 1-8957), files reports
with the Commission pursuant to the Securities Exchange Act of 1934, as amended.

Exhibit Index begins on page 27.
<PAGE>
PART I

ITEM 1.	BUSINESS

GENERAL INFORMATION
Alaska Airlines, Inc. (Alaska or the Company) is a wholly owned 
subsidiary of Alaska Air Group, Inc.  Alaska Air Group, Inc. is a 
holding company that also owns Horizon Air Industries, Inc. (Horizon).  
Alaska is a major airline that was organized in 1932 and incorporated in 
the state of Alaska in 1937.  Alaska became a wholly owned subsidiary of 
Alaska Air Group, Inc. in 1985 pursuant to a reorganization of Alaska 
into a holding company structure.  Alaska Air Group, Inc. is a 
registrant pursuant to Section 12(b) of the Securities and Exchange Act 
of 1934 (Commission File No. 1-8957).  Alaska's executive offices are 
located at 19300 Pacific Highway South, Seattle, Washington 98188.  In 
1998, Alaska accounted for 83% of Alaska Air Group, Inc.'s total 
operating revenues.

Horizon, a Washington corporation, began service in 1981 and was 
acquired by Alaska Air Group, Inc. in 1986.  Horizon is a regional 
airline, that operates in the Pacific Northwest, Northern California and 
Western Canada.

Operations
Alaska serves 35 cities in six states (Alaska, Washington, Oregon, 
California, Nevada and Arizona), one city in Canada and five cities in 
Mexico..  In each year since 1973, Alaska has carried more passengers 
between Alaska and the U.S. mainland than any other airline.  In 1998, 
Alaska carried 13.1 million passengers.  Passenger traffic within Alaska 
and between Alaska and the U.S. mainland accounted for 25% of Alaska's 
1998 revenue passenger miles, West Coast traffic (including Vancouver, 
Canada) accounted for 67% and the Mexico markets 8%.  Based on passenger 
enplanements, Alaska's leading airports are Seattle, Portland, Los 
Angeles and Anchorage.  Based on revenues, its leading nonstop routes 
are Seattle-Anchorage, Seattle-Los Angeles and Seattle-San Diego.  At 
December 31, 1998, Alaska's operating fleet consisted of 84 jet 
aircraft.

Alaska distinguishes itself from competitors by providing a higher level 
of customer service.  The airline's excellent service in the form of 
advance seat assignments, a first class section, attention to customer 
needs, high-quality food and beverage service, well-maintained aircraft 
and other amenities has been recognized by independent studies and 
surveys of air travelers.  Alaska offers competitive fares.

The majority of Alaska flights, and certain Northwest Airlines flights, 
are dual-designated in airline computer reservation systems as Alaska 
Airlines and Northwest Airlines in order to facilitate feed traffic 
between the two airlines.  Alaska Airlines also serves six smaller 
cities in California, six in Washington, two in Oregon and many small 
communities in Alaska through code share marketing agreements with local 
commuter carriers.  In October 1998, Alaska suspended its service to 
Russia due to economic instability in Russia.


BUSINESS RISKS 
The Company's operations and financial results are subject to various 
uncertainties, such as intense competition, volatile fuel prices, a 
largely unionized labor force, the need to finance large capital 
expenditures, government regulation, potential aircraft incidents and 
general economic conditions.

Competition
Competition in the air transportation industry is intense.  Any domestic 
air carrier deemed fit by the DOT is allowed to operate scheduled 
passenger service in the United States.  Alaska carries 2.3% of all U.S. 
domestic passenger traffic.  Alaska competes with one or more domestic 
or foreign airlines on most of its routes.  Some of these competitors 
are substantially larger than Alaska, have greater financial resources 
and have more extensive route systems.

Most major U.S. carriers have developed, independently or in partnership 
with others, large computerized reservation systems (CRS).  Airlines, 
including Alaska, are charged industry-set fees to have their flight 
schedules included in the various CRS displays.  These systems are 
currently the predominant means of distributing airline tickets.  In 
order to reduce anti-competitive practices, the DOT regulates the 
display of all airline schedules and fares.

Fuel
Fuel costs were 11.8% of the Company's total operating expenses in 1998.  
Fuel prices, which can be volatile and are largely outside of the 
Company's control, can have a significant impact on the Company's 
operating results.  Currently, a one cent change in the fuel price per 
gallon affects annual fuel costs by approximately $3.0 million.  The 
Company has in the past hedged against its exposure to fluctuations in 
the price of jet fuel, but does not currently do so.  The Company 
evaluates hedging strategies on an ongoing basis.

Unionized Labor Force
Labor costs were 35% of the Company's total operating expenses in 1998.  
Wage rates can have a significant impact on the Company's operating 
results.  At December 31, 1998, labor unions represented 87% of Alaska's 
employees.  The air transportation industry is regulated under the 
Railway Labor Act, which vests in the National Mediation Board certain 
regulatory powers with respect to disputes between airlines and labor 
unions.  The Company cannot predict the outcome of union contract 
negotiations nor control the variety of actions (e.g. work stoppage or 
slowdown) unions might take to try to influence those negotiations.

Leverage and Future Capital Requirements
The Company, like many airlines, is relatively highly leveraged, which 
increases the volatility of its earnings.  Due to its high fixed costs, 
including aircraft lease commitments, a decrease in revenues results in 
a disproportionately greater decrease in earnings.  In addition, the 
Company has an ongoing need to finance new aircraft deliveries and there 
is no assurance that such financing will be available in sufficient 
amounts or on acceptable terms.  See Item 7 for management's discussion 
of liquidity and capital resources.

Government Regulation; International Routes
Like other airlines, the Company is subject to regulation by the Federal 
Aviation Administration (FAA) and the United States Department of 
Transportation (DOT).  The FAA, under its mandate to ensure aviation 
safety, has the authority to ground aircraft and to suspend temporarily 
or revoke permanently the authority of an air carrier or its licensed 
personnel for failure to comply with Federal Aviation Regulations and to 
levy civil penalties for such failure.  The DOT has the authority to 
regulate certain airline economic functions including financial and 
statistical reporting, consumer protection, computerized reservations 
systems, essential air transportation and international route authority.  
The Company is subject to bilateral agreements between the United States 
and the foreign countries to which the Company provides service.  There 
can be no assurance that existing bilateral agreements between the 
United States and the foreign governments will continue or that the 
Company's designation to operate such routes will continue.

Risk of Loss and Liability; Weather
The Company is exposed to potential catastrophic losses in the event of 
aircraft accidents or terrorist incidents.  Consistent with industry 
standards, the Company maintains vigorous safety, training and 
maintenance programs, as well as insurance against such losses.  
However, any aircraft accident, even if fully insured, could cause a 
negative public perception of the Company with adverse financial 
consequences.  Unusually adverse weather can significantly reduce flight 
operations, resulting in lost revenues and added expenses.

OTHER INFORMATION
Frequent Flyer Program
All major airlines have developed frequent flyer programs as a way of 
increasing passenger loyalty.  Alaska's Mileage Plan allows members to 
earn mileage by flying on Alaska, Horizon and other participating 
airlines, and by using the services of non-airline partners, which 
include a credit card partner, telephone companies, hotels and car 
rental agencies.  Alaska is paid by non-airline partners for the miles 
it credits to member accounts.  Alaska has the ability to change the 
Mileage Plan terms, conditions, partners, mileage credits and award 
levels.

