Document:

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                                                                   EXHIBIT 10.12

                              ALASKA AIRLINES, INC.

                                       and

                             ALASKA AIR GROUP, INC.

                              Seattle, Washington

                          SUPPLEMENTARY RETIREMENT PLAN

                              FOR ELECTED OFFICERS

                          as amended November 7, 1994

                       1981 VERSION APPLICABLE TO OFFICERS

                        FIRST ELECTED AFTER JUNE 1, 1981

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                                     PREFACE

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

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

                                       1

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                                    SECTION 1

                                   DEFINITIONS

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

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

         1.3      "Participant" shall mean:

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

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

                  (c)      a retiree hereunder.

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

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

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

                                       2

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

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

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

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

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

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

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

                                       3

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

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

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

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

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

         1.12     "Change in Control" shall occur whenever:

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

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

                                       4

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

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

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

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

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

                                       5

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

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

                                       6

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                                    SECTION 2

                                   ELIGIBILITY

         2.1      Eligibility for Benefits.

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

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

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

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

         2.2      Continuous Service.

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

                                       7

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

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

         2.3      Forfeiture of Benefits for Cause.

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

                  (a)      Forfeiture Due to Misconduct.

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

                                       8

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

                  (b)      Forfeiture on Entry into Competition.

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

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

                                       9

<PAGE>

                                    SECTION 3

                                    BENEFITS

         3.1      Retirement Benefits.

                  (a)      General.

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

                  (b)      Normal Retirement.

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

                                       10

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                  (c)      Early Retirement.

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

                  (d)      Forms of Benefit Payment.

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

                           The payment options available under the Plan are as
                  follows:

                           (1)      Normal Option.

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

                                       11

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                           (2)      Joint & Survivor Option.

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

                           (3)      10-Year Certain & Life.

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

                  (e)      Adjusted Retirement Benefits.

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

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

                                       12

<PAGE>

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

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

                  (f)      Change in Control.

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

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

                                       13

<PAGE>

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

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

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

                                       14

<PAGE>

         3.2      Termination Benefits and Vesting.

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

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

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

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

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

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

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

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

                                       15

<PAGE>

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

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

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

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

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

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

                                       16

<PAGE>

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

         3.3      Death Benefits to Beneficiary.

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

         3.4      Benefits Related to Salaried Retirement Plan,

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

                                       17

<PAGE>

                                    SECTION 4

           SUCCESSOR-RELATED CORPORATIONS AND PARTICIPATING EMPLOYERS

         4.1      Successor Corporations.

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

         4.2      Employer Participation.

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

         4.3      Transfer to Related Corporations.

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

                                       18

<PAGE>

                                    SECTION 5

                       AMENDMENT AND TERMINATION OF PLAN

         5.1      Amendment.

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

         5.2      Termination.

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

                                       19

<PAGE>

                                    SECTION 6

                                  MISCELLANEOUS

         6.1      Participants' Rights; Acquittance.

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

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

         6.2      Delegation of Authority by Employer.

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

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

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

                                       20

<PAGE>

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

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

         6.4      No Assignment by Participant.

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

         6.5 Unlocated Recipients.

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

                                       21
<PAGE>

         6.6      Required Information.

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

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

         6.7      Use of Terms.

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

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

                                         ALASKA AIR GROUP, INC.

                                         By:____________________________________

                                         ALASKA AIRLINES, INC.

                                         By:____________________________________

                                       22

<PAGE>

                          SUPPLEMENTARY RETIREMENT PLAN
                              FOR ELECTED OFFICERS

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

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

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

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

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

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

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

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

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

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

<PAGE>

Supplementary Retirement Plan for Elected Officers
Page 2

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

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

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

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

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

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

<PAGE>

Supplementary Retirement Plan for Elected Officers
Page 3

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

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

<PAGE>

                                                                       EXHIBIT A

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

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

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

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

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

<PAGE>

Officers Supplementary Retirement Plan                                    Page 2
April 7, 1987

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

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

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

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

<PAGE>

Officers Supplementary Retirement Plan                                    Page 3
April 7, 1987

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

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

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

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

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

<PAGE>

Officers Supplementary Retirement Plan                                    Page 4
April 7, 1987

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

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

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

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

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

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

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

         (1)      Election of Payment Form.

                  (i)      Time of Election.

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

                                       1
<PAGE>

                  (ii)     Election Procedures.

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

                  (iii)    Automatic Payment Form.

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

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

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

         (g)      Post-Retirement Lump-Sum Benefit.

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

                  (1)      Definition.

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

                  (2)      Actuarial Equivalent.

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

                                       2
<PAGE>

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

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

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

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

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

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

                                       3
<PAGE>

                  (3)      Election Procedures.

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

                  (4)      Right to Amend or Eliminate.

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

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

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

         6.8      Unfunded ERISA Plan.

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

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

                                       4
<PAGE>

                                    Section 7
                           Claims and Review Procedure

         7.1      Application for Benefits.

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

         7.2      Denial of Application.

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

                  (a)      specific reasons for the denial,

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

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

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

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

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

         7.3      Review Panel.

                                       5
<PAGE>

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

         7.4      Request for Review.

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

         7.5      Decision on Review.

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

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

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

                                       6
<PAGE>

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

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

         7.6      Rules and Procedures.

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

         7.7      Exhaustion of Administrative Remedies.

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

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

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

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

                                       7<PAGE>

                                                                 EXHIBIT 10.13

                             ALASKA AIR GROUP, INC.

                              1995 ELECTED OFFICERS

                          SUPPLEMENTARY RETIREMENT PLAN

                             EFFECTIVE AUGUST 8,1995

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
PREAMBLE...................................................................................................     1

SECTION 1 - DEFINITIONS....................................................................................     2

         1.1      Actuarial Equivalence....................................................................     2
         1.2      Administrative Committee.................................................................     3
         1.3      Affiliated Companies.....................................................................     3
         1.4      Authorized Leave of Absence..............................................................     4
         1.5      Beneficiary..............................................................................     4
         1.6      Board....................................................................................     4
         1.7      Change of Control........................................................................     4
         1.8      Code.....................................................................................     5
         1.9      Company..................................................................................     5
         1.10     Company Service..........................................................................     5
         1.11     Compensation.............................................................................     5
         1.12     Competing Activity.......................................................................     6
         1.13     Disabled.................................................................................     6
         1.14     Early Retirement Date....................................................................     6
         1.15     Effective Date...........................................................................     6
         1.16     Elected Officer..........................................................................     7
         1.17     Elected Officer Service..................................................................     7
         1.18     Employee.................................................................................     7
         1.19     Employer.................................................................................     7
         1.20     ERISA....................................................................................     7
         1.21     Final Average Monthly Compensation.......................................................     7
         1.22     Hour of Service..........................................................................     7
         1.23     Late Retirement Date.....................................................................     8
         1.24     Normal Retirement Age....................................................................     8
         1.25     Normal Retirement Date...................................................................     8
         1.26     Participant..............................................................................     8
         1.27     Plan.....................................................................................     8
         1.28     Plan Administrator.......................................................................     8
         1.29     Plan Year................................................................................     8
         1.30     Qualified Plan...........................................................................     8
         1.31     Qualified Plan Benefit...................................................................     8
         1.32     Retirement Date..........................................................................     8
</TABLE>

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995
<PAGE>

Table of Contents, Continued

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>                                                                                                           <C>
         1.33     Social Security Benefit..................................................................     9
         1.34     Terminate................................................................................     9
         1.35     Termination For Cause....................................................................     9
         1.36     Wages....................................................................................     9
         1.37     Additional Definitions in Plan...........................................................     9

SECTION 2 - ELIGIBILITY AND PARTICIPATION..................................................................    10
         2.1      Eligibility and Participation............................................................    10
         2.2      Termination of Participation.............................................................    10
         2.3      Inactive Participation...................................................................    10

SECTIONS 3 - RETIREMENT BENEFITS...........................................................................    11
         3.1      Target Aggregate Benefit.................................................................    11
         3.2      Normal Retirement Benefit................................................................    12
         3.3      Early Retirement Benefit.................................................................    12
         3.4      Late Retirement Benefit..................................................................    12
         3.5      Cost of Living Adjustment................................................................    13

SECTION 4 - PAYMENT FORMS..................................................................................    14
         4.1      Forms of Payment.........................................................................    14
         4.2      Automatic Form of Payment................................................................    15
         4.3      Payment Form Election....................................................................    15

SECTION 5 - CHANGE OF CONTROL BENEFITS.....................................................................    16
         5.1      Change of Control Benefit................................................................    16
         5.2      Form of Payment..........................................................................    16
         5.3      Amount of Change of Control Benefit......................................................    16

SECTION 6 - DEATH BENEFITS.................................................................................    17
         6.1      Death Benefits Prior to Benefit Commencement.............................................    17
         6.2      Death Benefits After Benefit Commencement................................................    17

SECTION 7 - VESTING........................................................................................    18
         7.1      Vesting..................................................................................    18
         7.2      Forfeiture...............................................................................    19

SECTION 8 - POWERS AND DUTIES OF THE COMMITTEE.............................................................    20
         8.1      Appointment of Administrative Committee..................................................    20
         8.2      Powers and Duties........................................................................    20
         8.3      Administrative Committee Procedures......................................................    20
         8.4      Appointment of Agents....................................................................    21
         8.5      Administrative Committee Expenses........................................................    21
</TABLE>

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995
<PAGE>

Table of Contents, Continued

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>                                                                                                           <C>
         8.6      Administrative Expenses..................................................................    21
         8.7      Determinations...........................................................................    21
         8.8      Claim and Review Procedure...............................................................    21
         8.9      Exemption From Liability/Indemnification.................................................    23

SECTION 9 - AMENDMENT AND TERMINATION......................................................................    24
         9.1      Amendment or Termination.................................................................    24

SECTION 10 - MISCELLANEOUS PROVISIONS......................................................................    25
         10.1     Appendices...............................................................................    25
         10.2     ERISA Status.............................................................................    25
         10.3     Unfunded Nature of the Obligation........................................................    25
         10.4     Facility of Payment......................................................................    25
         10.5     Governing Law............................................................................    25
         10.6     Limitation on Assignment.................................................................    25
         10.7     No Additional Rights.....................................................................    25
         10.8     Notice...................................................................................    26
         10.9     Severability.............................................................................    26
         10.10    Tax Consequences and Withholding.........................................................    26
EXECUTION/SIGNATURE PAGE...................................................................................    27

APPENDIX I TO THE - ALASKA AIR GROUP, INC. 1995 ELECTED OFFICERS
         SUPPLEMENTARY RETIREMENT PLAN.....................................................................    28

APPENDIX II TO THE - ALASKA AIR GROUP, INC. 1995 ELECTED OFFICERS
         SUPPLEMENTARY RETIREMENT PLAN.....................................................................    29
</TABLE>

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

<PAGE>
                                    PREAMBLE

         The purpose of this Alaska Air Group, Inc. 1995 Elected Officers
Supplementary Retirement Plan is to provide certain elected officers of Alaska
Air Group, Inc. (the "Company") and of certain affiliated companies with
supplemental retirement benefits, the receipt of which is deferred until after
the covered employee retires or terminates employment.