Mileage can be redeemed for free or discounted travel and for other 
travel industry awards.  Upon accumulating the necessary mileage, 
members notify Alaska of their award selection  Over 70% of the flight 
awards selected are subject to blackout dates and capacity-controlled 
seating.  Unlike many other airlines, Alaska's miles do not expire.  As 
of the year-end 1997 and 1998, Alaska estimates that 652,000 and 812,000 
round trip flight awards could have been redeemed by Mileage Plan 
members who have mileage credits exceeding the 20,000 mile free round 
trip domestic ticket award threshold.  At December 31, 1998, fewer than 
4% of these flight awards were issued and outstanding.  For the years 
1996, 1997 and 1998, approximately 173,000, 185,000 and 191,000 round 
trip flight awards were redeemed and flown on Alaska and Horizon.  These 
awards represent approximately 4.4% for 1996, 3.2% for 1997, and 3.1% 
for 1998, of the total passenger miles flown for each period.

Alaska maintains a liability for its Mileage Plan obligation that is 
based on its total miles outstanding, less an estimate for miles that 
will never be redeemed.  The net miles outstanding are allocated between 
those credited for travel on Alaska, Horizon or other airline partners 
and those credited for using the services of non-airline partners.  
Miles credited for travel on Alaska, Horizon or other airline partners 
are accrued at Alaska's incremental cost of providing the air travel.  
The incremental cost includes the cost of meals, fuel, reservations and 
insurance.  The incremental cost does not include a contribution to 
overhead, aircraft cost or profit.  A portion of the proceeds received 
from non-airline partners is also deferred.  At December 31, 1997 and 
1998, the total liability for miles outstanding was $22.3 million and 
$28.0 million, respectively.

Employees
Alaska had 9,244 active full-time and part-time employees at December 
31, 1998.  Alaska's union contracts at December 31, 1998 were as follows:	

                                        			  Number of
	Union	                   Employee Group	    Employees   	Contract Status 

Air Line Pilots          	Pilots                	1,156    Amendable 4/30/03
Association International 	

Association of           	Flight attendants     	1,635    Amendable 3/14/99
Flight Attendants

International            	Rampservice	             932    Amendable 8/31/97
Association of	           and stock clerks			             In mediation
Machinists and	
Aerospace Workers	
                        		Clerical, office      	3,211    Amendable 5/20/99
                         	and	passenger service		         In negotiation

Aircraft Mechanics       	Mechanics, inspectors 	1,031	   Initial contract
Fraternal Association    	and cleaners			                 In negotiation

Mexico Workers           	Mexico airport           	71   	Amendable 4/1/99
Association	              personnel
of Air Transport

Transport Workers        	Dispatchers              	16	   Amendable 2/9/02
Union of America


ITEM 2.	PROPERTIES

Aircraft
The following table describes the aircraft operated and their average 
age at December 31, 1998.

                     	Passenger							                 	Average Age
Aircraft Type        	Capacity		Owned 	Leased	 Total   	in Years
Boeing 737-200C	         111       	7      	1     	8	     18.4
Boeing 737-400	          140       	4     	33	    37	      3.8
McDonnell Douglas MD-80	 140      	16     	23    	39      	9.0
                                 		27     	57    	84      	7.6

Eleven of the 27 aircraft owned by Alaska as of December 31, 1998 are 
subject to liens securing long-term debt.  Alaska's leased B737-200C, 
B737-400 and MD-80 aircraft have lease expiration dates in 1999, between 
2002 and 2016, and between 1999 and 2013, respectively.  Alaska has the 
option to extend most of the leases for additional periods, or the right 
to purchase the aircraft at the end of the lease term, usually at the 
then fair market value of the aircraft.  For information regarding 
obligations under capital leases and long-term operating leases, see 
Notes to Financial Statements.

Special noise ordinances or agreements restrict the type of aircraft, 
the timing and the number of flights operated by Alaska and other air 
carriers at four Los Angeles area airports plus San Diego, San Jose, San 
Francisco and Seattle.  At December 31, 1998, all of Alaska's aircraft 
meet the Stage 3 noise requirements under the Airport Noise and Capacity 
Act of 1990.

Ground Facilities and Services
Alaska leases ticket counter, gates, cargo and baggage, office space and 
other support areas at the majority of the airports it serves.  Alaska 
also owns terminal buildings at various Alaska cities.

Alaska has centralized operations in several buildings located at or 
near Seattle-Tacoma International Airport (Sea-Tac) in Seattle, 
Washington.  The owned buildings, including land unless located on 
leased airport property, include: a three-bay hangar facility with 
maintenance shops; a flight operations and training center; an air cargo 
facility; a reservations and office facility; two office buildings; its 
corporate headquarters; and two storage warehouses.  Alaska also leases 
a two-bay hangar/office facility at Sea-Tac.   

Alaska's other major facilities include: a regional headquarters 
building, an air cargo facility and a leased hangar/office facility in 
Anchorage; a Phoenix reservations center; and a leased two-bay 
maintenance facility in Oakland.

ITEM 3.	LEGAL PROCEEDINGS

In July 1998, the Company announced that it had reached an agreement in 
principle with the trustee for creditors of the defunct MarkAir, Inc. 
regarding a breach of contract lawsuit.  Subsequently, a formal 
settlement agreement was approved by the bankruptcy court.  The $16.5 
million settlement resulted in an after-tax charge of $10.1 million in 
the third quarter of 1998.

PART II

ITEM 5.	MARKET PRICE FOR THE REGISTRANT'S COMMON STOCK AND RELATED
	STOCKHOLDER MATTERS

All of Alaska's outstanding common stock is held by Alaska Air Group, 
Inc. and such stock is not traded in any market.  No cash dividend has 
been paid since 1989 and Alaska does not expect to pay regular dividends 
to Alaska Air Group.

ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

Industry Conditions
The airline industry is cyclical due to a high correlation between 
demand for air travel and general economic conditions.  Generally 
speaking, economic conditions have been strong during the years covered 
by this discussion.  Because the industry has high fixed costs in 
relation to revenues, a small change in load factors or fare levels has 
a large impact on profits.

For most airlines, labor and fuel account for almost half of operating 
expenses.  The strong economy has increased employee turnover and put 
upward pressure on labor costs.  Fuel prices have been volatile in the 
last three years.  For Alaska Airlines, fuel prices increased 20% in 
1996, decreased 4% in 1997 and decreased another 25% in 1998.

In recent years, airlines have reduced their ticket distribution costs 
by capping travel agent commissions, by decreasing commission rates from 
10% to 8%, by partially eliminating paper tickets and by selling tickets 
directly to passengers via the Internet.

RESULTS OF OPERATIONS
1998 Compared with 1997  Net income in 1998 was $116.5 million, compared 
with $76.0 million in 1997.  The 1998 results include an after-tax 
charge of $10.1 million for settlement of the MarkAir litigation.  
Operating income was $194.0 million in 1998 compared to $134.3 million 
in 1997. Lower fuel prices accounted for $48.1 million of the $59.7 
million improvement in operating income.  Airline financial and 
statistical data is shown following the financial statements.  A 
discussion of this data follows.

Operating income increased 44.5% to $194.0 million, resulting in a 12.4% 
operating margin as compared to a 9.3% margin in 1997.  Operating 
revenue per available seat mile (ASM) decreased 0.6% to 9.32 cents while 
operating expenses per ASM decreased 4.1% to 8.17 cents.

The decrease in revenue per ASM was primarily due to a 0.2 point 
decrease in passenger load factor.  The Pacific Northwest-Southern 
California and Pacific Northwest-Northern California markets experienced 
modest increases in load factor, while the Seattle-Anchorage market 
experienced a small decrease.  Alaska's top five markets, which 
represent 79% of its traffic, experienced increases in passenger yield.  
Several smaller markets, including the new Canadian market, had 
decreases in yield.