         This Plan shall constitute a plan which is unfunded and which is
maintained primarily for the purpose of providing deferred compensation benefits
for certain elected officers who constitute a select group of management or
highly compensated employees within the meaning of Sections 201(2), 301(a)(3),
and 401(a)(I) of ERISA.

         The Plan set forth in the following pages is adopted by the Company,
effective August 8, 1995.

Alaska Air Group, Inc.
1995 Elected Officers Supplemental Retirement Plan
Effective August 8, 1995

                                                                               1
<PAGE>

                                    SECTION 1

                                  DEFINITIONS

Whenever capitalized in this Plan, the following capitalized terms shall have
the meanings set forth below except where otherwise provided. As used in the
Plan, the masculine, feminine, and neuter genders shall each be deemed to
include the other or others.

1.1      Actuarial Equivalence

         "Actuarial Equivalence" and its derivatives as the context requires
         (such as "Actuarially") means that the present value of two (2)
         payments or series of payments shall be of equal value when computed as
         follows:

         (a)      For purposes of Sections 3.2 Normal Retirement Benefit, 4.1(c)
                  Ten Year Certain and Life Annuity, 4.1(d) Ten Year Certain
                  Installments, and 5.3 Amount of Change of Control Benefit,
                  Actuarial Equivalence shall be computed using the following:

                  (i)      the annual interest rate on thirty (30) year Treasury
                           securities as determined under Code Section 417
                           (which, as of the Effective Date, is the average
                           annual yield on thirty (30) year Treasury Constant
                           Maturities) for the November preceding the beginning
                           of the Plan Year; and

                  (ii)     the prevailing Commissioners' standard table
                           described in Code Section 807(d)(5)(A), without
                           regard to any other subparagraphs of Section
                           807(d)(5) used to determine reserves for group
                           annuity contracts issued on the date as of which the
                           present value is being determined (which as of the
                           Effective Date is the 1983 Group Annuity Mortality
                           Table, fifty percent (50%) male and fifty percent
                           (50%) female).

         (b)      For purposes of Section 4.1(b) Joint and Survivor Annuity,
                  Actuarial Equivalence shall be computed using the following
                  formula:

                  1.0 - (.12)(W) - (.005)[(2.0)(X) - Y - Z],
                  but not more than one (1),
                  where W equals the Joint and Survivor Annuity percentage;
                  X equals the Participant's age nearest birthday;
                  Y equals the Participant's spouse's age nearest birthday; and
                  Z equals the age at the Participant's Normal Retirement Date.

         (c)      For purposes of Section 5.3(a) After Commencement of Benefits,
                  the Actuarial Equivalent of the remaining benefits otherwise
                  payable is determined as follows:

                  (i)      for a Participant whose benefit, as of the date of
                           the Change of Control, is reduced by the
                           Participant's Social Security Benefit, the Actuarial
                           Equivalent of the remaining benefits otherwise
                           payable is determined assuming that the Participant's
                           Social Security Benefit does not increase after the
                           Change of Control date;

                  (ii)     for a Participant whose benefit, as of the date of
                           the Change of Control, is not reduced by a Social
                           Security Benefit, the Actuarial Equivalent of the
                           remaining benefits otherwise payable is determined
                           assuming that the Participant begins receiving
                           monthly Social Security Benefits on the later of the
                           Change of Control date or the earliest date on which
                           the Participant is eligible for a benefit from Social
                           Security. The amount of the monthly

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                               2

<PAGE>

                           Social Security Benefit assumed to be received by the
                           Participant is determined in accordance with the
                           Social Security Act in effect as of the date of the
                           Change of Control and is based on the following
                           assumptions;

                           (1)      assuming the Participant's Wages exceed the
                                    taxable wage base provided under Section 230
                                    of the Social Security Act for each Plan
                                    Year beginning with the Plan Year in which
                                    the Participant attained age twenty one (21)
                                    and ending with the last Plan Year ending
                                    before the Change of Control; and

                           (2)      assuming the Participant has no Wages during
                                    or after the Plan Year in which the Change
                                    of Control occurs; and

                           (3)      assuming the Social Security Benefits do not
                                    increase after the assumed Social Security
                                    Benefit beginning date.

         (d)      For purposes of Section 5.3(b) Before Commencement of Benefits
                  and After Termination and 5.3(c) Before Termination, the
                  Actuarial Equivalent of the Normal Retirement Benefit is
                  determined assuming that the Participant begins receiving
                  monthly Social Security Benefits on the later of the Change of
                  Control date or the earliest date on which the Participant is
                  eligible for a benefit from Social Security. The amount of the
                  monthly Social Security Benefit assumed to be received by the
                  Participant is determined in accordance with the Social
                  Security Act in effect as of the date of the Change of
                  Control, based on the following assumptions:

                  (i)      assuming the Participant's Wages exceed the taxable
                           wage base provided under Section 230 of the Social
                           Security Act for each Plan Year beginning with the
                           Plan Year in which the Participant attained age
                           twenty one (21) and ending with the last Plan Year
                           ending before the Change of Control; and

                  (ii)     assuming the Participant has no Wages during or after
                           the Plan Year in which the Change of Control occurs.

                  (iii)    For purposes of determining the Qualified Plan
                           Benefit under Section 1.31, Actuarial Equivalence
                           shall be computed using the definition of Actuarial
                           Equivalence under the Qualified Plan, unless the form
                           of payment elected under this Plan is not an option
                           under the Qualified Plan, in which case Actuarial
                           Equivalence under Section 1.1(a) above shall apply.

1.2      Administrative Committee

         "Administrative Committee" means a committee appointed by the Chairman
         of the Board to administer the Plan pursuant to Section 8.

1.3      Affiliated Companies

         "Affiliated Companies" or "Affiliate" means:

         (a)      the Company;

         (b)      any other corporation which is a member of a controlled group
                  of corporations which includes the Company (as defined in Code
                  Section 414(b));

         (c)      any other trade or business under common control with the
                  Company (as defined in Code Section 414(c)); or

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                               3

<PAGE>

         (d)      any other member of an affiliated service group which includes
                  the Company (as defined in Code Section 414(m)).

1.4      Authorized Leave of Absence

         "Authorized Leave of Absence" means any period of approved leave of
         absence from the Employer taken by a Participant, and granted by the
         Employer in its absolute discretion, including absences for which a
         Participant is granted re-employment rights under any Federal or state
         law.

1.5      Beneficiary

         "Beneficiary" means the person or persons entitled to receive a
         Participant's benefits payable under the Plan. The Beneficiary is the
         person or persons named in the Participant's latest written designation
         filed with the Administrative Committee, provided that the consent of
         the Participant's spouse (if any) is required for the election of a
         nonspouse Beneficiary and for any subsequent changes of the
         Participant's Beneficiary designation. Spousal consent must be in
         writing, name the designated Beneficiary and be notarized.

         If no designation has been filed with the Administrative Committee, or
         if the person or persons designated do not survive the Participant,
         the Beneficiary shall be the following persons in the following order
         of priority: (1) the surviving spouse (regardless of length of
         marriage), and (2) the estate of the Participant.

         If the Beneficiary dies after the death of the Participant, but before
         full distribution has been made to that Beneficiary, the balance, if
         any, shall be distributed to the estate of that deceased Beneficiary.

1.6      Board

         "Board" means the Board of Directors of the Company, or a committee
         composed of fewer than all of the members of the Board of Directors of
         the Company that is authorized to act on behalf of the Board.

1.7      Change of Control

         "Change of Control" means the occurrence of any of the following:

         (a)      the Board approves (or, if approval of the Board is not
                  required as a matter of law, the shareholders of the Company
                  approve):

                  (i)      any consolidation or merger of the Company in which
                           the Company is not the continuing or surviving
                           corporation or pursuant to which shares of common
                           stock of the Company would be converted into cash,
                           securities or other property, other than a merger of
                           the Company in which the holders of common stock of
                           the Company immediately prior to the merger have the
                           same proportionate ownership of common stock of the
                           surviving corporation immediately after the merger;

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

                  (iii)    the adoption of any plan or proposal for the
                           liquidation or dissolution of the Participant's
                           Employer;

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                               4

<PAGE>

         (b)      at any time during a period of twenty-four (24) months, fewer
                  than a majority of the members of the Board are Incumbent
                  Directors. "Incumbent Directors" means:

                  (i)      individuals who constituted the Board at the
                           beginning of such period; and

                  (ii)     individuals who were nominated or elected by all of,
                           or a committee composed entirely of, the individuals
                           described in (i); and

                  (iii)    individuals who were nominated or elected by
                           individuals described in (ii).

                  (iv)     any person (as such term is used in Section 13(d) of
                           the Securities Exchange Act of 1934, as amended (the
                           "Exchange Act")) shall, as a result of a tender or
                           exchange offer, open market purchases,
                           privately-negotiated purchases or otherwise, become
                           the beneficial owner (within the meaning of Rule
                           13d-3 under the Exchange Act), directly or
                           indirectly, of the then-outstanding securities of the
                           Company ordinarily (and apart from rights accruing
                           under special circumstances) having the right to vote
                           in the election of members of the Board ("Voting
                           Securities" to be calculated as provided in paragraph
                           (d) of Rule 13d-3 in the case of rights to acquire
                           common stock of the Company) representing 20% or
                           more of the combined voting power of the
                           then-outstanding Voting Securities.

         Unless the Board shall determine otherwise, a Change of Control shall
         not be deemed to have occurred by reason of any corporate
         reorganization, merger, consolidation, transfer of assets, liquidating
         distribution or other transaction entered into solely by and between
         the Company and an Employer, or any Affiliates thereof, provided such
         transaction has been approved by at least two-thirds (2/3) of the
         Incumbent Directors (as defined above) then in office and voting.

1.8      Code

         "Code" means the Internal Revenue Code of 1986, as amended and
         regulations promulgated under the Code.

1.9      Company

         "Company" means Alaska Air Group, Inc., a corporation organized and
         existing under the laws of the State of Delaware, and its successors in
         interest.

1.10     Company Service

         "Company Service" means the period of time measured in completed whole
         years, commencing with the date on which an Employee first completes an
         Hour of Service for an Affiliated Company during the current period of
         employment and ending on the earlier of the date of Termination or the
         date the Employee ceases to be an Elected Officer. Non-continuous
         periods are aggregated to determine the Employee's total Company
         Service. Notwithstanding the foregoing, the Board may increase an
         individual's Company Service, in its absolute discretion provided that
         any affected Participant shall be notified of any such adjustment.

1.11     Compensation

         "Compensation" means the basic monthly salary paid to an Employee,
         excluding amounts payable under the Management Incentive Program, any
         other bonus, transportation allowances, repayment of expenses,
         insurance payments, or similar payments or allowances, but including
         any earnings deferred by an Employee for the month under the terms of
         any

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                               5

<PAGE>

         salary deferral plan including the Alaskasaver Plan maintained by the
         Company, and including any pre-tax employee contributions to a
         cafeteria plan pursuant to Code Section 125.

1.12     Competing Activity

         "Competing Activity" means the following activities if begun without
         the prior written consent of the Participant's Employer:

         (a)      solicitation of business at any time within four (4) years
                  after Termination that is substantially similar to the
                  business conducted by an Employer; or

         (b)      employment at any time within four (4) years after Termination
                  by another airline serving any of the same geographic area
                  served by any Affiliate.

         The Administrative Committee shall determine in its sole discretion
         whether a Participant has or is engaged in a Competing Activity and
         shall provide the Participant with written notice of the determination
         and of its demand to cease the Competing Activity within thirty (30)
         days after the notice. The Administrative Committee's determination of
         Competing Activity shall become final and operative if the
         Administrative Committee determines that the Competing Activity is
         being conducted after the expiration of the thirty (30) day notice
         period.

1.13     Disabled

         "Disabled" means a condition resulting from demonstrable injury or
         disease which will permanently, continuously and wholly prevent the
         Employee from engaging in any occupation or performing any work for
         remuneration or profit; provided that this term shall not include any
         injury or disease which:

         (a)      resulted from or consists of habitual drunkenness or addiction
                  to narcotics;

         (b)      was contracted, suffered or incurred while the Employee was
                  engaged in, or resulted from having engaged in, a criminal
                  enterprise;

         (c)      was intentionally self-inflicted;

         (d)      arose while the Employee was on Authorized Leave of Absence
                  without pay or was absent without authorization; or

         (e)      arose as a result of service in the armed forces of any
                  country.

1.14     Early Retirement Date

         "Early Retirement Date" means the first day of the first month
         following the later of:

         (a)      Termination; and

         (b)      the Participant's fifty-fifth (55th) birthday, provided that
                  Termination occurs prior to the participant's sixtieth (60th)
                  birthday.

         If the Participant has reached age sixty (60) on the date of
         Termination, Early Retirement Date shall not apply.

1.15     Effective Date

         "Effective Date" means August 8, 1995.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                               6

<PAGE>

1.16     Elected Officer

         "Elected Officer" means an officer of an Employer that is elected by
         the Board, pursuant to the bylaws of the Employer.

1.17     Elected Officer Service

         "Elected Officer Service" means the period(s) of time measured in
         completed whole years, during which an Employee is an Elected Officer
         of the Company or Alaska Airlines, Inc. and the period(s) during which
         an Employee is the Chief Executive Officer of Horizon Air Industries,
         Inc. Non-continuous periods of Elected Officer Service are aggregated
         to determine an Employee's total years of Elected Officer Service.
         Notwithstanding the foregoing, the Board may increase an individual's
         Elected Officer Service, in its absolute discretion provided that any
         affected Participant shall be notified of any such adjustment.

1.18     Employee

         "Employee" means any person who is:

         (a)      employed by an Employer as a common law employee;

         (b)      is customarily employed by the Employer for twenty (20) or
                  more hours per week and for at least five (5) months per
                  calendar year; and

         (c)      is compensated on a salary basis.

1.19     Employer

         "Employer" means the Company and any Affiliate that adopts this Plan in
         writing with the consent of the Board, and agrees to be bound by the
         terms and conditions of the Plan and any amendments or modifications
         thereto, and which is listed in Appendix II. In the event an Employer
         ceases participation in the Plan, the date participation ceases shall
         be indicated in the Appendix.

1.20     ERISA

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
         amended.

1.21     Final Average Monthly Compensation

         "Final Average Monthly Compensation" means a Participant's average
         Compensation for a period of sixty (60) consecutive months ending on
         the earlier of (a) the Participant's Termination or (b) the date of a
         Change of Control. If an active Participant has fewer than sixty (60)
         consecutive months in the period, Final Average Monthly Compensation
         means average Compensation for the lesser of:

         (a)      the most recent sixty (60) months (whether or not
                  consecutive); or

         (b)      the total Company Service.

1.22     Hour of Service

         "Hour of Service" means each hour for which an Employee is paid or
         entitled to payment for the performance of duties for the Employer or
         any Affiliated Company.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                               7
<PAGE>

1.23     Late Retirement Date

         "Late Retirement Date" means the first day of the month next following
         the date of the Participant's Termination, provided that Termination
         occurs after the Participant's sixtieth (60th) birthday.

1.24     Normal Retirement Age

         "Normal Retirement Age" means the first day of the month next following
         the Participant's sixtieth (60th) birthday.

1.25     Normal Retirement Date

         "Normal Retirement Date" means the first day of the month next
         following the Participant's sixtieth (60th) birthday provided the
         Participant Terminates on the Participant's sixtieth (60th) birthday.

1.26     Participant

         "Participant" means each Elected Officer who participates in this Plan
         pursuant to the provisions of Section 2.

1.27     Plan

         "Plan" means the Alaska Air Group, Inc. 1995 Elected Officers
         Supplementary Retirement Plan, as set forth herein.

1.28     Plan Administrator

         "Plan Administrator" means the Company.

1.29     Plan Year

         "Plan Year" means the period beginning on the Effective Date and ending
         on December 31, 1995, and thereafter each calendar year.

1.30     Qualified Plan

         "Qualified Plan" means any defined benefit retirement plan that is
         qualified or is intended to be qualified under Code Section 401 (a) and
         that is maintained by an Affiliated Company, as amended from time to
         time.

1.31     Qualified Plan Benefit

         "Qualified Plan Benefit" means the Actuarial Equivalent of the
         monthly benefit the Participant is entitled to receive under the
         Qualified Plan determined as though benefits under the Qualified Plan
         commence at the same time and are payable in the same form of payment
         as benefits under this Plan.

1.32     Retirement Date

         "Retirement Date" means a Participant's Early, Normal or Late
         Retirement Date, whichever applies.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                               8

<PAGE>

1.33     Social Security Benefit

         "Social Security Benefit" means the Primary Insurance Amount, as
         defined under the Social Security Act, that is actually received by a
         Participant or Beneficiary. Except as provided under Section 1.1(c)
         and (d) in determining Change of Control benefits under Section 5.3,
         the Administrative Committee shall deem the Participant or Beneficiary
         to actually receive the greatest amount of Social Security Benefit at
         the earliest date to which the Participant or Beneficiary is eligible
         unless the Participant provides evidence to the contrary that is
         satisfactory to the Administrative Committee.

1.34     Terminate

         "Terminate" and its derivatives as the context requires (such as
         "Termination") means no longer employed by an Employer or Affiliated
         Company as a common law employee. An Authorized Leave of Absence is not
         a Termination.

1.35     Termination For Cause

         "Termination For Cause" means Termination for reason of admission by
         the Employee or substantiation by the Employer of;

         (a)      embezzlement, dishonesty or other fraud, conviction of a
                  felony or conspiracy against an Employer; or

         (b)      if Termination occurred prior to a Change of Control, any
                  willful or intentional injury to either an Employer, its
                  property, or its employees in connection with the business
                  affairs of an Employer.

1.36     Wages

         "Wages" means a Participant's wages as defined under Code Section 3121,
         which are subject to Federal Insurance Contribution Act tax under Code
         Section 3101.