Freight and mail revenues increased 1.0% primarily due to a 4.7% 
increase in mail pounds and a 0.5% increase in freight pounds carried.  
Freight rates were down due to increased competition in the Seattle-
Anchorage market.  Other-net revenues increased 6.2% due to increased 
revenue from travel partners in Alaska's frequent flyer program.

Wages and benefits increased 10.0% due to a 5.7% increase in the number 
of employees combined with a 4.1% increase in average wages and benefits 
per employee.  Employees were added in all areas to service the 8.9% 
capacity (ASM) increase and the 6.3% increase in passengers carried.  
Average wages and benefits per employee increased primarily due to 
higher pilot wage rates and pension costs that resulted from a new pilot 
contract signed in late 1997.

Profit sharing expense increased 63% due to a large increase in pretax 
income.

Contracted services increased 15%, due to growth in ground handling and 
security charges as a result of more flights to Canada and other cities, 
greater use of temporary employees (particularly in computer systems 
development), higher shipping charges incurred and increased navigation 
fees in Canada and Mexico.

Fuel expense decreased 19%, as the 8% increase in fuel consumption was 
more than offset by a 25% decrease in the price of fuel.

Maintenance expense increased 15%, exceeding the 9% increase in 
capacity, due to a greater number of annual aircraft inspections (C 
checks) performed, and increased engine overhaul expense.

Aircraft rent increased 7%, primarily due to leasing nine new aircraft 
in 1998.

Food and beverage expense increased 5%, in line with the 6% increase in 
passengers carried.

Commission expense decreased 6% (in spite of a 9% increase in passenger 
revenue), primarily because the commission rate paid to travel agents 
decreased from 10% to 8% for sales made since October, 1997.  As a 
percentage of passenger revenue, commission expense decreased 14%, from 
7.8% to 6.7%.  In 1998, 70% of ticket sales were made through travel 
agents, versus 72% in 1997.

Other selling expenses increased 18%, higher than the 9% increase in 
passenger revenues, due to increased advertising to promote the new 
Canada market and other markets.

Depreciation and amortization expense increased 9%, primarily due to 
modifications (made in late 1997) to the B737-200C fleet to meet Stage 3 
noise requirements, a full year of depreciation on two MD-80s purchased 
in 1997 and added depreciation on computers and related equipment.

Landing fees and other rentals increased 12%, higher than the 9% 
increase in capacity, primarily due to rental rate and space increases 
at several airports and higher than average fees in Canada.

Other expense decreased 1%, primarily due to a $2.7 million recovery of 
California property taxes that resulted from settlement of industry 
litigation, lower long distance telephone rates and lower insurance 
rates.  These savings were partly offset by higher expenditures for 
operating supplies, employee hiring, flight crew hotels and legal fees.

Nonoperating Income (Expense) Net nonoperating items improved $3.4 
million over 1997 due to lower interest expense (due to less 
intercompany and other debt ) and higher interest income (due to higher 
cash balances), which were partly offset by a $16.5 million charge for 
settlement of the MarkAir litigation.

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

                          	Dec. 31, 1997  	Dec. 31, 1998   	Change
                           (In millions, except debt-to-equity)

Cash and marketable securities	   $212.4	        	$306.3	   	$93.9
Working capital (deficit)		       (151.4)		        (85.7)   		65.7
Long-term debt and
  capital lease obligations      		215.3         		171.5	   	(43.8)
Shareholders' equity		             433.0         		549.5   		116.5
Debt-to-equity	                  33%:67%        	24%:76%       	NA

1998 Financial Changes  The Company's cash and marketable securities 
portfolio increased by $94 million during 1998.  Operating activities 
provided $272 million of cash during this period. Additional cash was 
provided by the sale and leaseback of nine B737-400 aircraft ($288 
million).  Cash was used for $420 million of capital expenditures, 
including the purchase of nine new B737-400 aircraft, a previously 
leased B737-400 aircraft, flight equipment deposits and airframe and 
engine overhauls and the repayment of debt ($45 million).

Like most airlines, the Company has a working capital deficit.  The 
existence of a working capital deficit has not in the past impaired the 
Company's ability to meet its obligations as they become due and it is 
not expected to do so in the future.

Financing Arrangements   During 1998, Alaska sold nine B737-400 aircraft 
and leased them back for 18 years.


Commitments  During 1998, Alaska's lease commitments increased 
approximately $414 million due to the sale and leaseback of nine B737-
400 aircraft.  In addition, Alaska ordered eight Boeing 737 aircraft 
with a cost of approximately $256 million.  Alaska expects to finance 
the new planes with either leases, long-term debt or internally 
generated cash.  At December 31, 1998, the Company had firm orders for 
25 aircraft with a total cost of approximately $818 million as set forth 
below.  In addition, Alaska has options to acquire 26 more B737s.
	
                   	Delivery Period - Firm Orders
Aircraft        		1999  	2000  	2001	  2002  	Total
Boeing B737-400		    3	    --	    --	    --	      3
Boeing B737-700		    5	     7	    --	    --     	12
Boeing B737-900		   --    	--     	5	     5	     10
Total	              	8     	7     	5     	5     	25

Cost (Millions)  	$251  	$217  	$175  	$175    $818

The Company accrues the costs associated with returning leased aircraft 
over the lease period.  As leased aircraft are retired, the costs are 
charged against the established reserve.  At December 31, 1998, $45 
million was reserved for leased aircraft returns.

Deferred Taxes  At December 31, 1998, net deferred tax liabilities were 
$92 million, which includes $115 million of net temporary differences 
offset by $23 million of Alternative Minimum Tax (AMT) credits.  The 
Company believes that all of its deferred tax assets, including its AMT 
credits, will be realized through profitable operations.

Year 2000 Computer Issue  The Company uses a significant number of 
computer software programs and embedded operating systems that were not 
originally designed to process dates beyond 1999.  The Company has 
implemented a project to ensure that the Company's systems will function 
properly in the year 2000 and thereafter.  The Company expects to 
remediate most of its major systems by early 1999 and substantially to 
complete the project by the end of June 1999.  The Company believes 
that, with modifications to its existing software and systems and/or 
conversions to new software, the year 2000 issue will not pose 
significant operational problems.  Most of the Company's information 
technology projects in the last several years have made the affected 
systems year 2000 compliant.  The direct costs of projects solely 
intended to correct year 2000 problems are currently estimated at less 
than $2 million.  The Company does not track certain costs attributable 
to year 2000, such as salaries of information technology staff not 
dedicated entirely to the project.  Additional systems currently under 
review may require further resources.  The Company does not expect any 
cost increases to have a material effect on its results of operations.

The Company is also in contact with its significant suppliers and 
vendors with which its systems interface and exchange data or upon which 
its business depends.  These efforts are designed to minimize the extent 
to which its business will be vulnerable to their failure to remediate 
their own year 2000 issues.  The Company's business is also dependent 
upon certain governmental organizations or entities such as the Federal 
Aviation Administration (FAA) that provide essential aviation industry 
infrastructure.  The Company is working with the Airline Transport 
Association (ATA) and the International Airline Transport Association 
(IATA) to monitor the progress of FAA and airports in making their 
systems year 2000 compliant.  In addition, the Company is independently 
working with certain rural Alaska airports not within ATA's purview.  
There can be no assurance that such third parties on which the Company's 
business relies will successfully remediate their systems on a timely 
basis.  The Company's business, financial condition or results of 
operations could be materially adversely affected by the failure of its 
systems or those operated by other parties to operate properly beyond 
1999.  Areas that could be adversely affected include flight operations, 
maintenance, planning, reservations, sales, accounting and the frequent 
flyer program.  The Company already has in place certain disaster 
contingency plans anticipating the potential loss of essential services 
such as electricity and financial accounting systems.  The Company will 
leverage its year 2000 contingency planning off these existing plans.  
In addition, the Company is developing and executing additional 
contingency plans designed to allow continued operation in the event of 
failure of key third party systems or products.  The foregoing Year 2000 
Computer Issue comments include forward-looking statements regarding the 
performance of the Company.  Actual results may differ materially from 
these projections.  Factors that could cause results to differ include 
the availability of adequate resources to complete the Company's year 
2000 plan, the ability to identify and remediate noncompliant systems, 
and the success of third parties in remediating their year 2000 issues.