1.37     Additional Definitions in Plan

         The following terms are defined in the following Sections of the Plan:

<TABLE>
<S>                                                                         <C>
Benefit Percentage.......................................................   3.1(b)
Change of Control Benefit................................................   5.1
Joint and Survivor Annuity...............................................   4.1(b)
Review Panel.............................................................   8.8(c)
Target Aggregate Benefit.................................................   3.1(a)
Ten Year Certain and Life Annuity........................................   4.1(c)
Ten Year Certain Installments............................................   4.1(d)
Whole Life Annuity.......................................................   4.1(a)
</TABLE>

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                               9

<PAGE>

                                    SECTION 2

                          ELIGIBILITY AND PARTICIPATION

2.1      Eligibility and Participation

         An Elected Officer shall become a Participant upon the participation
         commencement date specified by the Administrative Committee. Each
         Participant, the Participant's participation commencement date, and the
         Participant's Company Service and Elected Officer Service, if any, on
         the Participant's participation commencement date shall be listed on
         Appendix I.

2.2      Termination of Participation

         A Participant's participation in the Plan will terminate when the
         Participant's benefits under this Plan have been paid in full.

2.3      Inactive Participation

         A Participant's active participation will cease when he or she
         Terminates or becomes Disabled. A Participant's active participation
         also will cease if the Board determines that the Participant ceases to
         be an Elected Officer or the Administrative Committee determines that
         the Participant failed to make tax payments under Section 10.9. The
         date a Participant's active participation ceases shall be listed on
         Appendix I, which shall be updated from time to time. An inactive
         Participant's benefits shall be determined as though the Participant
         Terminates on the date active participation ceases.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              10

<PAGE>

                                    SECTION 3

                               RETIREMENT BENEFITS

3.1      Target Aggregate Benefit

         (a)      Target Aggregate Benefit Definition

                  A Participant's "Target Aggregate Benefit" is determined in
                  the form of a Whole Life Annuity commencing at Normal
                  Retirement Age and is equal to:

                  (i)      the Participant's Final Average Monthly Compensation
                           multiplied by the Participant's Benefit Percentage;
                           or

                  (ii)     if greater than (i) above, the Participant's
                           Qualified Plan Benefit determined without application
                           of any Code Section the effect of which is to limit,
                           reduce or restrict the Participant's Qualified Plan
                           Benefit, including without limitation Code Sections
                           415 and 401(a)(17).

                  Notwithstanding the preceding sentence, a Participant's
                  benefit under this Plan is determined in accordance with
                  Sections 3.2, 3.3, 3.4 and 3.5, whichever apply to the
                  Participant.

         (b)      Benefit Percentage Definition

                  A Participant's "Benefit Percentage" is determined in
                  accordance with the following table:

<TABLE>
<CAPTION>
===================================================================================
                              ELECTED OFFICER SERVICE
-----------------------------------------------------------------------------------
                                                                            10 or
                  At Least   At Least   At Least   At Least   At Least       More
                  5 Years    6 Years    7 Years    8 Years     9 Years      Years
-----------------------------------------------------------------------------------
<S>               <C>        <C>        <C>        <C>        <C>           <C>
Company Service
-----------------------------------------------------------------------------------
0 to 10 Years       50%        50%         50%       55%        55%          55%
-----------------------------------------------------------------------------------
11 to 15 Years      50%        55%         55%       60%        60%          60%
-----------------------------------------------------------------------------------
16 to 20 Years      55%        60%         60%       65%        65%          65%
-----------------------------------------------------------------------------------
21 to 25 Years      60%        65%         65%       70%        70%          70%
-----------------------------------------------------------------------------------
26 or More          65%        70%         70%       70%        70%          75%
Years
===================================================================================
</TABLE>

Notwithstanding the above and without regard to the Participant's Company
Service, a Participant who has less than five (5) years of Elected Officer
Service on the date of a Change of Control shall have the following "Benefit
Percentage" for purposes of determining the Participant's Change of Control
benefit under Section 5.3(b) or 5.3(c):

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              11

<PAGE>

<TABLE>
<CAPTION>
=====================================================
ELECTED OFFICER SERVICE            BENEFIT PERCENTAGE
-----------------------------------------------------
<S>                                <C>
At least 1 year                          10%
-----------------------------------------------------
At least 2 years                         20%
-----------------------------------------------------
At least 3 years                         30%
-----------------------------------------------------
At least 4 years                         40%
=====================================================
</TABLE>

3.2      Normal Retirement Benefit

         A Participant's monthly Normal Retirement Benefit payable on his or her
         Normal Retirement Date is the Participant's Target Aggregate Benefit,
         if any, adjusted as follows:

         (a)      first, Actuarially adjusted for form of payment (if the form
                  of payment is other than a Whole Life Annuity);

         (b)      second, reduced by the Qualified Plan Benefit as defined in
                  Section 1.31;

         (c)      third, multiplied by the vesting percentage determined under
                  Section 7; and

         (d)      fourth, reduced by the amount of the Social Security Benefit
                  (if any) as defined in Section 1.33.

3.3      Early Retirement Benefit

         A Participant's monthly Early Retirement Benefit payable on his or her
         Early Retirement Date is the Participant's Target Aggregate Benefit, if
         any, adjusted as follows:

         (a)      first, reduced by one one-hundred-eightieth (1/180th) for each
                  of the first sixty (60) months that ,the Participant's Early
                  Retirement Date precedes the Participant's Normal Retirement
                  Age;

         (b)      second, Actuarially adjusted for form of payment (if the form
                  of payment is other than a Whole Life Annuity);

         (c)      third, reduced by the Qualified Plan Benefit as defined in
                  Section 1.31;

         (d)      fourth, multiplied by the vesting percentage determined under
                  Section 7; and

         (e)      fifth, reduced by the amount of the Social Security Benefit
                  (if any) as defined in Section 1.33.

3.4      Late Retirement Benefit

         A Participant's monthly Late Retirement Benefit payable on his or her
         Late Retirement Date is the Participant's Target Aggregate Benefit, if
         any, determined taking into account Elected Officer Service and Company
         Service and Final Average Monthly Compensation earned as of the date of
         Termination (including service and compensation earned after age sixty
         (60)), adjusted as follows:

         (a)      first, Actuarially adjusted for form of payment (if the form
                  of payment is other than a Whole Life Annuity);

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         (b)      second, reduced by the Qualified Plan Benefit as defined in
                  Section 1.31;

         (c)      third, multiplied by the vesting percentage determined under
                  Section 7; and

         (d)      fourth, reduced by the amount of the Social Security Benefit
                  as defined in Section 1.33.

3.5      Cost of Living Adjustment

         The Board may adjust the amount of benefits then being paid to any or
         all Participants and Beneficiaries to reflect increases in the cost of
         living The adjustment shall be made in the amount and at the times
         determined solely in the discretion of the Board.

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1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

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                                    SECTION 4

                                 PAYMENT FORMS

4.1      Forms of Payment

         The following forms of benefit payment are options under the Plan,
         subject to the conditions of Sections 4.2 and 4.3.

         (a)      Whole Life Annuity

                  "Whole Life Annuity" means monthly payments beginning on the
                  Retirement Date and ending the first day of the month
                  preceding the Participant's date of death.

         (b)      Joint and Survivor Annuity

                  "Joint and Survivor Annuity" means reduced monthly payments to
                  a Participant from the Retirement Date to the first day of the
                  month preceding the Participant's date of death, and if the
                  Participant predeceases the Participant's Beneficiary, monthly
                  payments to the Participant's Beneficiary equal to fifty
                  percent (50%), sixty-six and two-thirds percent (66-2/3%),
                  seventy-five percent (75%), or one hundred percent (100%) of
                  the reduced amount payable to the Participant, beginning on
                  the Participant's date of death and ending the first day of
                  the month preceding the Beneficiary's date of death. The
                  Participant shall elect which percentage applies at the same
                  time that the Participant elects a Joint and Survivor Annuity.
                  A Joint and Survivor Annuity shall be Actuarially Equivalent
                  to the Participant's benefit payable in the form of a Whole
                  Life Annuity.

                  If the Participant's Beneficiary dies after the Participant's
                  benefit payments begin, the Participant's payments will be the
                  same reduced amount as otherwise payable under the Joint and
                  Survivor Annuity. If the Participant's Beneficiary dies before
                  the date as of which the Participant's benefit payments are to
                  begin, any election of a form of benefit under this Section
                  would be canceled automatically. If the Participant dies
                  before the date as of which the Participant's benefit payments
                  are to begin, the Beneficiary shall not be entitled to receive
                  any payments under this Section. However, a spouse may be
                  entitled to a death benefit under Section 6.

         (c)      Ten Year Certain and Life Annuity

                  "Ten Year Certain and Life Annuity" means reduced monthly
                  payments from the Retirement Date to the first of the month
                  preceding the Participant's death, but in no event will less
                  than one hundred and twenty (120) equal monthly payments be
                  made. If the Participant dies before receiving one hundred and
                  twenty (120) monthly payments, the remaining payments shall
                  continue to be made to the Participant's Beneficiary. A Ten
                  Year Certain and Life Annuity shall be Actuarially Equivalent
                  to the Participant's benefit payable in the form of a Whole
                  Life Annuity.

         (d)      Ten Year Certain Installments

                  "Ten Year Certain Installments" means one hundred and twenty
                  (120) equal monthly payments that are Actuarially Equivalent
                  to the Participant's benefits payable as a Whole Life Annuity.
                  If the Participant dies before receiving one hundred and
                  twenty (120) monthly payments, the remaining payments shall
                  continue to be made to the Participant's Beneficiary.

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Effective August 8, 1995

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4.2      Automatic Form of Payment

         Unless a Participant elects otherwise in accordance with Section 4.3,
         the Participant's benefit shall be paid as provided below:

         (a)      Married Participant

                  A Participant who is married on the Participant's Retirement
                  Date shall receive his or her benefits in the form of a one
                  hundred percent (100%) Joint and Survivor Annuity.