New Accounting Standards  During June 1998, the Financial Accounting 
Standards Board issued FAS 133, Accounting for Derivative Instruments 
and Hedging Activities  The new standard requires companies to record 
derivatives on the balance sheet as assets or liabilities, measured at 
fair value.  Gains or losses resulting from changes in the values of 
those derivatives would be accounted for depending on the use of the 
derivative and whether it qualifies for hedge accounting.  Due to the 
Company's minimal use of derivatives, the new standard is expected to 
have no material impact on its financial position or results of 
operations.  FAS 133 will be effective for the Company's fiscal year 
beginning January 1, 2000.


ITEM 8.	FINANCIAL STATEMENTS

See Item 14.


ITEM 9.	DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART IV


ITEM 14.	EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS 
	ON FORM 8-K

(a) 	(1)	Financial Statements
                                                                 		Page(s)
	Balance Sheet as of December 31, 1997 and 1998                     	13-14
	Statement of Income for the years ended 
	  December 31, 1996, 1997 and 1998	                                    15
	Statement of Shareholder's Equity for the years ended
	  December 31, 1996, 1997 and 1998	                                    16
	Statement of Cash Flows for the years ended December 31, 1996, 
	  1997 and 1998	                                                       17
	Notes to Financial Statements as of December 31, 1998	              18-23
	Report of Independent Public Accountants	                              25


	(2)	Financial Statement Schedule II, Valuation and Qualifying 
		  Accounts, for the years ended December 31, 1996, 1997 and 1998     	26

	(3)	Exhibits
		See Exhibit Index on page 27.

(b)	No reports on Form 8-K were filed during the fourth quarter of 
1998.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized.

ALASKA AIRLINES, INC.


By: 	/s/ John F. Kelly							Date: February 10, 1999
	John F. Kelly
	Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on February 
10, 1999 on behalf of the registrant and in the capacities indicated.

		/s/ John F. Kelly			Chairman and Chief Executive Officer 
		John F. Kelly			Director

		/s/ Harry G. Lehr			Senior Vice President/Finance 
		Harry G. Lehr			(Principal Financial Officer)

		/s/ Bradley D. Tilden			Controller 
		Bradley D. Tilden			(Principal Accounting Officer)

		/s/ Ronald F. Cosgrave		Director
		Ronald F. Cosgrave

		/s/ Mary Jane Fate			Director
		Mary Jane Fate

		/s/ R. Marc Langland			Director
		R. Marc Langland

		 /s/ Robert L. Parker, Jr.		Director
			Robert L. Parker, Jr.

		 /s/ Patricia Q. Stonesifer	Director
			Patricia Q. Stonesifer

<TABLE>
BALANCE SHEET
Alaska Airlines, Inc.
<CAPTION>
ASSETS

As of December 31  (In Millions)                                   1997             1998

<S>                                                            <C>              <C>
Current Assets
Cash and cash equivalents                                        $102.3            $29.1
Marketable securities                                             110.1            277.2
Receivables from related companies                                  4.3              7.0
Receivables - less allowance for doubtful accounts
 (1997 - $1.2; 1998 - $0.9)                                        65.5             66.0
Inventories and supplies                                           26.5             23.9
Prepaid expenses and other assets                                  86.6            103.5

Total Current Assets                                              395.3            506.7

Property and Equipment
Flight equipment                                                  886.4            926.0
Other property and equipment                                      222.8            243.2
Deposits for future flight equipment                               80.0            130.4
                                                                1,189.2          1,299.6
Less accumulated depreciation & amortization                      324.6            364.1
                                                                  864.6            935.5
Capital leases:
Flight and other equipment                                         44.4             44.4
Less accumulated amortization                                      27.5             29.6
                                                                   16.9             14.8
                                                                    0.0              0.0
Total Property and Equipment - Net                                881.5            950.3

Intangible Assets                                                  14.5             14.0

Other Assets                                                       79.4             77.8

Total Assets                                                   $1,370.7         $1,548.8

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
BALANCE SHEET
Alaska Airlines, Inc.
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY

As of December 31  (In Millions)                                   1997             1998

<S>                                                            <C>              <C>
Current Liabilities
Accounts payable                                                  $55.9            $63.8
Payables to related companies                                      50.7            104.4
Accrued aircraft rent                                              47.7             62.1
Accrued wages, vacation and payroll taxes                          60.5             68.9
Other accrued liabilities                                          83.0             88.3
Air traffic liability                                             166.2            177.7
Note payable to related company                                    54.0              -
Current portion of long-term debt and
  capital lease obligations                                        28.7             27.2
                                                                    0.0              0.0
Total Current Liabilities                                         546.7            592.4
                                                                    0.0              0.0
Long-Term Debt & Capital Lease Obligations                        215.3            171.5

Other Liabilities and Credits
Deferred income taxes                                              72.2             98.2
Deferred income                                                    15.4             38.1
Other liabilities                                                  88.1             99.1
                                                                  175.7            235.4

Commitments

Shareholder's Equity
Common stock, $1 par value
  Authorized:  1,000 shares
  Issued:  1997 and 1998 - 500 shares                               -                -
  Capital in excess of par value                                  225.8            225.8
Retained earnings                                                 207.2            323.7
                                                                  433.0            549.5

Total Liabilities and Shareholder's Equity                     $1,370.7         $1,548.8

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF INCOME
Alaska Airlines, Inc.
<CAPTION>

Year Ended December 31
(In Millions)                                        1996            1997               1998
<S>                                               <C>             <C>              <C>
Operating Revenues
Passenger                                         $1,146.8        $1,297.0         $1,410.4
Freight and mail                                      82.7            82.9             83.7
Other - net                                           67.8            68.0             72.2
Total Operating Revenues                           1,297.3         1,447.9          1,566.3
Operating Expenses
Wages and benefits                                   384.5           435.9            485.8
Contracted services                                   36.9            42.5             48.7
Aircraft fuel                                        200.5           199.7            162.3
Aircraft maintenance                                  57.1            67.4             77.6
Aircraft rent                                        146.0           148.5            158.9
Food and beverage service                             44.2            46.7             49.1
Commissions                                           88.7           100.8             94.4
Other selling expenses                                64.3            63.9             75.2
Depreciation and amortization                         55.9            56.9             61.9
Loss (gain) on disposition of assets                  (9.3)           (1.2)             1.0
Landing fees and other rentals                        49.9            53.1             59.4
Other                                                 88.6            99.4             98.0
Total Operating Expenses                           1,207.3         1,313.6          1,372.3
Operating Income                                      90.0           134.3            194.0
Nonoperating Income (Expense)
Interest income                                       11.5            12.2             23.2
Interest expense                                     (29.7)          (25.0)           (17.4)
Interest capitalized                                   0.6             3.4              5.1
Other - net                                            2.1             2.5            (14.4)
                                                     (15.5)           (6.9)            (3.5)
Income before income tax                              74.5           127.4            190.5
Income tax expense                                    28.9            51.4             74.0
Net Income                                           $45.6           $76.0           $116.5