         (b)      Unmarried Participant

                  A Participant who is not married on the Participant's
                  Retirement Date shall receive the Participant's benefits in
                  the form of a Ten Year Certain and Life Annuity.

4.3      Payment Form Election

         (a)      Advance Election

                  Subject to approval of the Administrative Committee, a
                  Participant may elect one of the forms of payment of benefits
                  under Section 4.1 in lieu of the automatic payment form under
                  Section 4.2 as long as the Participant's election is made at
                  least one (1) year before the Participant's Termination.
                  Subject to approval of the Administrative Committee, a
                  Participant may change a prior payment-form election, provided
                  that the change is made at least one (1) year before the
                  Participant's Termination. Once benefit payments commence,
                  the payment form cannot be changed by the Participant or
                  Beneficiary.

         (b)      Unanticipated Changes In Life Circumstances

                  Notwithstanding the preceding Section 4.3(a), subject to
                  approval of the Administrative Committee, Participant may
                  elect a payment form or change a prior payment-form election
                  less than one (1) year before Termination, provided that the
                  Participant demonstrates that the Participant has experienced
                  or will experience an unanticipated change in life
                  circumstances that is involuntary and with respect to which
                  the participant's request payment form is consistent. Examples
                  of an unanticipated change in life circumstances that satisfy
                  this Section 4.3 include (but are not limited to) involuntary
                  Termination and death of a spouse.

         (c)      Form and Manner of Election

                  All payment-form elections shall be made in the form and
                  manner prescribed by the Administrative Committee and shall be
                  subject to approval of the Administrative Committee.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              15

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                                    SECTION 5

                           CHANGE OF CONTROL BENEFITS

5.1      Change of Control Benefit

         Notwithstanding any other provision of the Plan, in the event of a
         Change of Control, each Participant (or his or her Beneficiary), except
         a Participant Terminated For Cause before the date of the Change of
         Control, shall receive a Change of Control benefit in accordance with
         this Section, in lieu of all other benefits payable under this Plan.

5.2      Form of Payment

         All Change of Control Benefits shall be paid in the form of a single
         lump sum payment determined under Section 5.3, within sixty (60) days
         after a Change of Control. After payment of all Change of Control
         Benefits, this Plan shall terminate automatically, and no Participant
         or Beneficiary will have any further rights under the Plan.

5.3      Amount of Change of Control Benefit

         (a)      After Commencement of Benefits

                  If benefit payments have commenced as of the date of the
                  Change of Control, any Participant, spouse, or Beneficiary
                  receiving benefits as of the date of the Change of Control
                  shall receive a single lump sum payment that is the Actuarial
                  Equivalent of the remaining benefits otherwise payable.

         (b)      Before Commencement of Benefits And After Termination

                  If the date of the Change of Control is after a Participant's
                  Termination, but before benefit payments have begun, the
                  Participant shall receive a single lump sum payment that is
                  Actuarially Equivalent to the Participant's Normal Retirement
                  Benefit (if any).

         (c)      Before Termination

                  If the date of the Change of Control is before a Participant's
                  Termination, the Participant shall receive a single lump sum
                  payment that is Actuarially Equivalent to the Participant's
                  Normal Retirement Benefit (if any) determined as though the
                  Participant Terminated on the date of the Change of Control.

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1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

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                                    SECTION 6

                                 DEATH BENEFITS

6.1      Death Benefits Prior to Benefit Commencement

         In the event a married Participant dies before benefit payments begin,
         he or she shall become one hundred percent (100%) vested upon death
         pursuant to Section 7.1(c) and his or her spouse shall receive a death
         benefit as described below:

         (a)      Death Following Early Retirement Date

                  If the Participant dies after reaching age fifty-five (55) but
                  before benefit commencement, the spouse's benefit shall be
                  paid monthly from the first of the month coinciding with or
                  following the Participant's death through the first of the
                  month preceding the spouse's death. The benefit shall equal
                  the amount payable to the surviving spouse under a one hundred
                  percent (100%) Joint and Survivor Annuity form of payment as
                  if the Participant had commenced receiving Early Retirement
                  Benefit, Normal Retirement Benefit, or Late Retirement Benefit
                  payments (whichever applies) as of the date spouse death
                  benefits commence, based upon the Participant's vested Target
                  Aggregate Benefit, if any, at the date of death.

         (b)      Death Prior to Early Retirement Date

                  If the Participant dies prior to reaching age fifty-five (55),
                  the spouse's death benefit shall be paid monthly from the
                  Participant's earliest Retirement Date (determined as if the
                  Participant had survived but was not employed after the date
                  of death) through the first of the month preceding the
                  spouse's death. The benefit shall equal the amount payable to
                  the surviving spouse under a one hundred percent (100%) Joint
                  and Survivor Annuity form of payment as if the Participant had
                  Terminated on the date of death, survived to the date spouse
                  benefits commence and commenced receiving Early Retirement
                  Benefit or Normal Retirement Benefit payments (whichever
                  applies) on such date. If the surviving spouse dies before
                  benefit payments begin, no benefits shall be payable to the
                  spouse's estate or beneficiaries.

6.2      Death Benefits After Benefit Commencement

                  In the event a Participant dies after benefit payments have
                  commenced, his or her Beneficiary may be entitled to receive a
                  benefit depending on the form of payment elected by the
                  Participant. The benefit payable to a Beneficiary is described
                  in Section 4.1(b) Joint and Survivor Annuity, 4.1(c) Ten Year
                  Certain and Life Annuity or 4.1(d) Ten Year Certain
                  Installments, whichever applies according to the form elected
                  by the Participant.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              17

<PAGE>

                                    SECTION 7

                                     VESTING

7.1      Vesting

         Except as provided in Section 7.2, each Participant shall have at all
         times a vested, nonforfeitable right to his or her Target Aggregate
         Benefit as adjusted pursuant to Sections 3.2, 3.3 and 3.4, if any,
         multiplied by the appropriate vesting percentage determined in
         accordance with whichever of the following tables produces the greatest
         vesting percentage:

         (a)      Schedule A

                  A Participant who:

                  (i)      has reached age fifty (50) and has completed Company
                           Service of at least fifteen (15) years; or

                  (ii)     Terminates on or after age sixty (60)

                  shall have the following vesting percentage in his or her
                  benefit, if any:

<TABLE>
<CAPTION>
----------------------------------------------------
ELECTED OFFICER SERVICE           VESTING PERCENTAGE
----------------------------------------------------
<S>                               <C>
 5                                        50%
--------------------------------------------
 6                                        60%
--------------------------------------------
 7                                        70%
--------------------------------------------
 8                                        80%
--------------------------------------------
 9                                        90%
--------------------------------------------
 10                                      100%
--------------------------------------------
</TABLE>

         (b)      Schedule B

                  A Participant who has reached age fifty (50) and has completed
                  Elected Officer Service of at least ten (10) years shall be
                  one hundred percent (100%) vested in his or her benefit, if
                  any.

         (c)      Death or Disability

                  A Participant who dies prior to Termination or becomes
                  Disabled shall be one hundred percent (100%) vested in his or
                  her Target Aggregate Benefit as adjusted pursuant to Sections
                  3.2, 3.3 and 3.4, if any, on the date of death or Disability.

         (d)      Change of Control

                  Notwithstanding any other provision of the Plan to the
                  contrary, including without limitation Sections 1.10, 1.35,
                  7.2(a) and 7.2(b), all Participants who are Employees when a
                  Change of Control occurs shall be one hundred percent (100%)
                  vested in their Target Aggregate Benefit as adjusted pursuant
                  to Sections 3.2, 3.3 and 3.4, if any, (without regard to the
                  Participant's age) in the event of a Change of Control.

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1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

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         (e)      Termination of Plan

                  In the event that the Plan is Terminated in whole or in part,
                  all affected Participants shall be one hundred percent (100%)
                  vested in his or her Target Aggregate Benefit as adjusted
                  pursuant to Sections 3.2, 3.3 and 3,4, if any.

7.2      Forfeiture

         (a)      Termination

                  In the event a Participant Terminates:

                  (i)      before reaching age fifty (50) and before a Change of
                           Control; or

                  (ii)     before becoming one hundred percent (100%) vested;

                  the Participant's nonvested portion of the Target Aggregate
                  Benefit shall be forfeited.

         (b)      Termination For Cause and Competing Activity

                  Notwithstanding any Plan provision to the contrary other than
                  Section 7.l(d), a Participant's vested and nonvested Target
                  Aggregate Benefit and any death benefit will be forfeited in
                  their entirety and will not be reinstated for any reason upon:

                  (i)      the Participant's Termination for Cause; or

                  (ii)     a determination that the Participant is engaged in a
                           Competing Activity.

                  This forfeiture clause has no effect on benefits payable under
                  the Qualified Plan.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              19

<PAGE>

                                    SECTION 8

                       POWERS AND DUTIES OF THE COMMITTEE

8.1      Appointment of Administrative Committee

         The Plan shall be administered by the Administrative Committee which
         shall be appointed by the Chairman of the Board. The Administrative
         Committee shall be composed of at least three (3) members, all of whom
         are Elected Officers. No bond or other security shall be required of
         any Administrative Committee member in such capacity.

         The Chairman of the Board shall be the Chairman of the Administrative
         Committee. Administrative Committee members may participate in the Plan
         if they are otherwise eligible to do so.