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF SHAREHOLDER'S EQUITY
Alaska Airlines, Inc.
<CAPTION>
                                                        Capital in
                                             Common      Excess of      Retained
(In Millions)                                 Stock      Par Value      Earnings       Total

<S>                                           <C>            <C>            <C>        <C>
Balances at December 31, 1995                 $ -            $225.8         $85.6      $311.4


1996 net income                                                              45.6        45.6

Balances at December 31, 1996                   -             225.8         131.2       357.0


1997 net income                                                              76.0        76.0

Balances at December 31, 1997                   -             225.8         207.2       433.0


1998 net income                                                             116.5       116.5

Balances at December 31, 1998                 $ -            $225.8        $323.7      $549.5

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS
Alaska Airlines, Inc.
<CAPTION>
Year Ended December 31  (In Millions)                       1996         1997            1998
<S>                                                      <C>            <C>             <C>
Cash flows from operating activities:
Net income                                                $45.6          $76.0           $91.6
Adjustments to reconcile net income to cash:
   Depreciation and amortization                           55.9           56.9            46.0
   Amortization of airframe and engine overhauls           28.9           29.6            25.5
   Loss (gain) on sale of assets                           (9.3)          (1.2)            0.3
   Increase in deferred income taxes                        8.2            6.6            30.8
   Decrease (increase) in accounts receivable              14.2           90.1           (21.8)
   Increase in other current assets                       (10.5)          (7.6)            5.8
   Increase in air traffic liability                       38.3            4.0            26.9
   Increase in other current liabilities                   25.7           66.2            82.0
   Other-net                                                6.0            2.6             1.1
Net cash provided by operating activities                 203.0          323.2           288.2
Cash flows from investing activities:
Proceeds from disposition of assets                        53.0            4.5             0.6
Purchases of marketable securities                        (53.5)        (443.6)         (159.0)
Sales and maturities of marketable securities             110.4          385.9            54.1
Restricted deposits                                         0.1           (3.2)           (1.7)
Additions to flight equipment deposits                    (41.3)         (56.4)         (112.1)
Additions to property and equipment                      (188.6)        (236.6)         (233.0)
Net cash used in investing activities                    (119.9)        (349.4)         (451.1)
Cash flows from financing activities:
Proceeds from short-term borrowings                        47.0           56.4             -
Repayment of short-term borrowings                        (65.9)        (103.4)            -
Loan repayments to Alaska Air Group                       (10.8)           -               -
Proceeds from sale and leaseback transactions              85.6          124.2           288.0
Proceeds from issuance of long-term debt                    -             28.0             -
Long-term debt and capital lease payments                (115.4)         (25.9)          (35.4)
Net cash provided by (used in) financing activities       (59.5)          79.3           252.6
Net increase in cash and cash equivalents                  23.6           53.1            89.7
Cash and cash equivalents at beginning of year             25.6           49.2           102.3
Cash and cash equivalents at end of year                  $49.2         $102.3          $192.0
Supplemental disclosure of cash paid during the year for:
  Interest (net of amount capitalized)                    $30.0          $21.9           $11.4
  Income taxes                                             21.4           26.6            48.7
Noncash investing and financing activities:
1996 and 1997 - None
1998 - A $54.0 million note payable to Alaska Air Group was exchanged
            for a non-interest bearing payable.

See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Alaska Airlines, Inc.
December 31, 1998

Note 1.	Summary of Significant Accounting Policies

Organization and Nature of Operations
Alaska Airlines, Inc. (Alaska), an Alaska corporation, is a wholly owned 
subsidiary of Alaska Air Group, Inc. (Air Group), a Delaware 
corporation.  Air Group is also the parent company of  Horizon Air 
Industries, Inc. (Horizon).  The Company is a major airline serving 
Alaska, the West Coast, Mexico and Eastern Russia.  It operates an all 
jet fleet and its average passenger trip is 864 miles.

Basis of Presentation
Preparation of financial statements requires the use of management's 
estimates.  Actual results could differ from those estimates.  Certain 
reclassifications have been made in prior years' financial statements to 
conform to the 1998 presentation.

Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with original 
maturities of three months or less. They are carried at cost, which 
approximates market. The Company reduces its cash balance when checks 
are disbursed.  Due to the time delay in checks clearing the banks, the 
Company normally maintains a negative cash balance on its books which is 
reported as a current liability.  The amount of the negative cash 
balance was $9.0 million and $14.9 million at December 31, 1997 and 
1998, respectively.

Inventories and Supplies
Expendable and repairable aircraft parts, as well as other materials and 
supplies, are stated at average cost.  An allowance for obsolescence is 
accrued on a straight-line basis over the estimated useful lives of the 
aircraft.  Inventories related to the retired B727 fleet and other 
surplus items are carried at their net realizable value.  The allowance 
at December 31, 1997 and 1998 for all inventories was $12.6 million and 
$15.6 million, respectively.

Property, Equipment and Depreciation
Property and equipment are recorded at cost and depreciated using the 
straight-line method over their estimated useful lives, which are as 
follows:
Aircraft and other
	flight equipment        	14-20 years
Buildings	                10-30 years
Capitalized leases and 
	leasehold improvements	  Term of lease
Other equipment	          3-15 years

Assets and related obligations for items financed under capital leases 
are initially recorded at an amount equal to the present value of the 
future minimum lease payments.  The cost of major airframe overhauls, 
engine overhauls, and other modifications which extend the life or 
improve the usefulness of aircraft are capitalized and amortized over 
their estimated period of use.  Other repair and maintenance costs are 
expensed when incurred.  The Company periodically reviews long-lived 
assets for impairment.

Capitalized Interest
Interest is capitalized on flight equipment purchase deposits and ground 
facilities progress payments as a cost of the related asset and is 
depreciated over the estimated useful life of the asset.

Intangible Assets-Subsidiaries
The excess of the purchase price over the fair value of net assets 
acquired is recorded as an intangible asset and is amortized over 40 
years.  Accumulated amortization at December 31, 1996 and 1997 was $5.9 
million and $6.4 million, respectively.  
Deferred Income
Deferred income results from the sale and leaseback of aircraft, the 
receipt of manufacturer or vendor credits, and from the sale of foreign 
tax benefits.  This income is recognized over the term of the applicable 
agreements.

Passenger Revenues
Passenger revenues are considered earned at the time service is 
provided.  Tickets sold but not yet used are reported as air traffic 
liability. 

Frequent Flyer Awards
Alaska operates a frequent flyer award program that provides travel 
awards to members based on accumulated mileage.  The estimated 
incremental cost of providing free travel is recognized as an expense 
and accrued as a liability as miles are accumulated.  Alaska also defers 
recognition of income on a portion of the payments it receives from 
travel partners associated with its frequent flyer program.  The 
frequent flyer award liability is relieved as travel awards are issued.

Contracted Services
Contracted services includes the expenses for aircraft ground handling, 
security, temporary employees and other similar services.

Other Selling Expenses
Other selling expenses includes credit card commissions, computerized 
reservations systems (CRS) charges, advertising and promotional costs.  
The costs of advertising are expensed the first time the advertising 
takes place.  Advertising expense was $12.9 million, $8.8 million, and 
$15.5 million, respectively, in 1996, 1997 and 1998.

Nonoperating Expense
During 1998, the Company settled a breach of contract lawsuit with 
MarkAir, Inc., which resulted in a $16.5 million charge to other 
nonoperating expense.

Income Taxes
Income taxes are accounted for in accordance with Statement of Financial 
Accounting Standards No. 109, which requires the recognition of deferred 
tax assets and liabilities for the expected future tax consequences of 
events that have been recognized in the Company's financial statements 
or tax returns.