8.2      Powers and Duties

         The Administrative Committee shall have the power and the duty to take
         all action and to make all decisions necessary or proper to carry out
         the Plan, including the discretionary authority to interpret the
         provisions of the Plan and the facts and circumstances of claims for
         benefits. The Administrative Committee shall have the absolute
         discretion to decide all issues of fact or law. Any decision by the
         Administrative Committee that is not shown to be an abuse of discretion
         must be upheld by a court of law. Without limiting the foregoing, the
         Administrative Committee shall have the following administrative powers
         and duties:

         (a)      to require any Participant or Beneficiary to furnish
                  information as they may request for the purpose of the proper
                  administration of the Plan as a condition to receiving any
                  benefit under the Plan;

         (b)      to make and enforce rules and regulations and prescribe the
                  use of forms as, they shall deem necessary for the efficient
                  administration of the Plan;

         (c)      to interpret the Plan and to resolve ambiguities,
                  inconsistencies and omissions in a nondiscriminatory manner;

         (d)      to determine tax withholding;

         (e)      to compute the amount of benefits which shall be payable to
                  any person in accordance with the provisions of the Plan; and

         (f)      to delegate any of their administrative powers or duties
                  hereunder to any of their agents or employees,

8.3      Administrative Committee Procedures

         A majority of the Administrative Committee members in office may
         fulfill any act which the Plan authorizes or requires of the
         Administrative Committee, provided that no Administrative Committee
         member who participates in the Plan shall vote on any matter that
         pertains to the member or to the member's rights and/or benefits under
         the Plan unless such matter pertains to all Participants or all
         Participant's rights and/or benefits under the Plan. Each member of the
         Administrative Committee shall be recused from voting on any action
         pertaining solely to the member or members of the Administrative
         Committee or their rights and/or benefits under the Plan, and the
         action shall be taken by a majority of the remaining members of the
         Administrative Committee, or if the remaining members do not constitute
         a quorum, by the Compensation Committee of the Board.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

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         The action of such majority of the Administrative Committee expressed
         from time to time by a vote at a meeting, or in writing without a
         meeting, shall constitute the action of the Administrative Committee
         and shall have the same effect for all purposes as if assented to by
         all Administrative Committee members. The majority of Administrative
         Committee members may delegate in writing to any of them the authority
         to give certified notice in writing of any action taken by the
         Administrative Committee.

8.4      Appointment of Agents

         The Administrative Committee may appoint such actuaries, accountants,
         counsel, specialists, and other persons or organizations as they shall
         deem necessary for administration of the Plan and they shall be
         entitled to prudently rely upon any tables, valuations, certificates,
         opinions, or reports which shall be furnished to them by such persons
         or organizations.

8.5      Administrative Committee Expenses

         The Administrative Committee shall serve without compensation for
         services as such, but any reasonable expenses incurred by them in the
         performance of their duties as Administrative Committee members shall
         be paid by the Company.

8.6      Administrative Expenses

         All expenses incurred by the Administrative Committee in connection
         with the administration of the Plan, including but not limited to the
         compensation of any actuary, accountant, counsel, specialist, or other
         persons or organizations who shall be employed by the Administrative
         Committee in connection with the administration thereof, shall be paid
         by the Company.

8.7      Determinations

         All determinations hereunder made by the Board or the Administrative
         Committee shall be made in the sole and absolute discretion of the
         Board, the Compensation Committee of the Board or of the Administrative
         Committee, as the case may be.

         In the event that any disputed matter shall arise hereunder, including,
         without in any manner limiting the generality of the foregoing, any
         matter relating to the eligibility of any person to participate under
         the Plan, the participation of any person under the Plan, the amounts
         payable to any person under the Plan, and the applicability and the
         interpretation of the provisions of the Plan, the decision of the
         Administrative Committee, Board, or Compensation Committee of the Board
         upon such matter shall be binding and conclusive upon all persons,
         including, without in any manner limiting the generality of the
         foregoing, the Company, the Board, all persons at any time in the
         employ of the Company, the Participants and their Beneficiaries, and
         upon the respective successors, assigns, executors, administrators,
         heirs, next of kin, and distributees of all the foregoing.

8.8      Claim and Review Procedure

         (a)      Application for Benefits

                  Any application for benefits under the Plan shall be submitted
                  to the Company at its principal office. Such application shall
                  be in writing on the prescribed form and shall be signed by
                  the applicant.

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1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

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         (b)      Denial of Applications

                  In the event that any application for benefits is denied in
                  whole or in part, the Company shall notify the applicant in
                  writing of the right to a review of the denial. Such written
                  notice shall set forth, in a manner calculated to
                  be understood by the applicant, specific reasons for the
                  denial, specific references to the Plan provisions on which
                  the denial was based, a description of any information or
                  material necessary to perfect the application, an explanation
                  of why such material is necessary, and an explanation of the
                  Plan's review procedure. Such written notice shall be given to
                  the applicant within 90 days after the Company receives the
                  application unless special circumstances require an extension
                  of time for processing the application. In no event shall such
                  an extension exceed a period of ninety (90) days after the end
                  of the initial 90-day period. If such an extension is
                  required, written notice thereof shall be furnished to the
                  applicant before the end of the initial 90-day period. Such
                  notice shall indicate the special circumstances requiring an
                  extension of time and the date by which the Company expects to
                  render a decision. If written notice is not given to the
                  applicant within the period prescribed by this Subsection (b),
                  the application shall be deemed to have been denied for
                  purposes of Subsection (d) upon the expiration of such period.

         (c)      Review Panel

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

         (d)      Requests for Review

                  Any person whose application for benefits is denied in whole
                  or in part (or such person's duly authorized representative)
                  may appeal from the denial by submitting to the Review Panel a
                  request for a review of such application within six (6) months
                  after receiving written notice of the denial. The Review Panel
                  shall give the applicant or such representative an opportunity
                  to review pertinent documents in preparing such request for
                  review and to submit issues and comments in writing. The
                  request for review shall be in writing and shall be addressed
                  to the Company's principal office. The request for review
                  shall set forth all of the grounds on which it is based, all
                  facts in support of the request, and any other matters which
                  the applicant deems pertinent. The Review Panel may require
                  the applicant to submit such additional facts, documents or
                  other material as it may deem necessary or appropriate in
                  making its review.

         (e)      Decisions on Review

                  The Review Panel shall act upon each request for review within
                  sixty (60) days after receipt thereof, unless special
                  circumstances require an extension of time for processing, but
                  in no event shall the decision on review be rendered more than
                  one hundred twenty (120) days after the Review Panel receives
                  the request for review. If such an extension is required,
                  written notice thereof shall be furnished to the applicant
                  before the end of the initial sixty (60)-day period. The
                  Review Panel shall give prompt, written notice of its decision
                  to the applicant and to the Company. In the event that the
                  Review Panel confirms the denial of the application for
                  benefits in whole or in part, such notice shall set forth, in
                  a manner calculated to be understood by the applicant, the
                  specific reasons for such denial and specific references to
                  the

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              22

<PAGE>

                  Plan provisions on which the decision is based. To the extent
                  that the Review Panel overrules the denial of the application
                  for benefits, such benefits shall be paid to the applicant.

         (f)      Rules and Procedures

                  The Review Panel shall adopt such rules and procedures,
                  consistent with ERISA and the Plan, as it deems necessary or
                  appropriate in carrying out its responsibilities under this
                  Section 8.8

         (g)      Exhaustion of Administrative Remedies

                  No legal or equitable action for benefits under the Plan shall
                  be brought unless and until the claimant (1) has submitted a
                  written application for benefits in accordance with Subsection
                  (a); (2) has been notified that the application is denied; (3)
                  has filed a written request for a review of the application in
                  accordance with Subsection (d); and (4) has been notified in
                  writing that the Review Panel has affirmed the denial of the
                  application; provided, however, that an action may be brought
                  after the Company or the Review Panel has failed to act on the
                  claim within the time prescribed in Subsection (b) and
                  Subsection (e), respectively.

8.9      Exemption From Liability/Indemnification

                  The members of the Administrative Committee, collectively and
                  individually, shall be free from all liability, joint or
                  several, for their acts, omissions, and conduct, and for the
                  acts, omissions, and conduct of their duly-appointed agents,
                  in the administration of the Plan, except for those acts or
                  omissions and conduct resulting from willful misconduct or
                  lack of good faith.

                  The Company shall indemnify each member of the Administrative
                  Committee, and any other employee, officer, or director of the
                  Company against any claims, loss, damage, expense, or
                  liability, by insurance or otherwise (other than amounts paid
                  in settlement not approved by the Company), reasonably
                  incurred by the individual in connection with any action or
                  failure to act by reason of membership on the Administrative
                  Committee or performance of an authorized duty or
                  responsibility for or on behalf of the Company pursuant to the
                  Plan, unless the same is judicially determined to be the
                  result of the individual's gross negligence or willful
                  misconduct. Such indemnification by the Company shall be made
                  only to the extent such expense or liability is not payable to
                  or on behalf of such person under any liability insurance
                  coverage. The foregoing right to indemnification shall be in
                  addition to any other rights to which any such person may be
                  entitled as a matter of law.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              23

<PAGE>

                                    SECTION 9

                            AMENDMENT AND TERMINATION

9.1      Amendment or Termination

         (a)      Right to Amend or Terminate

                  Except as otherwise provided in this Section, the Company
                  reserves the right at any time and from time to time to amend
                  any or all provisions of the Plan or terminate the Plan, in
                  whole or in part, for any reason and without consent of any
                  person, and without liability to any person for such amendment
                  or termination. Notwithstanding the preceding sentence, no
                  amendment of the Plan shall:

                  (i)      adversely affect the benefits or rights of a
                           Participant or Beneficiary under the Plan (other than
                           election or availability of a form of benefit payment
                           under Section 4) earned and vested as of the
                           effective date of the amendment without the written
                           consent of each affected Participant and Beneficiary
                           unless such change is required by law or regulations
                           or is necessary to avoid unfavorable tax
                           consequences; or

                  (ii)     adversely affect the features of the Plan in effect
                           as of the effective date of the amendment without the
                           written consent of each affected Participant and
                           Beneficiary unless such change is required by law or
                           regulations or is necessary to avoid unfavorable tax
                           consequences; or

                  (iii)    be adopted or become effective after a Change of
                           Control without the written consent of all
                           Participants and Beneficiaries.