Derivative Financial Instruments
The Company enters into foreign exchange forward contracts, generally 
with maturities of less than one month, to manage risk associated with 
net foreign currency transactions.  Resulting gains and losses are 
recognized currently in other operating expense.  The Company 
periodically enters into interest rate swap agreements to hedge interest 
rate risk.  The differential to be paid or received from these 
agreements is accrued as interest rates change and is recognized 
currently in the income statement.  The Company periodically enters into 
hedge agreements to reduce its exposure to fluctuations in the price of 
jet fuel.  A gain or loss is recorded if the fuel index average exceeds 
the ceiling price or falls below the floor price.  There were no 
interest rate swaps or fuel hedges entered into in 1998.


Note 2.	Marketable Securities
Marketable securities are investments that are readily convertible to 
cash and have original maturities that exceed three months.  They are 
classified as available for sale and consisted of the following at 
December 31 (in millions):
                              	1997    	1998
Cost:
U.S. government securities  		$75.1	  $214.1
Asset backed obligations     		35.0  	  31.7
Other corporate obligations	    	--  	  31.4
                           		$110.1	  $277.2
Fair value:
U.S. government securities  		$75.2	  $214.9
Asset backed obligations		     35.0    	31.8
Other corporate obligations		    --	    31.3
		                           $110.2  	$278.0

There were no material unrealized holding gains or losses at December 
31, 1997 or 1998.

Of the marketable securities on hand at December 31, 1998, 49% will 
mature during 1999 and the remainder will mature during 2000.  Based on 
specific identification of securities sold, the following occurred in 
1997 and 1998 (in millions): 
                      	1997  	  1998
Proceeds from sales		$385.9	  $156.3
Gross realized gains		  0.1     	0.2
Gross realized losses		 0.1      	--

Realized gains and losses are reported as a component of interest 
income.

Note 3.	Other Assets

Other assets consisted of the following at December 31 (in millions):
                         	1997  	1998
Restricted deposits		    $66.8	 $68.4
Deferred costs and other	 12.6   	9.4
                       		$79.4 	$77.8

Deferred costs are amortized over the term of the related lease or 
contract.

Note 4.	Related Company Transactions

In May 1991, Air Group made a $95.2 million loan to Alaska.  Alaska made 
loan repayments of $3.6 million in 1996 and $10.8 million in 1997.  In 
February 1998, the remaining $54.0 million loan balance was exchanged 
for a non-interest bearing payable, which is due on demand, to Air 
Group.  The weighted average interest rate on the loan was 7% in all 
three years.

Note 5.	Long-Term Debt and Capital Lease Obligations

At December 31, 1997 and 1998, long-term debt and capital lease 
obligations were as follows (in millions):
                                   	1997   	1998
8.5%* fixed rate notes payable
	due through 2001	                $103.5	  $90.3
6.0%* variable rate notes payable
	due through 2009	                 114.9	   85.2
Long-term debt	                    218.4  	175.5
Capital lease obligations	          25.6   	23.2
Less current portion	              (28.7) 	(27.2)
                                 	$215.3  $171.5
* weighted average for 1998

At December 31, 1998, borrowings of $175.5 million are secured by flight 
equipment and real property.  At December 31, 1998, Alaska had a $115 
million credit facility with commercial banks.  Advances under this 
facility may be for up to a maximum maturity of four years.  Borrowings 
may be used for aircraft acquisitions or other corporate purposes, and 
they bear interest at a rate which varies based on LIBOR.  At December 
31, 1998, no borrowings were outstanding under this credit facility.

Certain Alaska loan agreements contain provisions that require 
maintenance of specific levels of net worth, leverage and fixed charge 
coverage, and limit investments, lease obligations, sales of assets and 
additional indebtedness.  At December 31, 1998, the Company was in 
compliance with all loan provisions, and under the most restrictive loan 
provisions, Alaska had $175 million of net worth above the minimum.

At December 31, 1998, long-term debt principal payments for the next 
five years were (in millions):
1999		$24.5
2000		$55.5
2001		$45.4
2002		$12.1
2003		$12.3

Note 6.	Commitments

Lease Commitments
Lease contracts for 57 aircraft have remaining lease terms of one to 18 
years.  The majority of airport and terminal facilities are also leased.  
Total rent expense was $173.3 million, $177.7 million and $193.6 
million, in 1996, 1997 and 1998, respectively.  Future minimum lease 
payments under long-term operating leases and capital leases as of 
December 31, 1998 are shown below (in millions):
                          		Operating Leases  	Capital
                     		  Aircraft 	Facilities	  Leases
1999	                      $151.0      	$23.9	   $4.1
2000                       	141.2       	21.8	    4.1
2001                       	133.1       	15.4    	4.1
2002	                       134.3        	9.4	    4.1
2003	                       114.2        	8.6    	4.1
Thereafter	                 890.1	       86.6    	9.0
Total lease payments		   $1,563.9     	$165.7   	29.5
Less amount representing interest		              (6.3)
Present value of capital lease payments 	       $23.2

Aircraft Commitments
The Company has firm orders for 25 Boeing 737 series aircraft to be 
delivered between 1999 and 2002.  The total amount of these commitments 
is approximately $818 million.  As of December 31, 1998, deposits 
related to these deliveries were $126 million.  In addition to the firm 
orders, the Company holds purchase options on 26 Boeing 737s.

Note 7.	Employee Benefit Plans

Pension Plans
Four defined benefit and four defined contribution retirement plans 
cover essentially all employees.  The defined benefit plans provide 
benefits based on an employee's term of service and average compensation 
for a specified period of time before retirement.  Pension plans are 
funded as required by the Employee Retirement Income Security Act of 
1974 (ERISA).

The defined benefit plan assets are primarily common stocks and fixed 
income securities.  The following table sets forth the status of the 
plans for 1997 and 1998 (in millions):
                                   	1997    	1998
Projected benefit obligation
Beginning of year	                $230.7  	$307.4
Service cost	                       17.3    	22.5
Interest cost	                      17.3    	21.9
Amendments	                         57.7      	--
Change in assumptions	              (8.7)   	27.1
Actuarial loss (gain)	               1.7    	(0.4)
Benefits paid	                      (8.6)   	(6.7)
End of year	                      $307.4  	$371.8
Plan assets at fair value
Beginning of year	                $223.7	  $289.2
Actual return 
on plan assets                     	47.6    	54.4
Employer contributions	             26.5    	36.1
Benefits paid                      	(8.6)   	(6.7)
End of year	                      $289.2	  $373.0

Funded status                    		(18.2)   		1.2
Unrecognized loss (gain)	          	(0.8)   		7.2
Unrecognized 
transition asset                 			(0.5)  		(0.3)
Unrecognized 
prior service cost               			60.1		   49.4
Prepaid pension cost		            $ 40.6 		$ 57.5
 
Weighted average assumptions
  as of December 31
Discount rate                     	7.25%   	6.75%
Expected return 
on plan assets	                    10.0%   	10.0%
Rate of compensation
 increase	                          3.2%    	5.5%

Net pension expense for the defined benefit plans included the following 
components for 1996, 1997 and 1998 (in millions):	

                       	1996   	1997   	1998
Service cost         	$	15.9	 $	17.3 	$	22.4
Interest cost	          15.4   	17.3	   21.9
Expected return
 on  assets	           (18.5) 	(22.1)	 (28.7)
Amortization of
  prior service cost    	0.3    	0.2	    3.8
Recognized 
  actuarial loss        	1.4	    1.0     	--
Amortization of
  transition asset     	(0.3)  	(0.3)  	(0.2)
Net pension expense	  $	14.2	 $	13.4	 $	19.2
 

Alaska also maintains an unfunded, noncontributory benefit plan for 
certain elected officers. The $21 million unfunded accrued pension cost 
for this plan was accrued as of December 31, 1998.

The defined contribution plans are deferred compensation plans under 
section 401(k) of the Internal Revenue Code.  Some of these plans 
require Company matching contributions based on a percentage of 
participants' contributions.  One plan has an Employee Stock Ownership 
Plan (ESOP) feature.  The ESOP owns Air Group common shares which are 
held in trust for eligible employees.  The Company records compensation 
for payments made to the Plan.  As Alaska's contributions are received, 
the Plan releases the shares of common stock to the employees' accounts.  
Total expense for the defined contribution plans was $5.7 million, $6.8 
million and $6.7 million, respectively, in 1996, 1997 and 1998.

Profit Sharing Plans
Alaska has an employee profit sharing plan. Profit sharing expense for 
1996, 1997 and 1998 was $0.9 million, $12.1 million and $19.7 million, 
respectively.



Other Postretirement Benefits
The Company allows retirees to continue their medical, dental and vision 
benefits by paying all or a portion of the active employee plan premium 
until eligible for Medicare, currently age 65.  This results in a 
subsidy to retirees because the premiums received by the Company are 
less than the actual cost of the retirees' claims.  The accumulated 
postretirement benefit obligation (APBO) for this subsidy at December 
31, 1997 and 1998 was $15.7 million and $15.7 million, respectively.  
The APBO is unfunded and is included with other liabilities on the 
Balance Sheet.  Annual expense related to this subsidy is not considered 
material to disclose.

Note 8.	Income Taxes

Alaska files a consolidated tax return with Air Group and other Air 
Group subsidiaries.  Each member of the consolidated group, including 
Alaska, calculates its tax provision and tax liability, if applicable, 
on a separate-entity basis.  Any differences between the consolidated 
amounts and the total of the subsidiaries' amounts are included in the 
tax provision of the parent company.

After consideration of temporary differences, taxable income for 1998 
was approximately $195 million.

The components of income tax expense were as follows (in millions):
                     		1996	   1997   	1998
Current tax expense:
	Federal             	$19.9  	$42.6  	$38.0
	State	                 0.9    	1.9    	7.7
Total current	         20.8   	44.5   	45.7
Deferred tax expense:
	Federal	               6.9	    2.5   	27.0
	State	                 1.2    	4.4    	1.3
Total deferred	         8.1    	6.9   	28.3
Total tax expense	    $28.9  	$51.4  	$74.0
 

Income tax expense reconciles to the amount computed by applying the 
U.S. federal rate of 35% to income before taxes as follows (in millions):	
                      	1996   	1997   	1998
Income before 
  income tax         	$74.5	 $127.4	 $190.5
Expected tax expense 	$26.1  	$44.6  	$66.7
Nondeductible 
expenses 	              1.9    	2.0    	2.0
State income tax	       0.9	    4.1    	6.1
Other - net	             --    	0.7   	(0.8)
Actual tax expense	   $28.9	  $51.4	  $74.0
 
Effective tax rate   	38.8%  	40.3%  	38.8%

Deferred income taxes result from temporary differences in the timing of 
recognition of revenue and expense for tax and financial reporting 
purposes.  Deferred tax assets and liabilities comprise the following at 
December 31 (in millions): 
                              	1997     	1998
Excess of tax over book
  depreciation	              $157.0	   $158.8
Other - net	                    1.4      	3.5
Gross deferred
 tax liabilities	             158.4	    162.3
Loss carryforward	             (0.5)    	(0.1)
Alternative minimum tax	      (50.2)   	(22.7)
Capital leases	                (4.5)    	(2.6)
Ticket pricing adjustments	    (1.1)    	(1.9)
Frequent flyer program        	(8.4)   	(10.5)
Employee benefits	             (6.2)    	(3.7)
Aircraft return provisions	   (14.5)   	(15.2)
Deferred gains	                (3.5)    	(7.4)
Capitalized interest	          (1.1)    	(1.5)
Inventory obsolescence	        (4.8)    	(4.7)
Gross deferred tax assets    	(94.8)   	(70.3)
Net deferred 
tax liabilities	             $ 63.6   	$ 92.0
 
Current deferred tax asset  	$ (8.6)  	$ (6.2)
Noncurrent deferred
 tax liability	                72.2     	98.2
Net deferred 
tax liabilities	             $ 63.6	   $ 92.0
 



Note 9.	 Financial Instruments

The estimated fair values of the Company's financial instruments were as 
follows (in millions):

			December 31, 1997
                         	Carrying	     Fair
                           	Amount	    Value
Cash and cash equivalents	  $102.3   	$102.3
Marketable securities	       110.1    	110.2
Restricted deposits	          66.8     	66.8
Long-term debt	              218.4    	218.4

			December 31, 1998
                         	Carrying     	Fair
                           	Amount    	Value
Cash and cash equivalents	   $29.1    	$29.1
Marketable securities	       277.2    	278.0
Restricted deposits          	68.4     	68.4
Long-term debt	              175.5	    175.5

The fair value of cash equivalents approximates carrying value due to 
the short maturity of these instruments.  The fair value of marketable 
securities is based on quoted market prices.  The fair values of 
restricted deposits and long-term debt approximate the carrying amounts.
<PAGE>
<TABLE>
                                 Alaska  Airlines Financial and Statistical Data
<CAPTION>
                                           Quarter Ended December 31                         Year Ended December 31

Financial Data (in millions):          1997         1998    % Change                    1997          1998   % Change
<S>                                   <C>         <C>            <C>                 <C>          <C>             <C>
Operating Revenues:
Passenger                             $313.0      $333.5         6.5                 $1,297.0     $1,410.4        8.7
Freight and mail                        20.7        19.8        (4.3)                    82.9         83.7        1.0
Other - net                             16.2        19.4        19.8                     68.0         72.2        6.2
Total Operating Revenues               349.9       372.7         6.5                  1,447.9      1,566.3        8.2

Operating Expenses:
Wages and benefits                     106.1       115.0         8.4                    423.8        466.1       10.0
Employee profit sharing                  2.4         3.7        54.2                     12.1         19.7       62.8
Contracted services                     11.6        11.8         1.7                     42.5         48.7       14.6
Aircraft fuel                           49.3        39.1       (20.7)                   199.7        162.3      (18.7)
Aircraft maintenance                    18.6        17.2        (7.5)                    67.4         77.6       15.1
Aircraft rent                           38.2        41.2         7.9                    148.5        158.9        7.0
Food and beverage service               11.8        12.5         5.9                     46.7         49.1        5.1
Commissions                             22.9        22.5        (1.7)                   100.8         94.4       (6.3)
Other selling expenses                  11.7        18.9        61.5                     63.9         75.2       17.7
Depreciation and amortization           14.9        15.9         6.7                     56.9         61.9        8.8
Loss (gain) on sale of assets           (0.9)        0.6         NM                      (1.2)         1.0        NM
Landing fees and other rentals          12.7        14.8        16.5                     53.1         59.4       11.9
Other                                   26.2        24.9        (5.0)                    99.4         98.0       (1.4)
Total Operating Expenses               325.5       338.1         3.9                  1,313.6      1,372.3        4.5

Operating Income                        24.4        34.6        41.8                    134.3        194.0       44.5

Interest income                          3.9         6.8                                 12.2         23.2
Interest expense                        (5.9)       (4.0)                               (25.0)       (17.4)
Interest capitalized                     1.1         1.5                                  3.4          5.1
Other - net                              0.1        (0.1)                                 2.5        (14.4)
                                        (0.8)        4.2                                 (6.9)        (3.5)