         (b)      Plan Termination

                  Nothing in this Plan shall be construed to require
                  continuation of benefit accruals under this Plan or
                  continuation of this Plan with respect to existing or future
                  Participants or Beneficiaries. Notwithstanding Section
                  9.l(a)(i), the Company may amend the Plan to cease all future
                  benefit accruals and shall pay benefits according to the then
                  existing or amended distribution provisions. Notwithstanding
                  Section 9.1(a)(i), the Company may terminate the Plan and
                  shall distribute all benefits as soon as administratively
                  feasible in the form of single lump sum payments calculated in
                  the same manner as lump sum benefits are calculated in the
                  event of a Change of Control pursuant to Section 5.3.

         (c)      Procedures

                  Any amendment or termination of the Plan shall be adopted by
                  the Board, made in writing, and executed on behalf of the
                  Company by an authorized officer of the Company.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              24

<PAGE>

                                   SECTION 10

                            MISCELLANEOUS PROVISIONS

10.1     Appendices

         Any Appendix to this Plan, as amended from time to time, is
         incorporated into the Plan and made a part of the terms and conditions
         of this Plan.

10.2     ERISA Status

         This Plan shall constitute a plan which is unfunded and which is
         maintained primarily for the purpose of providing deferred compensation
         benefits for a select group of management or highly compensated
         employees within the meaning of Sections 201(2), 301(a)(3), and
         401(a)(l) of ERISA.

10.3     Unfunded Nature of the Obligation

         The obligation to pay benefits under the Plan shall at all times be an
         unfunded, unsecured obligation of the Employer. The Employer is not
         obligated to purchase any annuity contracts to provide benefits under
         the Plan, to establish a trust for the purpose of receiving
         contributions and paying benefits under the Plan, or to otherwise set
         aside funds for the purpose of providing Plan benefits.

10.4     Facility of Payment

         In the event any benefit under this Plan shall be payable to a person
         who is under legal disability or is in any way incapacitated so as to
         be unable to manage his or her financial affairs, the Administrative
         Committee may direct payment of such benefit to a duly appointed
         guardian, committee or other legal representative of such person, or in
         the absence of a guardian or legal representative, to a custodian for
         such person under a Uniform Gifts to Minors Act or to any relative of
         such person by blood or marriage, for such person's benefit. Any
         payment made in good faith pursuant to this provision shall fully
         discharge the Company and the Plan of any liability to the extent of
         such payment.

10.5     Governing Law

         The Plan shall be construed in accordance with ERISA and the laws of
         the State of Washington, to the extent not preempted by ERISA.

10.6     Limitation on Assignment

         Benefits under this Plan may not be assigned, sold, transferred, or
         encumbered, and any attempt to do so shall be void. A Participant's or
         Beneficiary's interest in benefits under the Plan shall not be subject
         to debts or liabilities of any kind and shall not be subject to
         attachment, garnishment or other legal process.

10.7     No Additional Rights

         No person shall have any rights under the Plan, except as, and only to
         the extent, expressly provided for in the Plan. Neither the
         establishment or amendment of the Plan or the creation of any fund or
         account, or the payment of benefits, nor any action of an Employer or
         the Administrative Committee shall be held or construed to confer upon
         any person any right to be continued as an employee, or, upon
         dismissal, any right or interest in any account or fund

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              25

<PAGE>

         other than as herein provided. The Company and the other Employers
         expressly reserve the right to discharge any employee at any time with
         or without cause.

10.8     Notice

         All notices, statements, reports and other communications from the
         Company or Administrative Committee to any employee or other person
         required or permitted under the Plan shall be deemed to have been duly
         given when delivered to, or when mailed by first-class mail, postage
         prepaid and addressed to, such employee, or other person at his or her
         address last appearing on the Company's records.

10.9     Severability

         If any provision of this Plan is held unenforceable or invalid for any
         reason, such determination shall not affect the remaining provisions of
         this Plan which shall be construed as if the unenforceable or invalid
         provisions had never been included.

10.10    Tax Consequences and Withholding

         The Company does not represent or guarantee that any particular federal
         or state income, payroll, Social Security, or other tax consequences
         will result from participation in the Plan. A Participant should
         consult with professional tax advisors to determine the tax
         consequences of his or her participation in the Plan.

         All payments of federal or state income, Social Security, payroll, or
         other tax required with respect to contributions or benefits under the
         Plan shall be satisfied by withholding the required amount from the
         Participant's salary or Plan benefit payment, or if the Participant's
         salary or benefit payment is insufficient to satisfy any required tax
         payments, the Participant shall satisfy the payments in a manner
         approved by the Administrative Committee.

         Determinations by the Administrative Committee with respect to tax
         withholding shall be binding on the Participant and Beneficiaries.

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              26

<PAGE>

                            EXECUTION/SIGNATURE PAGE

         IN WITNESS WHEREOF, the Company has caused this Plan to be signed by
its duly authorized officer this 8th day of August, 1995.

                                                    ALASKA AIR GROUP, INC.

Witness:

/s/ Keith Loveless                                  By: /s/ John F. Kelly
------------------                                      -----------------
Keith Loveless                                          John F. Kelly
Assistant Secretary                                     Chairman, President and
                                                        Chief Executive Officer

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              27

<PAGE>

                                   APPENDIX I
                                     TO THE
                             ALASKA AIR GROUP, INC.
               1995 ELECTED OFFICERS SUPPLEMENTARY RETIREMENT PLAN
                               (as of July 1,2000)

Pursuant to Section 2 of the Plan, the following Elected Officers shall be
Participants in the Plan beginning on the date listed below and shall cease to
be active Participants on the date listed below:

<TABLE>
<CAPTION>
                             Participation                                                              Active
                              Commencement                    Company        Elected Officer        Participation
          Name                 Date (PCD)                  Service on PCD    Service on PCD             Ceases
<S>                        <C>                             <C>               <C>                   <C>
1.  William S. Ayer        August 8, 1995                      13.02               0

2.  Michel A. Swanigan     October 23, 1995                    15.54               0               January 31,2000

3.  Keith Loveless         May 21, 1996                        10.06               0

4.  Dennis J. Hamel        July 29, 1997                       13.88               0

5.  William L. MacKay      July 29, 1997                       20.93               0

6.  Robert M. Reeder       July 29, 1997                        7.38               0

7.  Gregg A. Saretsky      March 15, 1998                          0               0

8.  Robin L. Krueger       January 26, 1 999                   15.06               0               July 1, 1999

9.  Bradley D. Tilden      January 26, 1999                     7.93               0

10. William F. Weaver      October 26, 1999                     2.90               0

11. David A. Prewitt       June 1, 2000                            0               0
</TABLE>

ACKNOWLEDGED AND ACCEPTED
ALASKA AIR GROUP, INC.

By:________________________
   John F. Kelly
   Chairman and Chief Executive Officer

Date:______________________

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995

                                                                              28

<PAGE>

                                   APPENDIX II
                                     TO THE
                             ALASKA AIR GROUP, INC.
               1995 ELECTED OFFICERS SUPPLEMENTARY RETIREMENT PLAN

"Employer" as defined in Section 1.19 shall also include the following employers
during the following period of time.

<TABLE>
<CAPTION>
           Employer                Beginning Date        Ending Date
           --------                --------------        -----------
<S>                                <C>                   <C>
1. Alaska Airlines, Inc.           August 8, 1995

2. Horizon Air Industries, Inc.    August 8, 1995
</TABLE>

ACKNOWLEDGED AND ACCEPTED
ALASKA AIR GROUP, INC.

By: /s/ John F. Kelly
    -----------------
    John F. Kelly
    Chairman and Chief Executive Officer

Date: 12/31/97

Alaska Air Group, Inc.
1995 Elected Officers Supplementary Retirement Plan
Effective August 8, 1995                                                      29
<PAGE>

                                 FIRST AMENDMENT
                                     TO THE
                             ALASKA AIR GROUP, INC.
              1995 ELECTED OFFICERS SUPPLEMENTARY RETIREMENT PLAN

         The Alaska Air Group, Inc. 1995 Elected Officers Supplementary
Retirement Plan, effective August 8, 1995 (the "Plan"), is amended as follows,
effective January 30, 2002 unless otherwise specified below:

I.       The first sentence of Section 1.1 Actuarial Equivalence is deleted in
         its entirety and replaced with the following:

         "Actuarial Equivalence" and its derivatives as the context requires
         (such as "Actuarially Equivalent") mean that the present value of two
         (2) single sum payments, two (2) series of payments, a single sum and a
         series of payments, or payments commencing at different times, are of
         equal value when computed as follows:

II.      Section 1.30 Qualified Plan is deleted in its entirety and replaced
         with the following;

         1.30     Qualified Defined Benefit Plan

         "Qualified Defined Benefit Plan" means the Alaska Air Group, Inc.
         Retirement Plan for Salaried Employees, as amended and restated
         effective January 1, 2000 and as subsequently amended.