Income Before Income Tax               $23.6       $38.8        64.4                   $127.4       $190.5       49.5

Operating Statistics:
Revenue passengers (000)               2,958       3,211         8.5                   12,284       13,056        6.3
RPMs (000,000)                         2,490       2,749        10.4                   10,386       11,283        8.6
ASMs (000,000)                         3,847       4,204         9.3                   15,436       16,807        8.9
Passenger load factor                   64.7%       65.4%     0.7 pts                    67.3%        67.1%   (0.2)pts
Breakeven load factor                   60.2%       58.0%    (2.2)pts                    60.5%        58.0%   (2.5)pts
Yield per passenger mile               12.57c      12.13c       (3.5)                   12.49c       12.50c       0.1
Operating revenue per ASM               9.10c       8.87c       (2.5)                    9.38c        9.32c      (0.6)
Operating expenses per ASM              8.46c       8.04c       (5.0)                    8.51c        8.17c      (4.1)
Fuel cost per gallon                    71.7c       52.6c      (26.7)                    72.6c        54.6c     (24.8)
Fuel gallons (000,000)                  68.8        74.3         8.0                    275.2        297.4        8.1
Average number of employees            8,223       8,787         6.9                    8,236        8,704        5.7
Aircraft utilization (block hours)      11.2        11.2         0.0                     11.4         11.5        0.9
Operating fleet at period-end             78          84         7.7                       78           84        7.7
NM = Not Meaningful
c=cents
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholder of Alaska Airlines, Inc.:

We have audited the accompanying balance sheet of Alaska Airlines, Inc. 
(an Alaska corporation) as of December 31, 1998 and 1997, and the 
related statements of income, shareholder's equity and cash flows for 
each of the three years in the period ended December 31, 1998.  These 
financial statements are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these financial 
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit 
to obtain reasonable assurance about whether the financial statements 
are free of material misstatement.  An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the 
financial statements.  An audit also includes assessing the accounting 
principles used and significant estimates made by management, as well as 
evaluating the overall financial statement presentation.  We believe 
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present 
fairly, in all material respects, the financial position of Alaska 
Airlines, Inc. as of December 31, 1998 and 1997, and the results of its 
operations and its cash flows for each of the three years in the period 
ended December 31, 1998, in conformity with generally accepted 
accounting principles.

Our audits were made for the purpose of forming an opinion on the basic 
financial statements taken as a whole.  The schedule listed in Item 
14(a) is presented for purposes of complying with the Securities and 
Exchange Commission's rules and is not a required part of the basic 
financial statements.  This schedule has been subjected to the auditing 
procedures applied in our audits of the basic financial statements and, 
in our opinion, is fairly stated in all material respects in relation to 
the basic financial statements taken as a whole.


	
												
												/s/ Arthur Andersen LLP
	
											ARTHUR ANDERSEN LLP


Seattle, Washington
January 25, 1999
<PAGE>
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS
Alaska Airlines, Inc.                                                                   Schedule II
<CAPTION>

                                                            Additions
                                             Beginning        Charged        (A)             Ending
(In Millions)                                  Balance     to Expense     Deductions        Balance

<S>                                              <C>             <C>           <C>            <C>
Year Ended December 31, 1996
(a) Reserve deducted from asset
     to which it applies:
       Allowance for doubtful accounts            $1.6           $0.6          $(1.0)          $1.2
  
   Obsolescence allowance for flight             $10.9           $2.2          $(1.0)         $12.1
     equipment spare parts

(b) Reserve recorded as other
     long-term liabilities:                      $30.2           $7.6          $(2.8)         $35.0
  Leased aircraft return provision

Year Ended December 31, 1997
(a) Reserve deducted from asset
     to which it applies:
   Allowance for doubtful accounts                $1.2           $1.0          $(1.0)          $1.2
   Obsolescence allowance for flight
     equipment spare parts                       $12.1           $2.0          $(1.5)         $12.6

(b) Reserve recorded as other
     long-term liabilities:
  Leased aircraft return provision               $35.0           $8.0          $(2.6)         $40.4


Year Ended December 31, 1998
(a) Reserve deducted from asset
     to which it applies:
   Allowance for doubtful accounts                $1.2           $1.1          $(1.4)          $0.9
   Obsolescence allowance for flight
     equipment spare parts                       $12.6           $4.5          $(1.5)         $15.6

(b) Reserve recorded as other
     long-term liabilities:
  Leased aircraft return provision               $40.4           $9.2          $(4.4)         $45.2


(A) Deduction from reserve for purpose for which reserve was created.
</TABLE>
<PAGE>
EXHIBIT INDEX

Certain of the following exhibits have heretofore been filed with the 
Commission and are incorporated herein by reference from the document 
described in parenthesis.  Certain others are filed herewith.

	3.1	Articles of Incorporation of Alaska Airlines, Inc.  as  amended 
through February 26, 1991
	3.2	Bylaws  of Alaska Airlines, Inc. as amended and in effect  
February 26, 1991
	4.1	Trust Indentures and Security Agreement for Alaska Airlines 
Equipment Trust Certificates, Series A and B (Exhibit No. 4(a)(1) 
to Form S-3, Amendment No. 1, Registration No. 33-46668)
	4.2	Trust Indentures and Security Agreement for Alaska Airlines 
Equipment Trust Certificates, Series C and D (Exhibit No. 4(a)(1) 
to Form S-3, Amendment No. 2, Registration No. 33-46668)
	4.3	Participation Agreement for Alaska Airlines Equipment Trust 
Certificates, Series A and B (Exhibit No. 4(b)(1) to Form S-3, 
Amendment No. 1, Registration No. 33-46668)
	4.4	Participation Agreement for Alaska Airlines Equipment Trust 
Certificates, Series C and D (Exhibit No. 4(b)(1) to Form S-3, 
Amendment No. 2, Registration No. 33-46668)
	4.5	Lease Agreement for Alaska Airlines Equipment Trust Certificates 
(Exhibit No. 4(b)(2) to Form S-3, Registration No. 33-46668)
	10.1	Lease and Assignment of Sublease Agreement dated February 1, 1979 
between Alaska Airlines, Inc. and the Alaska Industrial 
Development Authority
	10.2	Lease and Assignment and Sublease Agreement dated April 1, 1978 
between Alaska Airlines, Inc. and the Alaska Industrial 
Development Authority
 	10.3	Management Incentive Plan (1992 Alaska Air Group, Inc. Proxy 
Statement)
	10.4	Loan Agreement dated as of December 1, 1984, between Alaska 
Airlines, Inc. and the Industrial Development Corporation of the 
Port of Seattle
	#10.5	Lease Agreement dated January 22, 1990 between International 
Lease Finance Corporation and Alaska Airlines, Inc. for the 
lease of a B737-400 aircraft, summaries of 19 substantially 
identical lease agreements and Letter Agreement #1 dated January 
22, 1990 (Exhibit 10-14 to 1990 10-K)
	#10.6	Agreement dated September 18, 1996 between Alaska Airlines, Inc. 
and Boeing for the purchase of 12 Boeing 737-400 aircraft 
(Exhibit 10.1 to Third Quarter 1996 10-Q)
	10.7	Alaska Air Group, Inc. Supplementary Retirement Plan for Elected 
Officers (Exhibit 10.7 to 1997 10-K)
	10.8	1995 Elected Officers Supplementary Retirement Plan (Exhibit 10.8 
to 1997 10-K)
	*27	Financial Data Schedule

* Filed herewith.
# Confidential treatment was granted as to a portion of this document.
<PAGE>