III.     Section 1.31 Qualified Plan Benefit is deleted in its entirety and
         replaced with the following, and Section 1.32 Retirement Date is
         redesignated as Section 1.31:

         Section 1.32 Retirement Offset

         "Retirement Offset" means the sum of (a), (b) and (c) below:

         (a)      Qualified Plan Offset

                  The Actuarial Equivalent of the vested monthly benefit the
                  Participant is actually entitled to receive under the
                  Qualified Defined Benefit Plan determined as though benefits
                  under the Qualified Defined Benefit Plan commence at the same
                  time and are payable in the same form of payment as benefits
                  under this Plan, adjusted as follows:

                  (i)      Reduction of Offset for Non-Officer Service

                           The amount determined under (a) shall be reduced by
                           the Actuarial Equivalent of the vested monthly
                           benefit the Participant would be entitled

                                        1

<PAGE>

                           to receive under the Qualified Defined Benefit Plan
                           if the Participant's Credited Service (as defined in
                           the Qualified Defined Benefit Plan) earned after the
                           date the Participant became an Elected Officer were
                           disregarded in determining the benefit; and

                  (ii)     Increase for Enhanced Match Election

                           If the Participant elected the enhanced match
                           pursuant to Section 2.6 of the Qualified Defined
                           Benefit Plan, the amount determined under (a) shall
                           be increased by the Actuarial Equivalent of the
                           additional vested monthly benefit the Participant
                           would have been entitled to receive under the
                           Qualified Defined Benefit Plan if the Participant had
                           not elected the enhanced match; and

         (b)      Phantom Offset

                  If the Participant has never been a participant in the
                  Qualified Defined Benefit Plan, the Actuarial Equivalent of
                  the vested monthly benefit that would be determined under (a),
                  as adjusted by (a)(i) if the Participant had participated in
                  the Qualified Defined Benefit Plan; and

         (c)      Supplementary Plan Offset

                  The Actuarial Equivalent of the vested monthly benefit the
                  Participant is actually entitled to receive under a
                  Supplementary Plan, determined as though benefits under the
                  Supplementary Plan commence at the same time and are payable
                  in the same form of payment as benefits under this Plan,
                  reduced by the Actuarial Equivalent of the vested monthly
                  benefit the Participant would be entitled to receive under the
                  Supplementary Plan if the Participant's service after the date
                  the Participant became an Elected Officer were disregarded in
                  determining the benefit.

IV.      The following new Section 1.34 Supplementary Plan is inserted
         immediately after Section 1.33 Social Security Benefit and the
         subsequent Sections are renumbered 1.35 through 1.38:

         Section 1.34 Supplementary Plan

         "Supplementary Plan" means any unfunded deferred compensation plan
         maintained by an Employer:

         (a)      that is exempted (or is intended to be exempted) from Parts 2,
                  3 and 4 of Subtitle B of ERISA under ERISA Sections 201(2),
                  301(3) and 401(a)(l);

         (b)      that provides a defined benefit at retirement (rather than
                  defined contributions to the Participant's account); and

                                        2

<PAGE>

         (c)      that is intended by its stated terms to supplement or replace
                  benefits provided under the Qualified Defined Benefit Plan.

V.       Section 3.2 Normal Retirement Benefit, subsection (b) is deleted in its
         entirety and replaced with the following:

         (b)      second, reduced by the Retirement Offset, as defined in
                  Section 1.32;

VI.      Section 3.3 Early Retirement Benefit subsection (c) is deleted in its
         entirety and replaced with the following:

         (c)      third, reduced by the Retirement Offset, as defined in Section
                  1.32;

VII.     Section 3.4 Late Retirement Benefit, subsection (b) is deleted in its
         entirety and replaced with the following:

         (b)      second, reduced by the Retirement Offset, as defined in
                  Section 1.32;

VIII.    Effective January 1, 2002, Section 8.8 Claim and Review Procedure is
         deleted in its entirety and replaced with the following:

         8.8      Claim and Review Procedures

                  (a)      Application for Benefits

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

                  (b)      Denial of Application

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

                           (i)      specific reasons for the denial,

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

                                       3

<PAGE>

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

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

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

                           The denial notice will be given to the Claimant
                           within ninety (90) days after the Administrative
                           Committee receives the application unless special
                           circumstances require an extension of time for
                           processing the application. In no event will an
                           extension exceed a period of ninety (90) days after
                           the end of the initial 90-day period. If an extension
                           is required, written notice of the extension shall be
                           furnished to the Claimant before the end of the
                           initial 90-day period. The extension notice will
                           indicate the special circumstances requiring an
                           extension of time and the date by which the
                           Administrative Committee expects to render a
                           decision. If a written denial notice is not given to
                           the Claimant within the period prescribed by this
                           Section 8.8(b), the application is deemed to have
                           been denied for purposes of section 8.8(d).

                  (c)      Review Panel

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

                  (d)      Request for Review

                           A Claimant whose application is denied, in whole or
                           in part, may appeal the denial by submitting to the
                           Review Panel a written request for a review of the
                           denial. The request for review must be submitted to
                           the Review Panel within sixty (60) days after the
                           Claimant receives written notice of the denial. Upon
                           request and free of charge, the Claimant shall be
                           permitted reasonable access to, and copies of,
                           relevant information and documents. The

                                        4

<PAGE>

                           Review Panel shall give the Claimant an opportunity
                           to submit written information, documents, records and
                           comments in support of the appeal. In making its
                           decision, the Review panel will take the Claimant's
                           submissions into account, regardless of whether this
                           information was available in considering the initial
                           request.

                  (e)      Decision on Review

                           The Review Panel will deliver to the Claimant an
                           electronic or written decision within a reasonable
                           time, but no later than sixty (60) days after receipt
                           of the Claimant's request for review. In special
                           circumstances, the period may be extended up to an
                           additional sixty (60) days. If an extension is
                           required, written notice of the extension will be
                           furnished to the Claimant before the end of the
                           initial 60-day period. The extension notice will
                           indicate the special circumstances requiring an
                           extension of time and the date by which the Review
                           Panel expects to render a decision. If a written
                           decision is not given to the Claimant within the
                           period prescribed by this Section 8.8(e), the
                           decision is deemed to be adverse. If the decision is
                           adverse, in whole or in part, the decision shall set
                           forth in a manner calculated to be understood by the
                           Claimant:

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

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

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

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

                  (f)      Rules and Procedures

                           The Administrative Committee and the Review Panel
                           shall establish additional administrative procedures
                           in accordance with this Section 8.8 and ERISA as they
                           deem necessary or appropriate, including safeguards
                           to insure and verify that decisions under this
                           Section 8.8 are made in accordance with the Plan
                           document and are applied consistently to
                           similarly-situated Participants and

                                        5

<PAGE>

                           Beneficiaries. Additional administrative procedures
                           may include, but are not limited to, protocols,
                           guidelines, periodic review and audits.

                  (g)      Exhaustion of Administrative Remedies

                           No legal or equitable action for benefits under the
                           Plan shall be brought unless and until the Claimant
                           has satisfied the procedures in this Section 8.8.

IX.      The first sentence of Section 10.3 Unfunded Nature of the Obligation is
         deleted in its entirety and replaced with the following:

                  No Participant, spouse or Beneficiary shall have any rights
                  with respect to any benefits except as a general, unsecured
                  creditor of the Employer.

         IN WITNESS WHEREOF, the Compensation Committee of the Board of
Directors of Alaska Air Group, Inc. has caused this First Amendment to be signed
by its duly-authorized Chair as of January 30, 2002.

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

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

                                        6

<PAGE>

                                SECOND AMENDMENT
                                     TO THE
                             ALASKA AIR GROUP, INC.
               1995 ELECTED OFFICERS SUPPLEMENTARY RETIREMENT PLAN

         The Alaska Air Group, Inc. 1995 Elected Officers Supplementary
Retirement Plan, effective August 8, 1995 (the "Plan"), is amended as follows,
effective August 28, 2002 unless otherwise specified below:

I.       The first clause of Section 1.1(a) Actuarial Equivalence is replaced
         with the following:

         (a)      For purposes of Sections 3.2 Normal Retirement Benefit, 3.6
                  Post-Retirement, Lump-Sum Benefit, 4.1(c) Ten Year Certain and
                  Life Annuity, 4.1(d) Ten Year Certain Installments and 5.3
                  Amount of Change of Control Benefit, Actuarial Equivalence
                  shall be computed using the following:

II.      Section 1.1 Actuarial Equivalence is amended by inserting the following
         new Section 1.1(e):

         (e)      For purposes of Section 3.6 Post-Retirement, Lump-Sum Benefit,
                  the lump sum that is Actuarially Equivalent to the remaining
                  monthly benefits otherwise payable is determined as follows:

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

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

                           (1)      assuming the Participant's Wages exceed the
                                    taxable wage base provided under Section 230
                                    of the Social Security Act for each Plan
                                    Year beginning with the Plan Year in which
                                    the Participant attained age twenty one (21)
                                    and ending

                                        1

<PAGE>

                                    with the last Plan Year ending before the
                                    first day of the most recent month for which
                                    a payment was made;

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

                           (3)      assuming the Social Security Benefits do not
                                    increase after the assumed Social Security
                                    Benefit beginning date.

III.     A new Section 3.6 Post-Retirement, Lump-Sum Benefit is inserted
         immediately after Section 3.5 Cost of Living Adjustment:

         Section 3.6       Post-Retirement, Lump-Sum Benefit

                  A Participant who has already begun receiving Normal, Early or
                  Late Retirement Benefits in one of the payment forms under
                  Section 4.1 may elect to receive a post-retirement lump sum.

                  (a)      Definition

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

                  (b)      Form and Manner of Election

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

                  (c)      Right to Amend or Eliminate

                           Notwithstanding Section 9.1(a), the Company may amend
                           or delete this Section 3.6 at any time, if the Board
                           determines in its sole discretion that such amendment
                           is required by law or regulations or is necessary or
                           advisable to avoid unfavorable tax consequences.

                                        2

<PAGE>

                           Any amendment of this Section 3.6 shall be made in
                           accordance with the procedures set forth in Section
                           9.1(c).

IV.      The last sentence of Section 4.3(a) Advance Election is deleted and
         replaced in its entirety with the following:

         Except as provided in Section 3.6, once benefit payments commence, the
         payment form cannot be changed by the Participant or Beneficiary.

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

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

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

                                        3

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